Mergers and Acquisitions

In the recent decision of LVI Grp. Inv., LLC v. NCM Grp. Holdings, LLC, et al., C.A. No. 12067-VCG (Del. Ch. Mar. 28, 2018), the Court of Chancery considered fraud claims in the inducement of a merger.  In ruling on a motion to dismiss filed by certain principals, the Court addressed the scope of director consent statutes, and whether certain conspiracy claims were adequately pled.

The litigation resulted from the combination of two large demolition firms—LVI Group Investments, LLC (“LVI”) and NCM Group Holdings, LLC (“NCM”)—into a single entity, NorthStar Group Holdings, LLC.  Each of the combining entities accuses the other of fraudulently misstating financial statements in the inducement of the transaction. In this opinion, Vice Chancellor Glasscock addressed claims raised in LVI’s amended complaint against third parties associated with NCM, including its president, the limited partnership funds that owned most of NCM’s outstanding units, and the persons and entities that controlled such funds.  Such third-parties moved to dismiss the complaint.

Moving defendants argued, among other things, that the Court lacked personal jurisdiction over them as they were residents of the State of Washington.  Plaintiff argued that defendant consented to jurisdiction by serving as directors or officers of Delaware corporations involved in the transaction at issue, along with participating in a conspiracy to defraud LVI.  The Court held that it had personal jurisdiction under such director defendants under the “necessary or property party” clause of Section 3114 of Title 10 of the Delaware Code.  This is so because such defendants had legal interests separate from the Delaware entities for which they consented to serve as directors or officers.

Of note, the Court rejected moving defendants’ argument that they could not plead conspiracy among a parent, subsidiary and its agents.  The Court noted that NCM was not wholly owned by the moving defendants.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

In a recent decision by the Delaware Court of Chancery, In re Straight Path Commc’ns Inc. Consol. S’holder Litig., Civil Action No. 2017-0486-SG (Del. Ch. Nov. 20, 20107), Vice Chancellor Glasscock stayed consideration of a pre-merger complaint brought by a stockholder, alleging claims that the controlling shareholder obtained a side deal at the expense of the corporation.  Because the deal had not yet consummated, plaintiff stockholder only sought monetary damages, while not opposing the closing of the merger.  Plaintiff asserted both direct claims for the side deal, as well as derivative claims alleging harm to the corporation.

Defendant corporation moved to dismiss the complaint, among other reasons asserting that the action was premature.  Given that the deal had not yet closed, the Court stayed consideration of the matter.  If the merger goes through, the Court held that the direct claims would then be ripe, and the derivative claims would be mooted.  If the merger fails, then the only permissible claim would be a derivative one belonging to the company arising from the side deal transaction with its controlling shareholder.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

In a very recent Delaware Supreme Court decision, Dieckman v. Regency GP LLC, et al., No. 208, 2016 (Del. Jan. 20, 2017), the High Court reversed the Court of Chancery and upheld claims based upon breach of the implied covenant of good faith and fair dealing.  The decision is noteworthy because the limited partnership agreement disclaimed fiduciary duties, and provided for conflict resolution safe harbors which defendants asserted were met.  However, the manner in which such safe harbors were obtained doomed defendants’ reliance upon the same.


The plaintiff is a limited partner/unitholder in the publicly-traded master limited partnership (“MLP”). The general partner proposed that the partnership be acquired through merger with another limited partnership in the MLP family. The seller and buyer were indirectly owned by the same entity, creating a conflict of interest.

The general partner sought refuge in two safe harbor conflict resolution provisions contained in the limited partnership agreement: “Special Approval” of the transaction by an independent Conflicts Committee, and “Unaffiliated Unitholder Approval.” The former requires approval by a special committee independent of the sponsor and its affiliates review and make a recommendation to the board whether to approve the transaction.  The latter requires approval by a majority of unitholder unaffiliated with the general partner and its affiliates.  Under the Limited Partnership Agreement (“LPA”), if either safe harbor is satisfied, then the transaction is not a breach of the agreement.

Plaintiff brought a petition before the Court of Chancery challenging the propriety of the transaction.  Plaintiff alleged that the Conflicts Committee itself was conflicted.  Plaintiff also alleged that the unitholder approval was not satisfied because the general partner made false and misleading statements in a 165 proxy statement to secure such approval.  According to plaintiff, the proxy statement failed to disclose that the Conflicts Committee was not disinterested.

