Revlon Does a ‘Mindbody’ Good
Any law school corporations class dabbles in Revlon claims, but in reality, such claims are infrequently litigated in the Delaware Court of Chancery. Although Revlon requires the board of directors to obtain the best price available for the stockholders in change-of-control situations, Revlon claims can be “cleansed” by Corwin if the transaction does not involve a controlling stockholder and was approved by a majority of the corporation’s fully informed, uncoerced and disinterested stockholders. Corwin cleansing became popular as boards used special committees and a majority of the minority vote, resulting in few plaintiff stockholders succeeding on Revlon claims because upon a Corwin cleanse the deferential business judgment rule applied. But in the 120-page opinion for In re Mindbody, C.A. No. 2019-0442-KSJM (Del. Ch. March 15, 2023), Chancellor Kathaleen McCormick throws shade on Corwin, finding Mindbody’s sales process run by Richard Stollmeyer—founder and then-CEO—was not cleansed by Corwin and holding him and Mindbody’s private equity acquirer, Vista Equity Partners, liable. In finding “a single disclosure deficiency will defeat Corwin cleansing,” the court ensured viability of post-merger Revlon claims and reinforced the significance (to both sellers and buyers) of avoiding conflicts and making full disclosures.
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