On January 7, 2025, the Delaware Court of Chancery ruled in favor of Williams & Connolly’s clients, The Carlyle Group, Inc. and various affiliated entities, along with former directors of Authentix, Inc., following a seven-day bench trial in January 2024. 

This case was brought by minority shareholders alleging breaches of fiduciary duty and other claims related to the 2017 sale of Authentix.  The minority shareholders alleged that the Board and Carlyle, as the majority stock holder, accepted a price that undervalued Authentix by over $100 million in order to complete the sale more quickly prior to the expiration of the ten-year life of the fund.  While Carlyle was alleged to have fully recovered on its preferred shares, the plaintiffs alleged that the common shareholders received essentially no compensation for their shares when a sale at a more opportune time would have resulted in millions more. 

Williams & Connolly tried the case before Vice Chancellor Glasscock in a seven-day bench trial in January 2024 led by Robert A. Van Kirk and Sarah Kirkpatrick.  Closing arguments took place in June 2024.  Williams & Connolly argued that plaintiffs’ case was an attack not on Carlyle or its handling of this fund, but on the private equity model itself.  The Carlyle fund involved in the Authentix purchase had an industry standard ten-year life, but Carlyle routinely extends the life of its funds when it believes it is in the best interests of investors to do so.  In fact, it did so with this fund.  However, in the case of Authentix, Carlyle believed the best option for maximizing value for investors was to sell the Company in 2017 at the price it obtained after a full sale process.  Moreover, Carlyle was both the largest preferred and common shareholder, so its interests were fully aligned with the minority shareholders and it had every incentive to maximize price and had no unique interests in the sale.

On January 7, 2025, the court issued its decision in Carlyle’s favor, denying plaintiffs’ claims in their entirety.  Specifically, Vice Chancellor Glasscock concluded that Carlyle did not force a fire sale of Authentix and the sale was not a conflicted transaction because Carlyle shared the same interest in maximizing price as all other shareholders, such that the business judgment rule applied.  The Court found that Carlyle had no unique or compelling liquidity needs that would have forced a premature sale.

In addition to Bob Van Kirk and Sarah Kirkpatrick, the Williams & Connolly team representing Carlyle included Matthew W. Lachman, Patrick C. Bradley, and Cole T. Wintheiser.

Click here to read coverage by Law360.