Thursday, January 12, 2023
HomeBusiness LawContractsProf Weblog

ContractsProf Weblog

DE ChanceryThe litigation arose out of a SPAC acquisition of Buzzfeed by a particular goal entity, 890 fifth Avenue Companions, Inc. (890).  The Courtroom refers to 890 as “New Buzzfeed” and to the acquired firm as “Previous Buzzfeed.”  Defendants within the litigation are 91 staff of Buzzfeed (each Previous and New) who declare that they had been excluded from an IPO carried out by New Buzzfeed that created a brand new class of inventory that the staff couldn’t purchase as a result of they may not well timed convert their Previous Buzzfeed inventory.  Pursuant to their employment agreements with Previous Buzzfeed, they sought to arbitrate their claims.  In Buzzfeed, Inc. v. Anderson, the Delaware Chancery Courtroom held that defendants’ claims are usually not topic to arbitration.  There are many fascinating points to this litigation, and I refer readers to wonderful posts by Ann Lipton on our sister weblog, the Enterprise LawProf Weblog right here and right here.

The merger, accomplished in December 2021, which the Courtroom refers to as “the Mixture,” concerned 4 entities and resulted in two surviving entities, New Buzzfeed, now a subsidiary of Working Co., which assumed Previous Buzzfeed’s liabilities.  Defendants owned Class B inventory in Previous Buzzfeed pursuant to their Choice Plan, and after the Mixture, that inventory was transformed into Class B inventory in New Buzzfeed.  However issues with conversion made it inconceivable for defendants to purchase the brand new class of inventory in New Buzzfeed in time to profitably take part within the IPO.  They filed what the Chancery Courtroom calls two “mass arbitrations.”  I am unsure what which means and the Corut does not clarify, however provided that Buzzfeed was required to pay submitting charges of $300 per claimant, I assume that it implies that attorneys filed the identical declare for every defendant, with every declare differing solely within the identify of the claimant and maybe in some particulars about how they acquired their shares and the variety of shares held.

Defendants claimed that the query of jurisdiction needed to be despatched to arbitration beneath Delaware’s Willie Gary take a look at.  That take a look at requires courts to determine questions of arbitrability absent “clear and unmistakable proof” that the events supposed in any other case.   Right here, solely the defendants’ employment agreements required arbitration, and the plaintiffs weren’t events to these agreements.  The court docket thus discovered that defendants had not established the events’ intent to have the arbiter decide whether or not the defendants’ claims had been arbitrable.  

The Courtroom then concluded that the plaintiffs’ claims, looking for declaratory and injunctive reduction, weren’t arbitrable.  The Courtroom decided that it had jurisdiction over plaintiffs’ claims and private jurisdiction over the defendants as New Buzzfeed shareholders pursuant to the New Buzzfeed discussion board choice clause, which specifies jurisdiction within the Delaware Chancery Courtroom.  The Courtroom then granted plaintiffs the anti-arbitration injunction they sought.  

Bat-signalThe reasoning appears strong, however the consequence appears unjust.  Plaintiffs have manipulated the company kind in order to deprive defendants of their most popular discussion board.  Defendants are pressured to litigate within the Chancery Courtroom as New Buzzfeed Shareholders, however they didn’t turn out to be New Buzzfeed shareholders by alternative.  That occurred because of the Mixture.  They thought they’d a proper to arbitrate pursuant to their employment agreements with Previous Buzzfeed, however they can not vindicate that proper towards a company entity that now not exists.  Nor can they vindicate that proper towards the brand new entity or its officers and administrators, as a result of they  weren’t occasion to the employment agreements.  

I ponder what contracts profs who additionally educate company regulation consider all this.  I am placing out a name for assist.



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments