In the recent decision of In re OM Group, Inc. Stockholders Litigation, Cons. C.A. No. 11216-VCS (Del. Ch. Dec. 16, 2016), Vice Chancellor Slights considered a motion for reargument by the Plaintiffs challenging his prior decision dismissing the complaint. Click here for prior decision by the Court granting motion to dismiss on Oct. 12, 2016.
The Complaint alleged that in the face of a threat of shareholder activism, the OM Board rushed to sell OM on the cheap in order to avoid the embarrassment and aggravation of a prolonged proxy fight and, in doing so, acted in a manner not consistent with maximizing present share value in violation of their fiduciary duties under Revlon.
The Court reiterated the familiar standards that govern a motion for reargument under Rule 59, namely that the Court "will deny a motion for reargument 'unless the Court has overlooked a decision or principle of law that would have a controlling effect or the Court has misapprehended the law or the facts so that the outcome of the decision would be affected.'"
Plaintiffs asserted that the Court misapprehended a pleaded fact that: "The disclosure issue in question for purposes of this motion concerns 'the evolution of Deutsche Bank's engagement.'" The Complaint had alleged that Deutsche Bank was retained as a second financial advisor to members of the OM Board in connection with the transaction, and raised issues with respect to such retention.
The Court noted that the October 12th opinion acknowledged that Plaintiffs were alleging that the Proxy "omitted information regarding the evolution of Deutsche Bank's engagement" and that the "Proxy failed to disclose that the OM Board initially contemplated hiring Deutsche Bank on a flat fee basis but then inexplicably converted the engagement to a contingency fee arrangement." The Court then rejected Plaintiffs' assertion that the Court did not fully understand the nuance of its disclosure theory with respect to Deutsche Bank fees because the Complaint did not plead, and the Proxy did not disclose, that the Board actually agreed to the contingency fee arrangement.
The Court rejected Plaintiffs' reasoning. The Court found that Plaintiffs' citations to RBC Capital Markets, LLC v. Jervis, No. 140, 2015 (Del. Supr. Nov. 30, 2015) and In re El Paso Corp. S'holder Litig., 41 A.3d 432 (Del. Ch. 2012) for the proposition that "the retention of second bank on a contingent basis can be conflict-reinforcing, not cleansing" was not helpful. Neither decision addressed in a disclosure context whether stockholders had been adequately apprised of the circumstances pursuant to which the later-retained bankers were engaged or would be compensated, and neither involved the cleansing effect of a fully-informed stockholder vote under Corwin.
The Court concluded that the Proxy adequately disclosed the circumstances surrounding the engagement of Deutsche Bank and that the omissions identified in the Complaint were not material. Having found that the majority of disinterested stockholders had approved the merger, the Court found that the business judgment rule applied, which necessitated dismissal of the action. Accordingly, Plaintiffs' motion for reargument was denied.
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