The case revolves around an interlocutory appeal arising from a class action lawsuit involving AMC Entertainment Holdings, Inc. ("AMC" or "the Company"). The plaintiffs in the case, representing common stockholders of AMC, had filed complaints against the company and its board of directors for various relief measures, including declaratory and injunctive relief. The central issues were related to AMC's issuance of AMC Preferred Equity Units ("APE units") and plans to amend the company's certificate of incorporation, which involved increasing the number of authorized common shares to enable the conversion of APE units into common stock and implementing a reverse stock split.
The Court of Chancery initially allowed AMC to hold a special meeting to seek stockholder approval for the proposed amendments but prevented AMC from implementing the results of the vote until the court ruled on preliminary injunction motion filed by the plaintiffs. Subsequently, AMC held the special meeting and obtained stockholder approval for the proposed amendments.
Following document discovery and mediation, the parties reached a settlement agreement. Under this settlement, AMC agreed to distribute common stock to existing common stockholders in a specific ratio after a reverse stock split but before the conversion. However, objections were raised to this settlement, leading to a settlement hearing in the Court of Chancery.
The Court of Chancery eventually declined to approve the settlement, stating that the release of claims related to preferred units lacked proper consideration and would harm preferred unitholders. The parties then revised the settlement to address the court's concerns, but an objector (Rose Izzo) filed a motion to maintain the status quo order pending appeal in case the settlement was ultimately approved.
The court assessed various factors in its decision-making process. It considered the Objector's likelihood of success on appeal, the potential harm to the Objector, the potential harm to the company, and the public interest. The court determined that granting a stay pending appeal could harm the company's ability to raise capital quickly, and the potential harm to the company and its stockholders outweighed the Objector's concerns.
The Objector attempted to argue that the company's financial prospects had improved recently, but the court deferred to its previous assessment of the company's financial position. Additionally, the Objector failed to propose a clear schedule for the appeal's resolution, making it uncertain how long a stay would affect AMC's capital-raising efforts.
Ultimately, the court denied the Objector's motion for a status quo order pending appeal, concluding that the circumstances did not warrant such an order. The court emphasized that the four factors in Kirpat v. Delaware Alcoholic Beverage Control Commission were considered together and led to the decision to deny the stay.
As a result, the motion for a status quo order pending appeal was denied, allowing the proceedings to move forward.