S&C successfully secured the dismissal of all claims in putative class litigation filed in the Delaware Court of Chancery by former shareholders of Redbox Entertainment Inc.
The defendant purchased Redbox in 2016 and ran it as a privately held company until 2021 when it was purchased by a SPAC, with the defendant remaining its controlling shareholder. In 2022, Redbox merged with Chicken Soup For the Soul Entertainment (CSSE). In the shareholder litigation, plaintiff alleged that the controlling shareholder breached its fiduciary duties to Redbox’s minority shareholders by extracting two unique benefits in the merger, including the conversion of a loan to Redbox into CSSE equity, and the release of any theoretical claims that Redbox may have had for breach of fiduciary duty for the period when the defendant held Redbox as a privately held company.
In his September 11 ruling, Vice Chancellor J. Travis Laster adopted S&C’s arguments in full. With respect to the loan conversion, the court held that the loan was converted at the rate of 10 cents on the dollar, making it a unique detriment not a unique benefit. With respect to the release, the court held that plaintiff failed to plead that the release covered any viable claims that could survive a motion to dismiss.
The S&C team includes John Hardiman (who argued the motion), Stephen Ehrenberg, Jacob Cohen, Zachary Ingber and Maximillian Frank.