In a transcript ruling, the Delaware Court of Chancery refused to issue an anti-suit injunction barring a Louisiana state stockholder litigation challenging Sumitomo Corporation of America's acquisition of Edgen Group, Inc, despite the fact that Edgen had a Delaware forum selection clause in its certificate of incorporation.(1) On October 16 2013 Edgen announced that it would be sold to Sumitomo for $12 per share, which was a 55% premium over its undisturbed market price.

Stockholder plaintiffs ignored Edgen's forum selection clause and filed suit in Louisiana, –where Edgen was headquartered – to enjoin the transaction. Another plaintiff filed a parallel Delaware action, but voluntarily dismissed it shortly thereafter. Edgen moved to dismiss the Louisiana action based on the forum selection clause, but the Louisiana court set the hearing date for this motion shortly before the transaction was scheduled to close. Edgen responded by suing the lead plaintiff in Delaware, seeking to prevent further pursuit of the Louisiana case (ie, an anti-suit injunction). The court denied this motion, even though it found that Edgen had shown a probability of success on the merits and irreparable harm. In so doing, the court disparaged the strength of the stockholder plaintiff's claims, stating that they "would likely not survive a motion to dismiss". It further decried the existence of multi-forum M&A cases, stating that "[t]his case really exemplifies the inter-forum dynamics that have allowed plaintiffs' counsel to extract settlements in M&A litigation and that have generated truly absurdly high rates of litigation challenging transactions".

However, the court refused to issue the anti-suit injunction, stating that it was "preferable" for the Edgen defendants first to seek dismissal of the Louisiana action based on the forum selection clause, as that approach would maximise judicial comity. The court also noted its reluctance to issue an anti-suit injunction based on a corporate governance document (as opposed to a bilateral contract), stating that: "it's not at all clear… that forum selection provisions are as yet sufficiently understood and accepted such that the Delaware Supreme Court would want the same approach taken for a forum selection clause that appears in the charter and bylaws."

For further information on this topic please contact Jane D Goldstein or Peter L Welsh at Ropes & Gray LLP's Boston office by telephone (+1 617 951 7000), fax (+1 617 951 7050) or email (jane.goldstein@ropesgray.com or peter.welsh@ropesgray.com). Alternatively, contact Martin J Crisp at Ropes & Gray LLP's New York office by telephone (+1 212 596 9000), fax (+1 212 596 9090), or email (martin.crisp@ropesgray.com).The Ropes & Gray LLP website can be accessed at www.ropesgray.com.

Endnotes

(1) Edgen Group, Inc v Genoud, CA 9055-VCL (Del Ch Nov 5 2013).