RBC Capital Mkts., LLC v. Jervis

129 A.3d 816 (Del. 2015)



The Supreme Court of Delaware has stated that corporate fiduciaries can breach their duty of disclosure under Delaware law by making a materially false statement, by omitting a material fact, or by making a partial disclosure that is materially misleading. The court has also observed that to state a claim for breach by omission of any duty to disclose, a plaintiff must plead facts identifying (1) material, (2) reasonably available (3) information that (4) was omitted from the proxy materials. For an omission to be material, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available. Stated another way, omitted facts are material if there is a substantial likelihood that a reasonable stockholder would consider them important in deciding how to vote. Materiality does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote, only that such reasonably available information would have impacted upon a stockholder's voting decision. But omitted facts are not material simply because they might be helpful.


This appeal arises out of a class action by stockholders (the "Class") against defendants, a board of directors and its financial advisors, which included claims for breach of fiduciary duty in connection with a merger. Rural is a Delaware corporation headquartered in Scottsdale, Arizona. Its ambulance business offers emergency and non-emergency transports under contracts with government organizations, hospitals, nursing homes, and other healthcare entities. Rural's shares traded on NASDAQ from July 1993 until the merger closed on June 30, 2011. Upon closing, each publicly held share of Rural common stock was converted into the right to receive $17.25 in cash. Before the merger, the board of directors had seven members: Christopher S. Shackelton, Eugene I. Davis, Earl P. Holland, Henry G. Walker, Robert E. Wilson, Conrad A. Conrad, and Michael P. DiMino (the "Board"). Of the Board's seven members, the trial court, in Rural I, determined that Wilson, Davis, Holland, Conrad, Walker, and Shackelton were "facially, independent, disinterested, outside directors." DiMino was Rural's President and CEO. Wilson did not vote on the merger. Shackelton, Davis, and Walker comprised the special committee (the "Special Committee" or "Committee"). Shackelton was its Chair. The trial court found that Shackelton played the most significant role, and that Davis and Walker generally deferred to Shackelton. On April 8, 2013, all parties filed pre-trial opening briefs and all defendants were headed for trial. On April 25, 2013, plaintiffs advised the Court of Chancery of an agreement in principle to settle with defendant Moelis, secondary financial advisor to the Special Committee of the Board, for a payment of $5 million to the Class. On April 29, 2013, the individual defendants advised the Court of Chancery that they had also reached an agreement in principle to settle for a contemplated payment of $6.6 million to the Class. Thus, the case proceeded to trial solely against defendant RBC, financial advisor to the Special Committee.


Did the defendants breach their fiduciary duties?




Judgment affirmed. Corporate board's overall course of conduct failed Revlon scrutiny, in connection with the sale of a company, as the evidence fully supported the trial court's findings that the solicitation process was structured and timed in a manner that impeded interested bidders from presenting potentially higher value alternatives/ Individual defendants breached their fiduciary duties by engaging in conduct that fell outside the range of reasonableness, and this was a sufficient predicate for a finding of liability for aiding and abetting a breach of fiduciary duty against RBC. The evidence supported the trial court's conclusion that RBC purposely misled the board so as to proximately cause the board to breach its duty of care. The lower court properly exercised its broad discretionary powers in fashioning a remedy and making its award of damages.

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