stockholder challenge in Delaware

2022A decade later in Parnes, our Supreme Court preserved direct standing for former target stockholders attacking the fairness of a merger by attacking a side transaction.48 To state such a direct claim, “a stockholder must challenge the validity 44 Id. at 350. 45 Parnes, 722 A.2d at 1245 (discussing Kramer); see also Kramer, 546 A.2d at 350 n.2, 354. 46 Kramer, 546 A.2d at 350 n.2. 47 Id. at 353 . 48 722 A.2d at 1245–6.

2022A decade later in Parnes, our Supreme Court preserved direct standing for former target stockholders attacking the fairness of a merger by attacking a side transaction.48 To state such a direct claim, “a stockholder must challenge the validity 44 Id. at 350. 45 Parnes, 722 A.2d at 1245 (discussing Kramer); see also Kramer, 546 A.2d at 350 n.2, 354. 46 Kramer, 546 A.2d at 350 n.2. 47 Id. at 353 . 48 722 A.2d at 1245–6.

2021A stockholder states a claim for breach of this duty if it can allege facts to support “a rational inference that material facts were not disclosed or that the disclosed information was otherwise materially misleading.” Morrison v. Berry, 191 A.3d 268, 282 (Del. 2018).

2020A stockholder states a claim for breach of this duty if it can allege facts to support “a rational inference that material facts were not disclosed or that the disclosed information was otherwise materially misleading.” Morrison v. Berry, 191 A.3d 268, 282 (Del. 2018).

2021“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)) (internal quotations omitted). “[T]here must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 16 information made available.” Rosenblatt, 493 A.2d at 944 (quoting TSC Indus., 426 U.S. at 449 ).

2021“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)) (internal quotations omitted). “[T]here must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 16 information made available.” Rosenblatt, 493 A.2d at 944 (quoting TSC Indus., 426 U.S. at 449 ).

2021“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)) (internal quotations omitted). “[T]here must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 16 information made available.” Rosenblatt, 493 A.2d at 944 (quoting TSC Indus., 426 U.S. at 449 ).

2021“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)) (internal quotations omitted). “[T]here must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 16 information made available.” Rosenblatt, 493 A.2d at 944 (quoting TSC Indus., 426 U.S. at 449 ).

2019Defendants’ interpretation of Spiegel is reasonable, but it fails to consider two subsequent Delaware Supreme Court decisions: Grimes67 and Scattered III.68 In Grimes, the Supreme Court explained that a demand-refusal analysis should consider whether directors acted independently and disinterestedly when responding to a stockholder demand. 69 The Court observed: Simply because the composition of the board provides no basis ex ante for the stockholder to claim with particularity and consistently with Rule 11 that it is reasonable to doubt that a majority of the board is either interested or not

2014C. § 141(a); see also Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990) (citing Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981)) (“The decision to bring a law suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the management of the corporation.”). 147 Wood v. Baum, 953 A.2d 136, 140 (Del. 2008). 148 473 A.2d 805 (Del. 1984). 149 634 A.2d 927 (Del. 1993). 150 In re China Agritech, Inc. S’holder Deriv.

2024Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1055 (Del. 2004) (quoting Lewis, 502 A.2d at 967 ). 113 Scattered Corp., 701 A.2d at 74 (“Simply because the composition of the board provides no basis ex ante for the stockholder to claim with particularity and consistently with Rule 11 that it is reasonable to doubt that a majority of the board is either interested or not independent, it does not necessarily follow ex post that the board in fact acted independently, disinterestedly or with due care in response to the demand.”).

2019Tr.”) at 20:14–21:10. 67 673 A.2d 1207 . 68 Scattered III, 701 A.2d 70 , aff’g on other grounds 1997 WL 187316 (Del.

2019Tr.”) at 20:14–21:10. 67 673 A.2d 1207 . 68 Scattered III, 701 A.2d 70 , aff’g on other grounds 1997 WL 187316 (Del.

2017May 8, 2015). 33 See Grimes v. Donald, 673 A.2d 1207, 1219 (Del. 1996), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (“Simply because the composition of the board provides no basis ex ante for the stockholder to claim with particularity and consistently with Rule 11 that it is reasonable to doubt that a majority of the board is either interested or not independent, it does not necessarily follow ex post that the board in fact acted independently, disinterestedly or with due care in response to the demand.

2024Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1055 (Del. 2004) (quoting Lewis, 502 A.2d at 967 ). 113 Scattered Corp., 701 A.2d at 74 (“Simply because the composition of the board provides no basis ex ante for the stockholder to claim with particularity and consistently with Rule 11 that it is reasonable to doubt that a majority of the board is either interested or not independent, it does not necessarily follow ex post that the board in fact acted independently, disinterestedly or with due care in response to the demand.”).

2022A decade later in Parnes, our Supreme Court preserved direct standing for former target stockholders attacking the fairness of a merger by attacking a side transaction.48 To state such a direct claim, “a stockholder must challenge the validity 44 Id. at 350. 45 Parnes, 722 A.2d at 1245 (discussing Kramer); see also Kramer, 546 A.2d at 350 n.2, 354. 46 Kramer, 546 A.2d at 350 n.2. 47 Id. at 353 . 48 722 A.2d at 1245–6.

