Turner v. Bernstein

Summary

The Delaware Court of Chancery addresses plaintiffs’ motion for partial summary judgment alleging that GenDerm Corporation’s former directors breached their fiduciary duty of disclosure in connection with the company’s merger into a Medicis Pharmaceutical subsidiary. The court concludes that the directors provided materially inadequate information to GenDerm stockholders regarding the merger and their alternatives, including appraisal. It also rejects the defendants’ arguments that the plaintiffs waived their disclosure claims by accepting the merger consideration or signing letters of transmittal.

Holdings

1. The GenDerm directors breached their fiduciary duty by failing to disclose the material facts within their control that stockholders needed to make an informed decision whether to accept the merger consideration or seek appraisal.
2. Plaintiffs did not waive their equitable fiduciary-duty claims because the directors failed to show that plaintiffs accepted the merger consideration on a fully informed basis.
3. The letters of transmittal waived only the plaintiffs' statutory appraisal rights under 8 Del. C. § 262 and did not waive equitable actions for breach of fiduciary duty.
4. Section 262 does not implicitly make statutory appraisal the exclusive remedy for a disclosure-based equitable fiduciary-duty claim.

Questions Presented

1. Whether the GenDerm directors breached their fiduciary duty of disclosure by failing to provide stockholders with material information needed to decide whether to accept the merger consideration or seek appraisal.
2. Whether plaintiffs knowingly waived their equitable disclosure claims by accepting the merger consideration after allegedly receiving information from other sources.
3. Whether the appraisal waiver in the letters of transmittal extended beyond 8 Del. C. § 262 to bar equitable fiduciary-duty claims.
4. Whether statutory appraisal is the exclusive remedy for stockholders asserting disclosure-based fiduciary-duty claims in connection with a cash-out merger.

Disposition

other