Lee Rudy of Kessler Topaz argued before New York's highest court, the Court of Appeals on March 23, 2016, on an important issue of corporate law: the standard of review applied to controlling-stockholder "freeze out" mergers.
In litigation challenging the going private freeze out of stockholders of Kenneth Cole Productions by its namesake majority stockholder Kenneth Cole, Lee argued that a 1984 decision of the Court of Appeals, Alpert v. 28 Williams St. Corp., 63 N.Y.2d 557, which imposed strict scrutiny on such mergers to determine their "entire fairness," should apply broadly. Defendants argued that a more deferential standard of review should apply when the controlling stockholder subjects a freeze out to approval by a committee of independent directors and the majority vote of the company's minority stockholders, as Kenneth Cole did. Mr. Rudy countered, "There's plenty of decisions, both social science and legal decisions, that show that special committees often fail to negotiate good deals with controlling stockholders. They roll over, like in Southern Peru. They fail because they're defrauded, like in Dole." On May 5, 2016, the court issued its decision adopting the standard that Delaware courts utilize in similar cases. See Matter of Kenneth Cole Prods., Inc. S’holder Litig., --- N.E.3d ---, 2016 WL 2350133 (N.Y. May 5, 2016).
(Video is also available at https://www.nycourts.gov/ctapps/arguments/2016/Mar16/Mar16_OA.htm)