Alaska Electrical v. Lyons Homes

Summary

Case Description: The action originated with a tender offer by General William Lyon of $93 per share for the outstanding shares of Lyon Homes, Inc., a Delaware corporation. On the same day the tender offer was announced, Plaintiff Intervenor-Appellant Alaska Electrical Pension Fund (“Alaska”) filed a class action suit in the Superior Court of California. Two days later, individual stockholders filed two separate class actions in the Delaware Court of Chancery. All three suits alleged similar breaches of fiduciary duty and disclosure claims relating to the tender offer. Lyon and the other Defendants reached an initial settlement with the Delaware Plaintiffs, agreeing to, inter alia, increase the offer price from $93 to $100. Alaska refused to join in the initial settlement. The tender offer was eventually increased by Lyon to $109 per share. Alaska filed a motion to intervene in the Delaware action to recover its attorney’s fees and cost. The Court of Chancery refused to award Alaska any fees after finding “that Defendants and the Delaware Plaintiffs have rebutted the presumption that Alaska and its attorneys were a cause of the second price increase. Alaska and its attorneys did not in any way contribute to the higher price.”

Proceeding Description: On this appeal Alaska contends that the Defendants did not rebut the presumption of causation in its favor. Alaska also contends that the Court of Chancery erred in permitting the Defendants to shield three emails from discovery under the attorney-client privilege.

Outcome: The Supreme Court concluded that the Court of Chancery applied the proper legal percepts in placing the burden on the Defendants to demonstrate that Alaska was in no way a cause of the tender increase. The court also found no abuse of discretion by the Vice Chancellor in denying Alaska’s motion to compel discovery. The court affirmed.

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