Selectica v. Versata

VERDICT

Trial
04/27/09 – 05/01/09

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Summary

Appeal to Delaware Supreme Court: Versata argues on appeal that (1) Selectica's board did not undertake a reasonable investigation in adopting the NOL poison pill with a 4.99% trigger; and (2) Selectica's poison pill was preclusive because it effectively prevented a successful proxy challenge.

Trial Below: Selectica v. Versata was a 5-day trial challenging the validity of Selectica's "poison pill" that Versata, and its parent Trilogy, intentionally triggered by acquiring additional shares in Selectica. This case represented the first time that a poison pill had been intentionally swallowed by a shareholder.

Selectica created the poison pill to protect its $160M Net Operating Loss (NOL) tax asset, the value of which would have been impaired if there were a significant ownership change. To prevent such an ownership change, Selectica created a shareholder rights plan that would dilute the holdings of shareholders who knowingly accumulated 5% of Selectica's shares. The prior rights plan had allowed ownership up to 15%.

Versata increased its holding to 6.7 percent. Selectica then used the poison pill to dilute Versata's ownership to 3.4%. Selectica sought a declaratory judgment that its NOL poison pill was valid.

Vice Chancellor Noble concluded that Selectica's Board reasonably understood that Trilogy and Versata, which competed with Selectica, seriously threatened to impair the value of Selectica's NOLs for their own advantage, and reasonably thought that the NOLs were worth preserving.

Purchase Now:

Appeal to the DE Supreme Court: Versata v. Selectica

Trial Below in the Court of Chancery: Selectica v. Versata.

Sample video from 4/27/09 proceedings: View a Demo Clip

Outcome

Court concluded that the adoption of the NOL Pill and the Reloaded NOL Pill and the implementation of the Exchange were valid exercises of the Board’s business judgment. Selectica’s declaratory relief was granted. Trilogy and Versata’s claims failed.

Sessions

APR
30

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