The Firm obtained summary judgment in the Delaware Court of Chancery on behalf of its client, a large privately-held medical device company. One of the company’s largest shareholders had agreed to purchase the shares of another shareholder, which triggered a dispute concerning the scope of contractual tag-along rights and a right of first refusal provided by the company’s shareholder agreement. The selling shareholder advanced an interpretation of the shareholder agreement that would have permitted tag-along shareholders to sell classes and series of shares that differed from the single class of common stock sold during the underlying transaction and that would have functionally prevented the company and other shareholders from exercising valid rights of first refusal over those tag-along sales.
The shareholder commenced litigation in the Delaware Court of Chancery seeking a declaratory judgment as to both issues and moved for expedited summary judgment. The Firm opposed the motion and cross-moved, arguing that shareholder agreement did not provide cross-class or cross-series tag-along rights and that each tag-along transaction was subject to company and shareholder rights of first refusal. After extensive briefing and oral argument, the court adopted the Firm’s position on both issues, holding that tag-along shareholders could sell only the class of shares that matched the shareholder’s original purchase and that the company and other shareholders could exercise a right of first refusal over those tag-along sales.
