Delaware Court Provides Further Guidance on Enforceability of “Don’t Ask, Don’t Waive” Standstills


On November 27, 2012, a bench ruling by Vice Chancellor J. Travis Laster of the Delaware Court of Chancery in In re Complete Genomics, Inc. Shareholder Litigation enjoined the enforcement of a “Don’t Ask, Don’t Waive” standstill forbidding a potential acquirer from asking the target company privately or publicly for a waiver of the standstill in order to make a competing offer. Following In re Complete Genomics, it can be expected that limitations on non-public requests for waivers will likely be viewed by Delaware Courts as violating a board’s fiduciary duties in contexts where Revlon applies.

In In re Complete Genomics, Inc., the Delaware Court viewed “Don’t Ask, Don’t Waive” agreements as resembling no-talk clauses, which were found to be in breach of a board’s fiduciary duties in Phelps Dodge Corporation v. Cyprus Amax3 and subsequent cases. In that case, the Court suggested the no-talk clause created “the legal equivalent of willful blindness, a blindness that may constitute a breach of a board’s duty of care,” since even “the decision not to negotiate…must be an informed one.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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