Gaines v. Narachi, et al.
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COURT OF CHANCERY OF THE STATE OF DELAWARE JOHN W. NOBLE VICE CHANCELLOR 417 SOUTH STATE STREET DOVER, DELAWARE 19901 TELEPHONE: (302) 739-4397 FACSIMILE: (302) 739-6179 September 30, 2011 Jessica Zeldin, Esquire Rosenthal, Monhait & Goddess, P.A. 919 North Market Street, Suite 1401 Wilmington, DE 19801 Stephen C. Norman, Esquire Potter Anderson & Corroon LLP 1313 North Market Street Wilmington, DE 19801 Jon E. Abramczyk, Esquire Morris, Nichols, Arsht & Tunnell LLP 1201 North Market Street Wilmington, DE 19801 Re: Gaines v. Narachi, et al. C.A. No. 6784-VCN Date Submitted: September 27, 2011 Dear Counsel: widely-criticized merger1 and has moved to expedite this action to facilitate his motion for a preliminary injunction to stop the transaction.2 1 2 The Plaintiff reports that the press has called the AMAG- -merger in Shareholders of Allos have also challenged the transaction. That action has been expedited, with a concurrence of all parties. , C.A. No. 6714VCN. Gaines v. Narachi, et al. C.A. No. 6784-VCN September 30, 2011 Page 2 The Plaintiff asserts three grounds for interim injunctive relief. First, under Revlon,3 directors have run afoul of Unocal4 by seeking to entrench themselves by entering rejecting a solicitation from a third party interested in acquiring AMAG. Finally, the Plaintiff asserts that the disclosures a are inadequate, primarily because of the insufficiency of the cash flow information provided. acquisition litigation, it remains the Plai burden to demonstrate a sufficiently colorable claim and a sufficient possibility of irreparable injury. The decision to expedite should not be made without recognizing the costs that accompany expedited proceedings.5 3 Revlon v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986). Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985); see also In re Santa Fe Pac. , 669 A.2d 59 (Del. 1995). 5 Giammargo v. Snapple Beverage Corp., 1994 WL 672698, at *2 (Del. Ch. Nov. 15, 1994). 4 Gaines v. Narachi, et al. C.A. No. 6784-VCN September 30, 2011 Page 3 The Defendants not only challenge each of the grounds asserted by the Plaintiff as justification for expedition but also raise a laches argument. The Defendants assert that Plaintiff simply waited too long to pursue his claims to be granted expedition. Revlon acquisitions case law. It, however, only applies when, inter alia, the corporation seeks to sell itself or when the proposed transaction would result in a sale or change of control. Here, AMAG is the acquirer of Allos, or so the transaction anticipates. AMAG is not selling itself; there will be no change of control, even if the transaction is concluded. Whether the AMAG board acted reasonably in negotiating its deal with Allos is not an action for this Court to review with scrutiny, especially because a majority of the AMAG board is independent and disinterested. In any event, the Plaintiff has not shown that his reliance on Revlon has given rise to a sufficiently colorable claim. Second, Unocal measures initiated by a board in response to some perceived threat. None of the actions taken to complete the merger which are now challenged by Plaintiff was Gaines v. Narachi, et al. C.A. No. 6784-VCN September 30, 2011 Page 4 undertaken while any external threat was being considered. Because the thirdparty offeror was not involved as of the time of the merger agreement (or before), the deal protection terms were not in response to a takeover threat. As intended to protect the deal from intervention by others, the deal protections are, from before the Court, such as its conclusion that the thirdwhether it would be funded, was somehow superior to the choice to go through with the Allos Acquisition. Finally, it frequently is not difficult to find facts that have been omitted from disclosures seeking approval by shareholders. In order to be actionable, however, those disclosures, as omitted or misstated, must have been material. The Plaintiff has been unable to identify any disclosures that might fall into that category except possibly with respect to certain cash flows. Although perhaps not entirely clear, it Gaines v. Narachi, et al. C.A. No. 6784-VCN September 30, 2011 Page 5 appears that those cash flows were in fact discussed in the S-4.6 Thus, there are no colorable disclosure claims. With the conclusion that the Plaintiff has not set forth any grounds justifying the doctrine of laches. denied.7 IT IS SO ORDERED. Very truly yours, /s/ John W. Noble JWN/cap cc: Register in Chancery-K 6 The S-4, at 77-90, reviews the cash flows as used by the investment bankers although the dis . 7 The AMAG-party acquirer might later provide a basis for expedition is something which the Court, of course, cannot anticipate. Simply to be developments warrant.
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