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MONTH-IN-BRIEF (May 2021)

M&A Law

Louisiana Appellate Court Decides Breach of Fiduciary Duty Lawsuit for Defendants

By Courtney Black

On May 5, 2021, the State of Louisiana Court of Appeal, Fourth Circuit (the “Court”) affirmed a 2017 judgment granting summary judgment to Stewart Enterprises, Inc., a national funeral service provider (the “Company”) and its Board of Directors (collectively with the Company, the “Defendants”). The lawsuit, brought by the Company’s shareholders (the “Plaintiffs”), sought to prevent an equity merger with Service Corporation International, Inc., another national funeral services provider (“SCI”). Here, Plaintiffs appealed, arguing summary judgment was improper because (1) they rebutted the business judgment rule, so Defendants were required to show the merger was inherently fair, and (2) they provided substantial evidence of disloyalty and bad faith.

For Plaintiffs’ first assignment of error, the Court found invocation of the business judgment rule was proper. The Company’s chairman was not an officer or director on both sides, lacked a financial interest in the deal, and failed to receive additional or different benefits relative to other shareholders. The Court also rejected Plaintiffs’ argument that the chairman’s post-merger investment in a third party was problematic. There was no precedent to hold post-merger investments in third parties are unlawful transactions.

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