Case Title: In Re General Motors (Hughes) Shareholders

Citation: 

Docket Number: 260, 2005

State: delaware

Court: Delaware Supreme Court

Date: 2006-03-20T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
IN RE GENERAL MOTORS   
§  
(HUGHES) SHAREHOLDER  
§   No. 260, 2005 
LITIGATION, 
 
 
 
§   Court Below – Court of Chancery  
 
 
 
 
 
 
§   of the State of Delaware, 
 
 
 
 
 
 
§   in and for New Castle County 
 
 
 
 
 
 
§   C.A. No. 20269-NC 
 
 
 
 
 
   Submitted:  December 21, 2005 
 
 
 
 
      Decided:  March 20, 2006 
 
Before STEELE, Chief Justice, HOLLAND and RIDGELY, Justices. 
 
 
Upon appeal from the Court of Chancery.  AFFIRMED.   
 
 
Michael Hanrahan, Esquire (argued) and Paul A. Fioravanti, Jr., 
Esquire, Prickett, Jones & Elliott, P.A., Wilmington, Delaware, Jay W. 
Eisenhofer, Esquire, Geoffrey C. Jarvis, Esquire (argued), James R. Banko, 
Esquire and Brad deLeeuw, Esquire, Grant & Eisenhofer, P.A., Wilmington, 
Delaware, co-counsel for plaintiffs-appellants. 
 
 
R. Franklin Balotti, Esquire, Lisa A. Schmidt, Esquire, Srinivas M. 
Raju, Esquire, Richards, Layton & Finger, Wilmington, Delaware, and 
Robert J. Kopecky, Esquire (argued), Kirkland & Ellis, Chicago, Illinois, for 
defendant-appellee, General Motors Corporation and individual defendants-
appellees. 
 
 
Edward P. Welch, Esquire (argued), Edward B. Micheletti, Esquire, 
Seth M. Beausang, Esquire, T. Victor Clark, Esquire and Jenness E. Parker, 
Esquire, Skadden, Arps, Slate, Meacher & Flom, Wilmington, Delaware, for 
defendant-appellee/cross-appellant, The News Corporation Limited. 
 
 
 
 
HOLLAND, Justice: 
 
In this appeal, we affirm the final judgments that were entered by the 
Court of Chancery.  Wyser-Pratte Management Co., Inc., Robert La Marchi, 
Ronald Young and George Silverman (the Plaintiffs), instituted this lawsuit 
against the defendant, General Motors Corporation (“GM”) and the 
defendant, The News Corporation Limited (“TNCL”),1 challenging a series of 
transactions by which TNCL acquired a significant interest in Hughes 
Electronics Corporation (“Hughes”).2  Hughes was previously a wholly-
owned subsidiary of GM. The individuals who were directors of GM at the 
relevant times have also been named as defendants (the “Individual” or 
“Director” defendants).3  The Plaintiffs were at all relevant times holders of 
GM’s Class H Common Stock (“GMH”), which was a “tracking stock” 
representing the financial performance of Hughes while Hughes was wholly-
owned by GM.   
                                          
 
1 TNCL is a South Australian corporation headquartered in New South Wales, Australia.   
2 Hughes was renamed The DIRECTV Group, Inc. on March 16, 2004.  The Court of 
Chancery and the Complaint referred to the entity as “Hughes.”  For purposes of 
consistency, we also use “Hughes” in this opinion.   
3 The Individual or Director defendants are:  G. Richard Wagoner, Jr. (“Wagoner”), John 
F. Smith, Jr. (“Smith”), Percy N. Barnevik (“Barnevik”), John H. Bryan (“Bryan”), 
Armando M. Codina (“Codina”), George M. C. Fisher (“Fisher”), E. Stanley O’Neal 
(“O’Neal”), Echard Pfeiffer (“Pfeiffer”), Alan G. Lafley (“Lafley”), Karen Katen 
(“Katen”), Philip A. Laskaway (“Laskaway”), Nobuyki Idei (“Idei”), and Lloyd D. Ward 
(“Ward”).   
The Court of Chancery granted the motions to dismiss brought by GM 
and the Director defendants.4  The Court of Chancery held that the revised 
Complaint, as amended, fails to state a claim upon which relief can be granted 
as to GM and the Director defendants.  The Court of Chancery also granted 
TNCL’s motion to dismiss for the same reason.  At the same time, however, 
the Court of Chancery denied TNCL’s motion to dismiss for lack of personal 
jurisdiction and improper service of process.   
Challenged Transactions5 
 
The split-off of Hughes was accomplished in a series of transactions 
and announced to the public for the first time on April 9, 2003.  Five days 
before the announcement, GM, as the 100% shareholder, caused Hughes to 
amend its certificate of incorporation to increase the number of authorized 
shares of Hughes common stock and Hughes Class B common stock from 1 
million shares to 2.5 billion shares.6  Several other amendments were also 
made, e.g., an “excess shares” provision was added to the certificate of 
incorporation and Hughes’ board of directors was staggered.7 
                                          
 
4 This brief summary is taken from the Court of Chancery’s opinion.  In re General 
Motors S’holder Litig., 2005 WL 1089021 (Del. Ch. May 4, 2005). 
5 Compl. ¶ 2. 
6 Id. at  ¶ 4. 
7 Id.  
 
