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    Business Law Today

    March 2025

    March 2025 in Brief: Mergers & Acquisitions

    Chauncey Lane and Yelena Dunaevsky

    Mar 31, 2025

    4 min read

    Board Considerations & Fiduciary Duties Mergers & Acquisitions Mergers & Acquisitions Law Month-in-Brief
    March 2025 in Brief: Mergers & Acquisitions
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    Delaware Superior Court Addresses Whether a Forum Selection Clause in a Membership Interest Purchase Agreement Conveys Jurisdiction over a Third-Party Beneficiary to the Agreement

    By Shawn Garrett, Founding Attorney, Garrett, PLLC

    On March 6, 2025, the Delaware Superior Court issued its decision in Curam, LLC (“Curam”), v. Brandon Gray (“Gray”) and Stephanie Chase as executor of the Estate of Michael J. O'Connell (“O’Connell”). This matter stems from Gray’s sale of three medical companies to Curam. These companies were initially started by O’Connell. At some point prior to the sale, O’Connell transferred the companies to Gray due to allegations filed against O’Connell. The present sale was effectuated by a Membership Interest Purchase Agreement (the “Agreement”) that contained representations and warranties regarding the companies’ financial positions, which Curam contends in its complaint were false.

    At the time of the sale, O’Connell was neither a signatory nor a party to the Agreement. Curam asserted that the Court had personal jurisdiction over O’Connell as (1) O’Connell was closely related to the Agreement and a third-party beneficiary thereunder, and (2) the Court had conspiracy theory jurisdiction over O’Connell (the latter of which will not be discussed here). In Curam’s complaint, it stated that the Agreement’s forum selection clause should be enforced against O’Connell as a third-party beneficiary to the Agreement. The Court analyzed that if the following three-prong test were met, the forum selection clause could be enforced against O’Connell: (1) whether the forum selection clause was valid, (2) whether the non-signatory was a third-party beneficiary or closely related to the agreement in question, and (3) whether the claim arose from the third party’s standing relating to the agreement.

    In its analysis, the Court considered the second prong of the test, stating that non-signatories are third-party beneficiaries to an agreement when (1) the contracting parties intend that the third party benefit from the agreement, (2) the benefit was intended as a gift to the third party or a satisfaction of a preexisting obligation, and (3) the intent of the contracting parties for the third-party to benefit was material to the parties entering into the agreement.

    The Agreement contained a specific carve-out that stated, “Nothing in this Agreement, whether express or implied, shall be construed to give any Person . . . any legal or equitable right . . . as a third-party beneficiary[.]” The Court added additional weight to this carve-out because it was a customized provision and not boilerplate. The Court reasoned that the customized provision displayed the parties’ intent that O’Connell was not a third-party beneficiary of the Agreement. Curam further argued that O’Connell was orchestrating and controlling the negotiations of the Agreement, but the Court was not satisfied that this argument could overcome the plain text of the Agreement’s carve-out.

    Senate Bill 21: Delaware’s Move to Protect Its Corporate Throne

    By Patrick V. Johnson II, Howard University School of Law

    On Tuesday, March 25, 2025, the Delaware General Assembly overwhelmingly passed Senate Bill 21 (“SB21”), which was shortly thereafter signed into law by Governor Meyer. Section 1 of SB21 amended key provisions to §144 of Title 8 of the Delaware General Corporation Law (“DGCL”) while lessening the degree of access for stockholder inspection demands via Section 2. Though amendments to the DCGL occur annually, this year’s amendments were far-reaching, as some dubbed SB21 the “Billionaire’s Bill,” given its favorable revisions for controlling stockholders. Undeniably, SB21 was introduced in the face of much speculation and even doubt surrounding Delaware’s diminishing influence in corporate law. After all, recent Delaware jurisprudence has become less predictable and less desirable to controlling stockholders. Indeed, some point to the seminal case of Kahn v. M&F Worldwide Corp (“MFW”), in which the Delaware Supreme Court held that the entire fairness standard of review applies to controlling stockholder transactions, as the turn of the tide. These developments and the departure of notable corporations that have reincorporated elsewhere somewhat explain the swift passage of SB21.

    Section 1 of SB21 arguably provides the most substantial changes to Title 8 of the DGCL. In fact, Section 1 institutes numerous safe harbor procedures for interested directors, officers, and controlling stockholders, thereby insulating such persons from challenges related to transactions where they are provided a unique benefit. Moreover, Section 1 limits controlling stockholder liability for money damages except for “a breach of the duty of loyalty to the corporation or other stockholders; acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; or any transaction from which the person derived an improper personal benefit.” By extension, it is worth noting that Section 1 expressly defines “control group” and “controlling stockholder,” among other notable terms.

    For firms advising Delaware companies on take-private or take-public transactions, SB21, by most accounts, removes one hoop for clients to jump through by lowering the MFW requirements and reversing In re Match Group, Inc. Derivative Litigation, which extended the application of entire fairness to controlling stockholder transactions outside of the freeze-out context. As a result, M&A deal activity may increase given the legislative clarity on how controlling stockholder transactions are reviewed by Delaware courts.

    As expected, commentators and the broader legal community are divided on just how much SB21 loosens the reins on controlling stockholders. For now, at least, it’s safe to say that “DExit” is no longer an existential threat, and SB21 has preserved Delaware’s status as the leading state for corporate law.

      Editors