The recent decision of Nguyen v. Barrett, C.A. No. 11511-VCG
(Del. Ch. Sept. 28, 2016) provides a useful discussion of pre- and
post-close disclosure claims. The action involved a challenge
to a merger agreement, brought pre-close, alleging inadequate price
and process, as well as some thirty disclosure violations.
However, in plaintiff's motion for preliminary injunctive
relief, the Plaintiff pursued only his "serious"
disclosure violation, involving lack of disclosure of purportedly
material financial information. The Court denied the preliminary
The stockholders overwhelmingly chose to tender into the merger,
which closed; and Plaintiff moved forward with a claim for damages
for breach of duty in regard to two alleged mal-disclosures; one,
the financial disclosure claim the Court found not reasonably
likely to succeed at the preliminary injunction stage; and a
second, involving incentives of the financial advisor, which the
Plaintiff plead pre-close but elected not to argue in the motion
for preliminary injunctive relief.
Defendants moved to dismiss the complaint, which the Court
granted. The Court distinguished between the standard
employed for pre-close and post-close disclosure claims:
In order to sustain a pre-close disclosure claim, heard on a
motion for preliminary injunctive relief, a plaintiff must
demonstrate "a reasonable likelihood of proving that the
alleged omission or misrepresentation is material;" by
contrast, when asserting a disclosure claim for damages against
directors post-close, a plaintiff must allege facts making it
reasonably conceivable that there has been a non-exculpated breach
of fiduciary duty by the board in failing to make a material
The Court went on to state that: "[t]his Court's
jurisprudence makes clear that it is preferable to bring disclosure
claims before closing." (Slip op. n. 56). Given the more
difficult standard applied to post-close disclosure claims, the
Court granted the motion to dismiss.
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