Most court decisions involve application of established principles of law to particular situations. Sometimes, a court decision creates a new principle of law or modifies an established one. However, an October 2009 Delaware Chancery Court decision by Chancellor Chandler created or changed not one, but at least three principles of Delaware M&A law and confirmed another that had not been free from doubt. It also may have changed the legal environment for M&A.
The decision was In re John Q Hammons Inc Hotels Shareholder Litigation. It involved the 2005 acquisition of John Q Hammons Hotels Inc by a company owned by Jonathan Eilian, a totally unrelated person.
Hammons Inc had been formed in 1994 to undertake a public offering and use the proceeds to become the general partner, with a 28% ownership interest, in John Q Hammons LP (the partnership), which owned or managed approximately 60 hotels, most...