Defendants moved to dismiss the Chancery action, taking the position that the general partner need only satisfy what the partnership agreement expressly required—to obtain the safe harbor approvals and follow the minimal disclosure requirements. Defendants asserted that, whether the information contained in the proxy statement was misleading, or who served on the special conflicts committee, was immaterial based upon the literal reading of the LPA.

The Court of Chancery granted Defendants’ motion to dismiss, which prompted the appeal. Chancellor Bouchard found that fiduciary duties could not be used to impose disclosure obligations on the general partner beyond those in the LPA, because the LPA disclaimed fiduciary duties.  The Court of Chancery also found that the only express requirement contained in the LPA in the event of a merger was that the general partner provide notice of the merger agreement, and there was no requirement to provide notice of a conflict among the Conflicts Committee.


The Supreme Court noted that the partnership agreement does not address how the general partner must conduct itself when seeking safe harbors contained in the partnership agreement. However, the Court found that where the express terms of the partnership agreement naturally imply certain corresponding conditions, unitholders are entitled to have those terms enforced according to the reasonable expectations of the parties to the agreement.

Specifically, the High Court stated:

The implied covenant is well-suited to imply contractual terms that are so obvious—like a requirement that the general partner not engage in misleading or deceptive conduct to obtain safe harbor approvals—that the drafter would not have needed to include the conditions as express terms in the agreement.

In other words, the general partner could not rely upon the safe harbor approvals, when it engaged in misleading or deceptive conduct to obtain such approvals, regardless of whether the LPA disclaimed fiduciary duties.

Key Takeaway

Although alternative entities may choose to waive fiduciary duties, the one duty that parties cannot waive in a Delaware alternative entity agreement is the duty to act consistently with the implied contractual covenant of good faith and fair dealing.  Moreover, once parties go beyond the minimal requirements set forth in safe harbor provisions, their actions and disclosures are likewise bound by the covenant.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

As set forth in the Delaware Supreme Court decision of Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304 (Del., 2015), a board’s decision to approve a merger transaction is subject to business judgment rule presumption when the merger was approved by a disinterested majority of the company’s stockholders in a fully-informed and uncoerced vote.

This rationale was applied in the recent decision of In re Solera Holdings, Inc. S’holder Litig., Cons. C.A. No. 11524-CB (Del. Ch. Jan. 5, 2017).  There, a former stockholder of Solera Holdings, Inc. (“Solera” or the “Company”) challenged a private equity firm’s acquisition of the Company for $55.85 per share (a total of approximately $3.7 billion) in a merger that closed in March 2016, at which time Solera merged with an affiliate of Vista Equity Partners (“Vista”) in the transaction that is the subject of this action (the “Merger”)

The complaint alleged a single claim for breach of fiduciary duty against the eight members of Solera’s board who approved the transaction (of which seven were outside directors).  Specifically, the complaint alleged that the defendants improperly favored the interests of Company’s management, failed to establish an effective special committee or to extract the highest price possible for the Company, implemented preclusive deal protection devices, and failed to disclose material information about the value of the Company’s stock.

Plaintiff did not contend that the transaction is subject to entire fairness review, given that the transaction did not involve a controlling stockholder and the disinterestedness of the outside directors was not challenged.  However, plaintiff asserted that the enhanced scrutiny standard under Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. Supr., 1985) and its progeny should be applied.

Chancellor Bouchard noted that, as explained Supreme Court explained in Corwin:

Revlon was ‘primarily designed to give stockholders and the Court of Chancery the tool of injunctive relief to address important M&A decisions in real time, before closing,’ and was not a tool ‘designed with post-closing money damages claims in mind.’

In the post-closing context, the Supreme Court held in Corwin that ‘when a transaction not subject to the entire fairness standard is approved by a fully informed, uncoerced vote of the disinterested stockholders, the business judgment rule applies.’ This rule flows from our ‘long-standing policy . . . to avoid the uncertainties and costs of judicial second-guessing when the disinterested stockholders have had the free and informed chance to decide on the economic merits of a transaction for themselves.’

