In the Matter of Kenneth Cole Productions, Inc. Shareholder Litigation: New York Court of Appeals Adopts MFW Business Judgment Standard of Review for Squeeze-Out Mergers

Sullivan & Cromwell LLP - May 9, 2016
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In In the Matter of Kenneth Cole Productions, Inc. Shareholder Litigation, the New York Court of Appeals (Stein, J.) adopted the Delaware Supreme Court’s 2014 approach in Kahn v. M&F Worldwide Corp. (“MFW”), holding that business judgment is the standard of review for squeeze-out mergers with controlling stockholders so long as the MFW-established conditions exist—the transaction from the outset is subject to the approval of a well-functioning independent special committee empowered to select its advisors and reject the transaction and an informed, uncoerced vote of a majority of the minority shares.  The Court of Appeals noted that the MFW standard serves as an attempt to achieve a balance between protecting minority shareholders and preventing frivolous litigation and unwarranted judicial interference in independent corporate decision-making.