Matter of Kenneth Cole Prods., Inc., Shareholder Derivative Litig – Case Brief Summary (New York)

Matter of Kenneth Cole Prods., Inc., Shareholder Derivative Litig., 122 A.D.3d 500, 998 N.Y.S.2d 1 (1st Dept 2014), affirmed 27 NY3d 268, 32 N.Y.S.3d 551, 52 N.E.3d 214 [2016], involved a class action arising from an effort by a controlling shareholder to take a New York public company private, in which minority shareholders complained that the $15.25 per-share price agreed to by a special committee -- instead of the $15.00 offered, which represented a 17% premium over the prior day's stock price -- was unfair to them (see pp. 1 & 3 of the decision/order).

Justice Lawrence K. Marks rejected (at p. 6) the shareholder-plaintiff's assertion that the company's board members had breached their fiduciary duties by failing to solicit thirdparty bids for the company where the complaint itself acknowledges that the controlling shareholder consistently asserted he would reject any such offers and "it is undisputed no such offers were received, despite the publicity surrounding [the controlling shareholder's] attempt to repurchase the stock."

Although the appeal to the Court of Appeals involved the issue of the effect of a the merger agreement's majority-of-the-minority provision/condition, and resulted in New York expressly adopting the standard of review announced by Delaware's Supreme Court in Kahn v. M & F Worldwide Corp., 88 A3d 635 (Del 2014), Justice Marks' finding that a market check was not required was not disturbed by the Court of Appeals or the Appellate Division.