The Court found there was no question that a majority of Solera’s stockholders approved the transaction in an uncoerced vote after receiving a definitive proxy statement dated Oct. 30, 2015.  Moreover, the complaint did not allege that the act of approving the merger was an act of waste.  Thus, the claim could only survive the motion to dismiss if it was demonstrated that the Solera stockholders who approved the transaction were not fully informed.

The Court further found that the Solera stockholders’ approval of the transaction was fully informed.  In making this analysis, the Court stated as follows:

Under Delaware law, when directors solicit stockholder action, they must “disclose fully and fairly all material information within the board’s control.” The essential inquiry is whether the alleged omission or misrepresentation is material. Delaware has adopted the standard of materiality used under federal securities laws. Under that standard, information is “not material simply because [it] might be helpful.” Rather, it is material only “if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” In other words, information is material if, from the perspective of a reasonable stockholder, there is a substantial likelihood that it “significantly alter[s] the ‘total mix’ of information made available.”

The Court disagreed with plaintiff’s insinuation that defendants were obligated to disclose “all troubling facts regarding director behavior” irrespective of their materiality.  Rather, the Corwin Court made clear that “troubling facts regarding director behavior . . . that would have been material to a voting stockholder” must be disclosed when seeking stockholder approval of a transaction.

For these reasons, the Court of Chancery granted defendant’s motion to dismiss, and dismissed plaintiff’s complaint with prejudice.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

In the first Chancery opinion of 2017, Vice Chancellor Montgomery-Reeves granted dismissal of a class action complaint which alleged breach of the duty of disclosure in connection with a short-form merger, in the decision of In re United Capital Corp. S’holders Litig., Cons. Case Nos. 11619-VCMR (Del. Ch. Jan. 4, 2017).

Lead Plaintiff Louis B. Geser (“Plaintiff”) owned shares of common stock in United Capital Corporation (“United Capital”).  Defendant A.F. Petrocelli owned approximately 94% of the outstanding shares of United Capital before the transaction at issue. On September 30, 2015, Petrocelli through his controlled entities merged with United Capital at $32 a share, thus becoming the sole shareholder of United Capital.

Plaintiff’s complaint alleged the notice of merger failed to disclose the following information:

  • The controller’s reasoning behind the merger price,
  • Special committee’s process,
  • Financial projections used to determine the value of the company,
  • Information regarding the working capital and future use of cash of the company,
  • The lack of independence of two members of the special committee, and
  • The identities of two directors and a director’s spouse who participated in a multi-million dollar note with the company.

The Court granted defendants’ motion to dismiss on the grounds that all material information was disclosed in the notice and, in the realm of a short-form merger, any omitted information is not material to the decision of whether the minority stockholders should accept the merger consideration or seek appraisal.

In granting the motion, the Court found that plaintiff did not allege adequately that the omitted information was material to the decision to seek appraisal and the duty of disclosure was not violated.  The Court found that Plaintiff’s sole remedy was one of appraisal.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

In 2016, beginning with In Re Trulia Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016) (see blog post here), the Court of Chancery has issued a wave of decisions analyzing the granting of fees in the context of disclosures.  In Trulia, the Court of Chancery set forth the standard that disclosure-only settlements will only be approved if the supplemental disclosures address a “plainly material” misrepresentation or omission, and the releases provided to D&Os are narrowly circumscribed.

Notably, in Trulia, the Court explained that the “plainly material” standard for supplemental disclosures does not apply to a mootness fee award.  This rationale was subsequently followed in Louisiana Municipal Employees’ Retirement System v. Black, C.A. No. 9410-VCN (Del. Ch. Feb. 19, 2016) (see blog post here) (noting that Trulia does not require a ‘plainly material’ inquiry in the mootness fee award context).

The recent Court of Chancery opinion of In re Xoom Corporation Stockholder Litigation, C.A. No. 11263-VCG (Del. Ch. Aug. 4, 2016) clarified the standard for supplemental disclosures on a mootness fee application.  Vice Chancellor Glasscock ruled that a mootness fee “can be awarded if the disclosure provides some benefit to stockholders, whether or not material to the vote. In other words, a helpful disclosure may support a fee award in this context.”

