Apparel Company – Motion to Dismiss Granted in Precedent Setting Merger Dispute
Represented a leading apparel company and its majority shareholders in a cash out merger dispute with its former minority shareholder. The minority shareholder filed an action in New York State Supreme Court to rescind the merger, alleging that the apparel company failed to comply with New York case law mandating a legitimate business or corporate purpose for corporate mergers. The Court initially denied the apparel company’s motion to dismiss but granted reargument, recognizing that its original decision did not fully address the business purpose arguments that lay at the core of the dispute. Following reargument, the Court granted the apparel company’s motion to dismiss, acknowledging the merger’s clear legitimate business purpose. This decision holds great significance for the legal community as there are very few precedents under New York law addressing the conditions under which a merger can be rescinded, particularly for lack of a legitimate business purpose. The case is Alan Ades v. Van Dale Industries, Inc. et al. (N.Y. Sup. Ct.).