Third, the court rejected the argument that the shareholders’ claims were “holder claims,” finding instead that the shareholders had “an active and affirmative choice” to divest or remain invested in the post-merger entity. Second, the court held that the obligation to disclose all material information about the proposed merger arose from the directors’ fiduciary duties, and was not a contractual obligation arising from the redemption right set forth in the SPAC’s certificate of incorporation. First, the court found that the plaintiffs’ claims were direct rather than derivative, as the claims implicated harm arising out of the shareholders’ redemption right rather than a right belonging to the SPAC. In its analysis, the court rejected three of the defendants’ threshold arguments. Two shareholders filed class action complaints alleging breaches of fiduciary duty by the SPAC’s directors, officers, and Klein (as controlling shareholder) for failing to disclose that MultiPlan’s biggest customer was poised to become MultiPlan’s biggest competitor. However, after the merger closed, MultiPlan’s stock price dropped precipitously after a research report stated that MultiPlan’s largest customer was building an in-house platform to compete with MultiPlan. (MultiPlan), and subsequently the shareholders overwhelmingly approved the deal. Absent a deal, the Class A shareholders would receive their pro rata share of the amount from the IPO in addition to interest, but the Class B shares would expire as worthless.įive months after the IPO, Churchill’s board of directors approved a merger with MultiPlan, Inc. Class B shares would convert into Class A common stock at a one-to-one ratio. If the SPAC struck a deal within 24 months, public shareholders could redeem their units for Class A shares and retain their warrants regardless of whether they voted for the deal. The SPAC’s board and the Sponsor received Class B founder shares. Churchill was one of several SPACs founded by Michael Klein (Klein), who allegedly maintained unilateral control over the appointment of the SPAC’s board of directors and controlled the sole shareholder of the sponsor entity (the Sponsor).Ĭhurchill’s 2020 initial public offering (IPO) offered units, with each unit consisting of one share of Class A common stock and a fractional warrant. III (Churchill), a special purpose acquisition company (SPAC), and MultiPlan Inc., a healthcare cost management provider. The claims at issues arose from a business combination between Churchill Capital Corp.

In January 2022, the Delaware Court of Chancery issued a much-anticipated ruling that applied traditional fiduciary principles to a de-SPAC merger.

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