On January 20, 2009, the Delaware Court of Chancery heard oral argument and denied a Ventana Medical Systems, Inc. shareholder’s mootness petition for attorneys’ fees against Davis Polk client Roche Holdings, Inc., in connection with Roche’s acquisition of Ventana Medical Systems in early 2008. The court determined that plaintiff did not show the requisite causation necessary to support such a fee petition.

In late June 2007, Roche made an unsolicited bid to acquire Ventana and filed a lawsuit against Ventana and Ventana’s board of directors in the Court of Chancery, alleging that the Ventana board had breached its fiduciary duties in connection with Roche’s tender offer. Nearly two months later, a shareholder filed a largely duplicative complaint in the Court of Chancery. In November 2007, after failing to obtain a superior alternative to the Roche offer, the Ventana board commenced negotiations with Roche. On January 21, 2008, Roche agreed to increase its offer and the companies entered into a merger agreement, pursuant to which Roche would acquire Ventana for $89.50 per share in cash (or an aggregate of $3.4 billion on a fully diluted basis). The merger agreement had been approved by the boards of Ventana and Roche.

In August 2008, the shareholder filed a mootness fee petition based on Delaware’s rebuttable presumption that there exists a causal connection between the plaintiff’s efforts and the defendant’s actions that mooted the claims. Davis Polk submitted affidavits of two senior executives from Ventana and Roche to rebut the presumption, which confirmed that litigation played absolutely no role in the Ventana board’s decision to negotiate with Roche, Roche’s decision to increase its offer price, or the companies’ decisions to enter into a merger agreement. The vice chancellor noted that the shareholder presented no evidence to discredit these affidavits and that, where a defendant has submitted credible affidavits disclaiming causation, the plaintiff must then produce some evidence to support a causal connection between its litigation and the favorable outcome, which this shareholder did not. In addition, the vice chancellor stressed that simply filing and amending a complaint and monitoring the news is insufficient to warrant an award of attorneys’ fees under Delaware law.

The litigation team that worked on the Roche-Ventana transaction, including the fee petition, included partners Arthur F. Golden and Lawrence Portnoy, associates Scott B. Luftglass and Brian M. Burnovski, former associate Martin A. Hewett and legal assistant James M. Dean. All members of the Davis Polk team are based in the New York office.

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