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

John O’Toole writes:

In In re Appraisal of DFC Global Corp., the Court of Chancery conducted an in-depth analysis of three common valuation methodologies—discounted cash flow analysis, multiples-based comparable company analysis, and deal price.  After discussing how each methodology was and should be applied, Chancellor Bouchard ultimately determined that although “all three metrics suffer from various limitations” the fair value of the merger in question was best ascertained by weighting all three methods equally.

The Court’s opinion serves a number of useful purposes.  First, it provides a comprehensive overview of each the methodologies discussed.  Second, given the context in which the Court’s analysis was done, it offers guidance on how to best determine the fair value of a company following a deal consummated in a “tumultuous environment” where a company’s “future profitability and…viability” are at issue.

John O’Toole is a summer associate, resident in the firm’s Wilmington office.

John O’Toole writes:

In In re Volcano Corporation Stockholder Litigation, the Court of Chancery held that stockholders’ acceptance of tender offers as part of mergers accomplished under  § 251(h) of the Delaware General Corporation Law (“DGCL”) “has the same cleansing effect as a stockholder vote in favor of a transaction.” C.A. No. 10485-VCMR, 2016 WL 3583704, at *11 (Del. Ch. June 30, 2016).  Thus, as “the business judgment rule irrebuttably applies” to a transaction approved by the “fully informed vote [of] a majority of a company’s disinterested, uncoerced stockholders,” the same result obtains upon “the acceptance of a first-step tender offer by fully informed, disinterested, uncoerced stockholders representing a majority of a corporation’s outstanding shares in a two-step merger under section 251(h)….”

Copyright: bbourdages / 123RF Stock Photo
Copyright: bbourdages / 123RF Stock Photo

The Court’s decision in Volcano is particularly noteworthy for two reasons.  First, Vice Chancellor Montgomery-Reeves determined that the fully informed, disinterested, uncoerced acceptance of a tender offer done pursuant to § 251(h) is functionally identical to a fully informed, disinterested, uncoerced stockholder vote.  Second, the Court’s determination that the  acceptance of tender offers and stockholder votes are, at least in this context, the same, extends the irrebuttable application of the business judgment rule as discussed in the line of Supreme Court cases from Corwin to Attenborough, to § 251(h) tender offers and mergers.

In equating § 251(h) tender offers to stockholder votes, the Vice Chancellor determined that § 251(h) sufficiently protects stockholder interests and that the policy analysis undertaken by the Supreme Court in Corwin as to stockholder votes applies equally to § 251(h) tender offers.  The Court held that because § 251(h) requires merger agreements, which in turn activate directors’ disclosure obligations and fiduciary duties, and prohibits structural coercion, stockholder interests are no less protected than if a vote were required.  Further, where the Supreme Court in Corwin held that, in the context of a vote, “stockholders [should] have…the free and informed chance to decide on the economic merits of a transaction for themselves” and “that judges are poorly positioned to evaluate the wisdom of business decisions,” the Court here found such policy “equally applicable to a tender offer in a Section 251(h) merger.”  Vice Chancellor Montgomery-Reeves held that “a stockholder is no less exercising her ‘free and informed chance to decide on the economic merits of a transaction’ simply by virtue of accepting a tender offer rather than casting a vote.”  Thus, the Court held that because of such statutory protections and policy considerations, there is no “basis for distinguishing between a stockholder vote and a [§ 251(h)] tender offer.”

It follows then, and the Court held, that mergers approved by the acceptance of § 251(h) tender offers should be afforded the same “cleansing effect” as mergers approved by stockholder votes.  Thus, for both § 251(h) mergers and mergers approved by stockholder votes, the business judgment standard of review irrebuttably applies.  In so holding, the Court clarified and expanded upon the recent line of Chancery and Supreme Court opinions discussing the effect of fully informed, disinterested, uncoerced stockholder votes.  Vice Chancellor Montgomery-Reeves explained that “[i]n this context, if the business judgment rule is ‘irrebuttable,’ then a plaintiff only can challenge a transaction on the basis of waste….If, by contrast, the business judgment rule is ‘rebuttable,’ then a board’s violation of either the duty of care or duty of loyalty…would render the business judgment rule inapplicable.”  By expanding the irrebuttable application of the business judgment rule, the Court necessarily expanded the types and number of mergers that will now be, at least practically speaking, insulated from stockholder challenges.