2022A decade later in Parnes, our Supreme Court preserved direct standing for former target stockholders attacking the fairness of a merger by attacking a side transaction.48 To state such a direct claim, “a stockholder must challenge the validity 44 Id. at 350. 45 Parnes, 722 A.2d at 1245 (discussing Kramer); see also Kramer, 546 A.2d at 350 n.2, 354. 46 Kramer, 546 A.2d at 350 n.2. 47 Id. at 353 . 48 722 A.2d at 1245–6.

2021Ch. 2016). 309 Mercier, 929 A.2d at 811 . 310 See Defs.’ Opening Br. at 32–36 (citing Third Point, 2014 WL 1922029 , at *21–22; Yucaipa, 1 A.3d at 343 ; Polk v. Good, 507 A.2d 531, 537 (Del. 1986); Cheff v. Mathes, 199 A.2d 548, 556 (Del. 1964)). 65 Defendants first cite to Polk, a stockholder challenge to Texaco’s agreement to repurchase the shares of the Bass Brothers, well-known takeover artists and greenmailers, 311 and who had acquired just under 10% of the company’s stock. 312 The Bass brothers were poised to launch “some hostile . . . move” on Texaco at a time when the company was “vuln

2021Ch. 2016). 309 Mercier, 929 A.2d at 811 . 310 See Defs.’ Opening Br. at 32–36 (citing Third Point, 2014 WL 1922029 , at *21–22; Yucaipa, 1 A.3d at 343 ; Polk v. Good, 507 A.2d 531, 537 (Del. 1986); Cheff v. Mathes, 199 A.2d 548, 556 (Del. 1964)). 65 Defendants first cite to Polk, a stockholder challenge to Texaco’s agreement to repurchase the shares of the Bass Brothers, well-known takeover artists and greenmailers, 311 and who had acquired just under 10% of the company’s stock. 312 The Bass brothers were poised to launch “some hostile . . . move” on Texaco at a time when the company was “vuln

2018Parnes involved allegations that the CEO of Bally Entertainment Corporation “informed all potential acquirors that his consent would be required for any business combination with Bally and that, to obtain his consent, the acquiror would be required to pay [him] substantial sums of money and transfer to him valuable Bally assets.”169 The CEO had no legal authority to make these demands, and several potential acquirors 165 Parnes v. Bally Entm’t Corp., 722 A.2d 1243, 1245 (Del. 1999). 166 Id. 167 Id. 168 See Dieterich v. Harrer, 857 A.2d 1017, 1027 (Del.

2017See Unocal, 493 A.2d at 954 .

2016Because our holding terminates the litigation, we do not reach the other issues raised by the parties. 4 See Parnes v. Bally Entm’t Corp., 722 A.2d 1243, 1245 (Del. 1999) (“In order to state a direct claim with respect to a merger, a stockholder must challenge the validity of the merger itself, usually by charging the directors with breaches of fiduciary duty resulting in unfair dealing and/or unfair price.” (citing Lewis, 477 A.2d at 1046 n.10; Kramer v. W.

2016See Parnes v. Bally Entm't Corp., 722 A.2d 1243, 1245 (Del. 1999) (“In order to state a direct claim with respect to a merger, a stockholder must challenge the validity of the merger itself, usually by charging the directors with breaches of fiduciary duty resulting in unfair dealing and/or unfair price.” (citing Lewis, 477 A.2d at 1046 n.10; Kramer v. W.

2014C. § 141(a); see also Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990) (citing Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981)) (“The decision to bring a law suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the management of the corporation.”). 147 Wood v. Baum, 953 A.2d 136, 140 (Del. 2008). 148 473 A.2d 805 (Del. 1984). 149 634 A.2d 927 (Del. 1993). 150 In re China Agritech, Inc. S’holder Deriv.

2014C. § 141(a); see also Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990) (citing Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981)) (“The decision to bring a law suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the management of the corporation.”). 147 Wood v. Baum, 953 A.2d 136, 140 (Del. 2008). 148 473 A.2d 805 (Del. 1984). 149 634 A.2d 927 (Del. 1993). 150 In re China Agritech, Inc. S’holder Deriv.

2014C. § 141(a); see also Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990) (citing Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981)) (“The decision to bring a law suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the management of the corporation.”). 147 Wood v. Baum, 953 A.2d 136, 140 (Del. 2008). 148 473 A.2d 805 (Del. 1984). 149 634 A.2d 927 (Del. 1993). 150 In re China Agritech, Inc. S’holder Deriv.

2014C. § 141(a); see also Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990) (citing Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del. 1981)) (“The decision to bring a law suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the management of the corporation.”). 147 Wood v. Baum, 953 A.2d 136, 140 (Del. 2008). 148 473 A.2d 805 (Del. 1984). 149 634 A.2d 927 (Del. 1993). 150 In re China Agritech, Inc. S’holder Deriv.