McGuireWoods Helps Dominion Energy Win Groundbreaking Fourth Circuit Merger Case

Ruling Allows Acquiring Companies to Remove M&A Class Actions to Federal Court

July 16, 2019

A McGuireWoods team recently helped Dominion Energy, Inc. win a significant appeal that moves putative class actions contesting the company’s $13.4 billion merger with SCANA Corp. from state courts to federal court. The opinion by the U.S. Court of Appeals for the Fourth Circuit could reduce M&A litigation costs for acquiring companies, which fight investor suits in state courts hundreds of times a year. The Fourth Circuit is the first court of appeals to address this important question of federal jurisdiction.

The City of Warren Police and Fire Retirement System and Metzler Asset Management GmbH — both owners of SCANA stock — filed separate class actions in South Carolina state courts in 2018 challenging the announced merger between Dominion Energy and SCANA. The plaintiffs alleged that Dominion Energy had “aided and abetted” alleged breaches of fiduciary duty by SCANA’s officers and directors to SCANA investors in negotiating the merger agreement.

Dominion Energy removed the suits to federal court under the Class Action Fairness Act of 2005 (CAFA), which expands federal jurisdiction over large class actions. But in two separate orders, the U.S. District Court for the District of South Carolina remanded the cases to state courts, ruling that the suits fell within one or more of CAFA’s exceptions to federal jurisdiction.

Dominion Energy sought permission to appeal those remand orders, which the Fourth Circuit granted. After full briefing and oral argument, the Fourth Circuit reversed and held that no CAFA exceptions apply to the plaintiffs’ claims that Dominion Energy aided and abetted a breach of fiduciary duty. In its June 28 ruling, the appellate court explained that aiding and abetting claims “are part and parcel of two interstate and nationally-important class actions, and Congress — in enacting CAFA — plainly intended for such actions to be litigated in the federal courts.”

McGuireWoods partners Brian Pumphrey and Brian Schmalzbach represent Dominion Energy, along with Nexsen Pruet members William W. “Billy” Wilkins and Burl Williams.

“This is an important ruling that will allow Dominion Energy to litigate these cases in the proper venue, as CAFA intended,” Pumphrey said. “We expect the Fourth Circuit’s decision will also help other acquiring companies litigate M&A class actions in the forum of their choosing, thereby reducing the cost of defending ‘aiding and abetting’ claims in future M&A class actions.”

McGuireWoods previously advised Dominion Energy in finalizing the merger with SCANA, which expanded Dominion Energy’s operations in Georgia, North Carolina and South Carolina. Lawyers from multiple McGuireWoods practices and government relations and grassroots advocacy teams from McGuireWoods Consulting assisted Dominion Energy in negotiating the merger and securing regulatory approvals.