This is the article I referenced earlier about shareholder loss being the best measure of damages, but it's just a legal opinion article, which presumably holds less weight than precedent.
clsbluesky.law.columbia.edu
The article references a "coming paper", which can be downloaded by following the links and registering. The paper says......
the clearest way to understand the issue is not that a corporation is claiming for its shareholders’ loss. Rather,
in the context of a breached M&A agreement, the corporation’s loss is best assessed by
its shareholders’ loss, since the consideration payable most accurately represents the
value and substance of the corporation’s bargain. Furthermore, there is no reliable means
of assessing the loss (or gain) to other constituencies such as employees, consumers, etc.
Recognizing that price most accurately represents the corporation’s loss does not hinder
the target’s directors from distributing the damages in whatever manner and to whichever
constituents they deem to be in the corporation’s best interests. This is also in line with
Canadian directors’ fiduciary duties that allow for consideration of the interests of nonshareholder
constituencies.
Consolidated Edison has also been severely criticized by commentators...
former Delaware Chief Justice Leo Strine once informally commented that he disagreed with Consolidated Edison’s general thrust. He observed that restrictive third-party beneficiary provisions in merger agreements were “designed to deal with the cacophony that could arise with individual shareholders trying
to enforce a contractual right” rather than “to deprive the corporation of remedies pursued
in good faith by the directors on behalf of the stockholders.”115 Strine also noted that he
was open to conceptualizing that a merger contract was negotiated by the directors for
the benefit of the stockholders and, in order to honor the parties’ expectations, allowing
the board to collect monetary damages suffered by the stockholders on their behalf
It is possible to uphold exclusionary provisions that limit
shareholders’ rights and, at the same time, still use loss of consideration damages as a
remedy given that the quantification of damages is separate from the questions of standing
to bring an action and to whom damages will be paid. An award in the amount that
corresponds to the shareholders’ loss of consideration can be paid to a target corporation
that brings an action against a buyer in breach.119 This would still respect any exclusions
limiting shareholders’ rights since recognizing that a corporation’s loss is best
approximated by the shareholders’ loss is altogether different from allowing a corporation
to recover for the shareholders’ loss itself. Indeed, if we accept that the shareholders’ loss
of consideration is the best indicator for a target’s loss as well, “it is then possible to
reconcile the fact that shareholders are not actual third-party beneficiaries to a merger
agreement with basic principles of contract damages.”120 Moreover, it is consistent with
contract damages principles to allow recovery of the shareholders’ expectancy damages
as the company’s own expectation damages.
Yeah, it sounds like he thinks the Con Edison case was poorly decided (ie, wrong).
Interesting.
Now i wonder what ability or inclination does Singapore arbitration have to rule on the topic, using Cayman law which perhaps has no precedent of this sort, and to what extent (if any) Singapore arbitration is bound by US and Canadian precedent.
Interesting! |
