241 A.3d 768
Del. Ch.2020Background
- Altaba (formerly Yahoo!) sold its operating business to Verizon in June 2017, retained investment assets (notably Alibaba shares), converted to a closed‑end investment company, and adopted a Plan of Complete Liquidation approved by stockholders.
- Altaba filed a certificate of dissolution (Oct. 4, 2019), gave statutory notice to potential claimants under 8 Del. C. §§ 280–281(a), and petitioned the Court of Chancery to fix security for claims and permit distributions.
- The Company sought an interim distribution of ~ $5.6 billion while retaining reserves for claims; it agreed to hold back full amounts for all but two claims (the Canadian data‑breach class actions and Rosenow privacy suit) and proposed a $250 million reserve for unknown future claims under § 281(c)(3).
- In Canada, the Ontario Action reached a proposed settlement and an Ontario court authorized an Ontario representative to agree to CAD $50 million security; a competing Saskatchewan Action (Larocque) challenged that amount and urged a CAD $1.05 billion holdback based on provincial per‑se privacy damages and overlapping class risks.
- Rosenow sued for alleged privacy breaches; he demanded $20 million reserve after Altaba’s notice; the Company proposed $50,000, stating Verizon (buyer) agreed to assume defense and liability for operating‑business claims.
- The Court had to decide (a) whether to permit an interim distribution before the final § 280 hearing and (b) what reserves were required for the disputed Canadian Actions, the Rosenow claim, and unknown claims.
Issues
| Issue | Petitioner/Claimant Argument | Company/Respondent Argument | Held |
|---|---|---|---|
| Authority to authorize interim distribution under §§ 280–281(a) | N/A (Company seeks permission) | Interim distributions are permissible despite the statute’s final‑hearing framework; court should allow distribution now. | Court may authorize an interim distribution but only on a powerful, summary‑judgment‑quality showing because interim relief is effectively final. |
| Standard of proof for interim distribution | N/A | Company: reserves proposed suffice; interim relief appropriate based on undisputed facts. | Movant must meet a heavy burden analogous to summary judgment; interim distributions limited to cases with clear, undisputed record. |
| Adequacy of reserve for Canadian Actions (data breaches) | Larocque/Saskatchewan: CAD $1.05 billion needed given per‑se privacy damages in some provinces and potential parallel certified classes. | Company: CAD $50 million agreed with Ontario representative is sufficient; Ontario representative’s agreement should be dispositive. | Court requires CAD $1.05 billion reserved for Canadian Actions before permitting interim distribution, given unresolved multi‑province litigation and significant uncertainty. |
| Rosenow privacy claim and reserve amount | Rosenow: requested $20 million reservation. | Company: reserve $50,000; Verizon agreed to assume defense/liability, and Company rejected the claim. | Court approved Company’s $50,000 reserve (Company showed sufficient undisputed facts, including Verizon’s assumption). |
| Reserve for unknown/unasserted claims (§ 281(c)(3)) | N/A (no adversary advocate appointed for unknown claimants at interim stage) | Company: $250 million reserve is ample. | Court found $250 million adequate on the undisputed record (sale of operating business, Verizon assumption of operating‑business claims, no fund‑related claims to date). |
Key Cases Cited
- In re RegO Co., 623 A.2d 92 (Del. Ch. 1992) (describing §§ 280–281(a) process and standards for security for post‑dissolution claims)
- Territory of the U.S. Virgin Islands v. Goldman, Sachs & Co., 937 A.2d 760 (Del. Ch. 2007) (discussing court’s role in adjudicating claims and director/shareholder protections in dissolution)
- In re Krafft‑Murphy Co., 82 A.3d 696 (Del. 2013) (explaining §§ 280–281(a) provide a court‑supervised safe harbor for directors/shareholders)
- City Capital Assocs. Ltd. v. Interco, Inc., 551 A.2d 787 (Del. Ch. 1988) (interim relief that is effectively final requires a strong showing analogous to summary judgment)
- Data Gen. Corp. v. Digital Computer Controls, Inc., 297 A.2d 437 (Del. 1972) (noting preliminary injunctions granting plaintiffs all relief expected after trial are rarely granted)