John O’Toole is a summer associate, resident in the firm’s Wilmington office.

Delaware, a state often considered an incorporation “mecca” with its favorable tax laws, preeminent business court and unified body of corporate law, has recently enacted a controversial statute that may call the state’s corporation-friendly reputation into question. On June 11, 2015, the Delaware General Assembly approved legislation to effectively prohibit fee shifting bylaw provisions in the context of stockholder litigation related to corporate governance and merger and acquisition transactions. This law effectively thwarts efforts to curb unwarranted and frivolous stockholder litigation. It will also block any attempts to quell the large runaway verdicts in directors and officers (D&O) matters in Delaware.

Will this statute—which will undoubtedly encourage derivative class action lawsuits against corporate management— incentivize companies to reconsider Delaware as the state of their incorporation?

Amendments to the Delaware General Corporation Law

The Delaware fee-shifting bylaw prohibition statute was introduced as SB 75 and passed on June 11, 2015, with an effective date of Aug. 1, 2015. Through the statute, the Delaware General Assembly, among other things, amended the Delaware General Corporation Law (DGCL) (the amendments) to nullify the effectiveness of corporate bylaws that allowed fee-shifting in the context of intra-corporate litigation such as stockholder derivative actions.

Specifically, the statute added a new subsection (f) to Section 102 of the DGCL, which states that the certificate of incorporation “may not contain any provision that would impose liability on a stockholder for the attorney fees or expenses of the corporation or any other party in connection with an internal corporate claim.” Similarly, Section 109(b) of the DGCL has been amended to provide that “[t]he bylaws may not contain any provision that would impose liability on a stockholder for the attorney fees or expenses of the corporation or any other party in connection with an internal corporate claim, as defined in Section 115 of this title.”

The amendments prohibit Delaware stock corporations from imposing liability on a stockholder for attorney fees or expenses pertaining to an “internal corporate claim” in their bylaws or certificate of incorporation. Section 115 of the DGCL defines an “internal corporate claim” as any claim, including those brought on behalf of a corporation, “that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity, or as to which [the DGCL] confers jurisdiction upon the [Delaware] Court of Chancery.”

Exceptions to the Amendments

The statute is not without limits; there are exceptions to the reach of the new legislation. Notably, the amendments do not prohibit the shifting of fees in stockholders’ agreements or other written agreements signed by stockholders. The amendments also do not apply to alternative business entities not governed by the DGCL, such as partnerships, limited partnerships or limited liability companies, as in In re El Paso Pipeline Partners, LP Derivative Litigation, C.A. No. 7141- VCL, n. 38 (Del. Ch. Dec. 2, 2015) (“The [Delaware] LP Act does not contain provisions analogous to Sections 102(f) and 109(b)”). The amendments implicate only Delaware corporations, which are subject to the DGCL.

In addition, amended Section 114(b)(2) of the DGCL specifies that the prohibition of fee-shifting provisions in a certificate of incorporation or bylaws do not apply to Delaware non-stock corporations. This exception ensured that the rationale of the Delaware Supreme Court, in its May 2014 decision ATP Tour v. Deutscher Tennis Bund, 91 A.3d 554 (Del. 2014), would not be disturbed. In ATP Tour, the high court answered questions of law certified to it from the U.S. District Court for the District of Delaware, and held that fee-shifting provisions in a Delaware non-stock corporation’s bylaws are not per se invalid. There, ATP Tour’s bylaws provided that if a member brought an action against it but did not obtain a judgment on the merits that “substantially achieved” the remedy sought, the member would be required to reimburse ATP Tour for all of its attorneys’ fees, costs and expenses. ATP Tour was then sued for antitrust violations and breach of fiduciary duty. The company and its directors prevailed and moved to recover fees and costs under the amended bylaws.

Following the Supreme Court’s ruling in ATP Tour, there was uncertainty and speculation as to whether the decision would apply to Delaware stock corporations as well, including public companies. The amendments clarified the issue, providing for a distinction between stock and non-stock corporations in terms of the enforceability of fee-shifting provisions.

