Litigation victory for Lucid Motors
On March 10, 2021, Davis Polk secured the denial of an application to enjoin the proposed $11.75 billion merger transaction between electric vehicle manufacturer Atieva, Inc., d/b/a Lucid Motors and special purpose acquisition company Churchill Capital Corporation IV. The case is captioned Hofman v. Churchill Capital Corp. IV, et al., Case No. 21SMCV00409 (Super. Ct. Cal.).
Plaintiff, a purported shareholder of Churchill, asserted claims against Churchill and Lucid Motors for fraud, negligent misrepresentation and false advertising in connection with the companies’ proposed merger transaction, announced on February 22, 2021. Plaintiff alleged that the defendants failed to correct market rumors regarding the terms of the proposed transaction prior to its public announcement and/or made false or misleading statements regarding the planned timing by which Lucid planned to deliver its first electric vehicles to market. Plaintiff’s complaint alleged that he purchased Churchill stock on the basis of market rumors about a potential transaction between the two companies and that he suffered unrealized losses when the price of Churchill’s stock declined following the announcement of the proposed transaction.
On March 8, 2021, plaintiff filed an ex parte application for a temporary restraining order and an order to show cause regarding the setting of a preliminary injunction hearing to block the proposed merger. Defendants filed an opposition to the application the next day, arguing that plaintiff had failed to satisfy the requirements for injunctive relief. On March 10, the California Superior Court held a hearing to consider the application, which the court denied in its entirety in an oral ruling from the bench. The court agreed with defendants’ position, finding that the plaintiff had not demonstrated a substantial likelihood of success on the merits, that the balance of equities strongly disfavored injunctive relief and noting that it would not interfere with the closing of a multi-billion dollar merger based on the complaint’s allegations. The court also held that, even if meritorious, plaintiff’s claims were compensable by money damages and, therefore, he could not demonstrate irreparable harm.
The Davis Polk litigation team included partners Neal A. Potischman and Brian M. Burnovski (who argued the application) and associate Micayla Hardisty. Members of the Davis Polk team are based in the New York and Northern California offices.