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Rock‑Tenn Wins Dismissal of Shareholder Class Action Suit Challenging Valuation of MeadWestvaco Merger

On August 17, 2017, the Delaware Court of Chancery granted a motion to dismiss a shareholder class action suit against Cravath client Rock‑Tenn Company challenging the company’s $16 billion merger with MeadWestvaco Corporation (“MWV”). The transaction closed in July 2015, creating one of the world’s leading providers of consumer and corrugated packaging.

The complaint, brought on behalf of MWV shareholders, alleged that MWV was sold at a material discount to its true value as a result of its board’s attempts to thwart a looming proxy fight with activist investor Starboard Value LP. Plaintiffs asserted that MWV’s board of directors breached their fiduciary duties by failing to take the necessary steps to maximize stockholder value in connection with the proposed transaction and that Rock‑Tenn aided and abetted those breaches.

Chancellor Andre G. Bouchard dismissed the action saying, in a memorandum opinion, that the shareholders failed to plead a viable claim for bad faith by the directors in the process leading up to the merger. The claim against Rock‑Tenn for aiding and abetting the breach of duty was dismissed due to the dismissal of the underlying breach claim and because the plaintiffs failed to plead anything other than genuine arm’s‑length bargaining by Rock‑Tenn.

The Cravath team included partner Gary Bornstein and associate Michael J. Zaken. The case is In re MeadWestvaco Corp. Stockholders Litigation, No. 10617 (Del. Ch.).