Delaware Redemption Actions—A New Frontier In SPAC Litigation?

The Delaware Court of Chancery's application of the "entire fairness" standard in In re MultiPlan Stockholders Litigation is an important development for SPACs incorporated in Delaware, and it could result in more SPAC-related suits being filed in that forum.

On January 3, 2022, the Delaware Court of Chancery allowed claims for breach of fiduciary duty to proceed against the board of directors, sponsor, and controlling stockholder of a special purpose acquisition company ("SPAC"). See In re Multiplan Corp. Stockholders Litig., C.A. No. 2021-0300-LWW. The investor-plaintiffs alleged that the defendants concealed material information about the SPAC's merger target and thereby impaired shareholders' redemption rights. In largely denying the defendants' motions to dismiss under the "plaintiff-friendly" Rule 12(b)(6) pleading standard, the court reached several conclusions that could be relevant to sponsors, officers, and directors of other SPACs incorporated