Finally, nothing in the amendments to the DGCL would serve to prevent Delaware courts from issuing sanctions or shifting fees under the bad-faith exception to the American rule that otherwise requires each party to pay their own attorneys’ fees. However, if the Delaware General Assembly had permitted fee-shifting, it would have resulted in the courts’ having a greater arsenal to defeat frivolous stockholder actions.

Impact of the Amendments

To date, there are no Delaware cases interpreting or applying the amendments to the DGCL. At this juncture, just months removed from the Aug. 1, 2015 effective date, it is too early to tell what effect, if any, the amendments will have on either: decisions of corporations to incorporate or remain in Delaware; or corporate management of Delaware corporations that are subject to the reach of the statute (i.e., stock corporations).

Clearly, the exceptions to the statute are not insignificant, as the amendments have no bearing upon alternative entities or nonstock corporations, which are free to enact fee-shifting provisions in their governing documents. Thus, it would be prudent for Delaware entities, concerned with the potential for intra-corporate litigation, to consider the use of alternative entities where possible and appropriate should they choose to implement fee-shifting provisions in their governing documents.

Ultimately, however, it will not be possible or practical for many corporations, such as publicly traded companies for example, to change their internal structures simply to avoid the implication of these amendments. It will remain to be seen the extent to which other jurisdictions, which are constantly competing with Delaware to acquire corporate charters, will enact legislation expressly allowing for fee-shifting in the bylaws of stock corporations in order to attract such entities. Were this to be the case, the Delaware General Assembly would be wise to consider whether the gains from limiting the liability of corporate stockholders and promoting intra-corporate lawsuits outweigh the potential for the perception of Delaware as a corporation friendly state to be called into question, and the unintended consequences resulting therefrom. In this vein, the Delaware Court of Chancery recently rendered an opinion of import rejecting “disclosure settlements,” in which supplemental disclosures are exchanged for broad releases to company management, as in In re Trulia Inc. Stockholder Litigation, C.A. No. 10020-CB, slip op. At 19 (Del. Ch. Jan. 22, 2016) (“Given … the mounting evidence that supplemental disclosures rarely yield genuine benefits for stockholders … the court’s historical predisposition toward approving disclosure settlements needs to be reexamined.”)

Given the recent massive settlement awards approved by the Delaware Court of Chancery over the past several years—including the $275 million stockholder derivative settlement of In re Activision Blizzard, Inc. Stockholder Litigation, Cons. C.A. No. 8885- VCL (Del. Ch. May 20, 2015), and the $154 million stockholder derivative settlement of In re Freeport-McMoRan Copper and Gold Inc. Derivative Litigation, C. A. No. 8154-VCN (Del. Ch.)—coupled with the recent amendments nullifying bylaw fee-shifting, directors and officers of Delaware stock corporations must continue to understand the risks of potential litigation in connection with any merger, transaction, or other stockholder dispute, and seek adequate legal representation to minimize the potential for intra-corporate litigation.

Reprinted with permission from the February 23, 2016, edition of The Legal Intelligencer © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877.257.3382 – or visit

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at

In the recent decision of In Re Trulia Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016), which we discussed here, the Court made clear that disclosure-only settlements will be subject to a high level of scrutiny, and the disclosures must be “plainly material” for the Court to approve the settlement.

In Trulia, Chancellor Bouchard explained “plainly material” as follows:

In using the term “plainly material,” I mean that it should not be a close call that the supplemental information is material as that term is defined under Delaware law. Where the supplemental information is not plainly material, it may be appropriate for the Court to appoint an amicus curiae to assist the Court in its evaluation of the alleged benefits of the supplemental disclosures, given the challenges posed by the non-adversarial nature of the typical disclosure settlement hearing.

The interpretation of “plainly material” has been provided in a recent decision, In re BTU International, Inc. Stockholders Litigation, Consol. C.A. No. 10310-CB (Del. Ch. Feb. 18, 2016)(Transcript).  As reported by The Chancery Daily, the Court of Chancery found that management free cash flow projections satisfy Trulia’s “plainly material” standard.

In addition, the Court’s bench ruling in BTU constitutes the first post-Trulia decision in which disclosures were found to be “plainly material,” accepting the proposed release for defendants as sufficiently narrow, and approving of the merger class action settlement.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at