The Williams Companies Wins Dismissal of Merger Class Action

On March 7, 2016, the Delaware Court of Chancery dismissed a putative shareholder class action lawsuit against certain directors of The Williams Companies, Inc. (“Williams”), seeking to enjoin its proposed $37.7 billion combination with Energy Transfer Equity (“ETE”) based on alleged inadequacies in the merger proxy statement. The decision by Vice Chancellor Sam Glasscock III ended one of a number of separate suits relating to the merger, which will create one of the largest energy companies in the world. Cravath is representing Williams and the director defendants in connection with the proposed transaction and all related litigation.

The lawsuit was unusual, in that the plaintiff‑shareholder sought to enjoin a deal it also expressly endorsed as value‑maximizing for Williams’ stockholders. The plaintiff advanced the novel theory that Williams’ shareholders might accord improper weight to the fact that Williams’ CEO had voted against the merger, and thus sought to “contextualize” the CEO’s vote by having Williams make additional disclosures in the proxy statement concerning the CEO’s individual reasons for voting as he did.

Ruling from the bench, Vice Chancellor Glasscock held that “individual directors are not obligated to disclose their underlying reasons for acting,” noting that “such disclosure risks overloading the stockholder with unnecessary information.”

The Cravath team included partner Antony L. Ryan and associates Justin C. Clarke and Nick Friedman. The case is In re The Williams Cos. Inc. Stockholder Litigation, No. 11236-VCG (Del. Ch.).