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Brookfield Asset Mgmt. v. Rosson

Brookfield Asset Mgmt. v. Rosson

Supreme Court of Delaware

June 30, 2021, Submitted; September 20, 2021, Decided

No. 406, 2020

Opinion

 [*1255]  VALIHURA, Justice:

This is an interlocutory appeal from an Opinion and Order [**2]  of the Court of Chancery holding that Appellees/Cross-Appellants, former stockholders of TerraForm Power, Inc. ("TerraForm"), have direct standing to challenge TerraForm's 2018 private placement of common stock to Appellant/Cross-Appellees Brookfield Asset Management, Inc. and its affiliates, a controlling stockholder, for allegedly inadequate consideration. The trial court held that Plaintiffs did not state direct claims under Tooley v. Donaldson, Lufkin & Jennette, Inc.,1 but did state direct claims predicated on a factual paradigm "strikingly similar" to that of Gentile v. Rossette,2 and that Gentile was controlling here. Appellants contend that Gentile is inconsistent with Tooley and that this Court's decision in Gentile has created confusion in the law and therefore ought to be overruled.

] Overruling a precedent of this Court should only occur after a full and fair presentation and searching inquiry has been made of the justifications for such judicial action. Having now engaged in such inquiry after a full and fair presentation of the issues by the parties, and for the reasons set forth herein, we now overrule Gentile. Accordingly, we REVERSE the judgment below, not because the Court [**3]  of Chancery erred, but rather, because the Vice Chancellor correctly applied the law as it existed, recognizing that the claims were exclusively derivative under Tooley, and that he was bound by Gentile.

I. Relevant Facts and Procedural Background3

A. The Parties

Nominal Defendant Below TerraForm Power, Inc. ("TerraForm" or the "Company") was, at the time of the proceedings below, a publicly traded Delaware corporation with its principal place of business in New York City. TerraForm acquired, owned, and operated solar and wind assets in North America and Western Europe.4 The Company's common stock traded on the NASDAQ Stock Market under the ticker symbol "TERP."

Appellant Brookfield Asset Management, Inc. ("Brookfield") is a Canadian corporation headquartered in Toronto. Brookfield is an alternative asset manager that primarily conducts business through subsidiaries.5 At the time the Complaint  [*1256]  was filed, Brookfield and its affiliates beneficially owned 61.5 percent of TerraForm.

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261 A.3d 1251 *; 2021 Del. LEXIS 291 **

BROOKFIELD ASSET MANAGEMENT, INC., ORION US HOLDINGS 1 L.P., BROOKFIELD BRP HOLDINGS (CANADA) INC., BRIAN LAWSON, HARRY GOLDGUT, RICHARD LEGAULT, SACHIN SHAH, and JOHN STINEBAUGH, Defendants-Below, Appellants/Cross-Appellees, v. MARTIN ROSSON and CITY OF DEARBORN POLICE AND FIRE REVISED RETIREMENT SYSTEM (CHAPTER 23), Plaintiffs-Below, Appellees/Cross-Appellants.

Subsequent History: Case Closed October 7, 2021.

Prior History:  [**1] Court Below: Court of Chancery of the State of Delaware. C.A. No. 2019-0757.

Upon appeal from the Court of Chancery.

In re TerraForm Power, Inc. Stockholders Litig., 2020 Del. Ch. LEXIS 328, 2020 WL 6375859 (Del. Ch., Oct. 30, 2020)

Disposition: REVERSED.

CORE TERMS

stockholders, derivative, special injury, dilution, stock, private placement, offering, shares, overpayment, shareholders, controlling stockholder, Backstop, percent, voting power, Plaintiffs', merger, issuance, per share, Holdings, rights, harmed, injury to a corporation, common stock, overrule, cases, derivative claim, fiduciary duty, affiliates, confusing, minority stockholder

Governments, Courts, Judicial Precedent, Business & Corporate Law, Actions Against Corporations, Derivative Actions, Enforcement of Corporate Rights, Civil Procedure, Class Actions, Ownership Requirement, Procedural Matters, Appeals, Standards of Review, De Novo Review, Justiciability, Standing, Personal Stake, Mergers & Acquisitions Law, Mergers, Duties & Liabilities of Shareholders, Shareholder Actions, Direct Actions, Shareholder Duties & Liabilities, Controlling Shareholders, Fiduciary Duties, Duties & Liabilities of Directors & Officers, Management Duties & Liabilities, Fiduciary Duties, Duty to Third Parties, Rights of Dissenting Shareholders, Questions of Fact & Law, Legislation, Interpretation, Rehearings in Appellate Courts, Appellate Jurisdiction, Interlocutory Orders, Certified Questions