Just before the split-off of Hughes was accomplished, Hughes paid a 
special dividend to its sole shareholder, GM, of $275 million in cash.8  The 
split-off occurred by GM’s redemption of each GMH share in exchange for 
one share of Hughes’ common stock, shares which Hughes had previously 
issued to GM.9  GM sold its economic interest in Hughes to TNCL in the form of 
Hughes Class B common stock.10  GM received a combination of cash ($3.1 
billion) and stock (28.6 million News Corp. Preferred American Depository 
Shares (“News ADSs”)) from TNCL.11  The News ADSs were valued at 
approximately $1.0 billion, bringing the total compensation from TNCL to 
GM to $4.1 billion.12  Including the $275 million dividend, GM received a 
total of $4.375 billion in compensation for divesting itself of Hughes, with 
$3.375 billion of that amount in cash.13 
 
Immediately following the foregoing transactions, TNCL acquired an 
additional interest in Hughes via the merger of a subsidiary of TNCL into 
Hughes (the “Merger”), leaving TNCL with approximately a 34% interest in 
                                          
 
8 Id. ¶¶ 6, 66-89. 
9 According to the Complaint, GM voted those 1.4 billion Hughes shares in favor of the 
merger between Hughes and the TNCL subsidiary before distributing them to the GMH 
shareholders.  Id. ¶¶ 117, 13. 
10 Id. ¶ 18. 
11 Id.  
12 Id.   
13 Id. ¶ 12. 
Hughes.14  The former GMH shareholders therefore received a combination of 
Hughes common stock and News ADSs in exchange for their GMH shares.15  
TNCL later transferred its interest in Hughes to another subsidiary of TNCL, 
Fox Entertainment.16 
Revised Amended Complaint 
 
The operative complaint in this action is the Revised Amended 
Consolidated Class Action Complaint (“Complaint”), filed on May 7, 2004.  
It is ninety-seven pages long and, with more than 200 paragraphs, alleges 
seven claims.  All of the claims except for Count VII are alleged against GM 
and the Director defendants. Count I is for breach of the duty of loyalty and 
unjust enrichment in the payment of the special dividend. Count II is for 
breach of the duty of loyalty in failing to deal fairly with the GMH 
shareholders and compensate them fairly in the transactions. Count III is for 
breach of the duty of loyalty in manipulating the shareholder vote. Count IV 
is for breach of the duty of disclosure. Count V is for breach of GM’s 
Restated Certificate of Incorporation, Article Seventh. Count VI is for breach 
of GM’s Restated Certificate of Incorporation, Article Fourth. Count VII is 
                                          
 
14 Via the merger, TNCL exchanged News ADSs for 17.5% of the Hughes common stock 
held by the former GMH shareholders.  Id. ¶¶ 9-10. 
15 Id. ¶ 11. 
16 Id. ¶ 10. 
alleged against TNCL for aiding and abetting a breach of fiduciary duty by 
GM and the Director defendants. 
Plaintiffs’ Contentions 
 
In this proceeding, the Court of Chancery held that the effect of 
shareholder ratification was to maintain the business judgment rule’s 
presumptions.17  According to the Plaintiffs, the “lynchpin of the Court of 
Chancery’s opinion dismissing all claims was stockholder ratification.”  The 
Plaintiffs argue that the Court of Chancery committed numerous errors in 
granting dismissal based on ratification, including (i) relying on facts outside 
of the Complaint, (ii) accepting a manipulated, uninformed vote by 
interested stockholders, (iii) ignoring claims against GM for breach of 
fiduciary duty and unjust enrichment, (iv) dismissing duty of loyalty claims 
based on ratification and (v) failing to apply the two-thirds vote requirement 
of Article Seventh of GM’s Certification of Incorporation.  According to the 
Plaintiffs, the Court of Chancery also misapplied the motion to dismiss 
standards in considering plaintiffs’ claims against TNCL.  We have 
concluded that none of the Plaintiffs’ arguments are meritorious. 
                                          
 
17 See also Solomon v. Armstrong, 747 A.2d 1098, 1124 (Del. Ch. 1999); In re GM Class 
H S’holders Litig., 734 A.2d 611, 616 (Del. Ch. 1999). 
TNCL’s Cross-Appeal 
 
TNCL cross-appeals from the Court of Chancery’s May 4, 2005 
decision denying its motion to dismiss the Amended Complaint for lack of 
personal jurisdiction and improper service.  The Court of Chancery denied 
TNCL’s motion to dismiss the Amended Complaint for lack of personal 
jurisdiction and improper service pursuant to Court of Chancery Rules 
12(b)(2) and 12(b)(4).  TNCL argues that this Court should affirm the Court 
of Chancery’s decision to dismiss the Amended Complaint pursuant to Rule 
12(b)(6); or, in the alternative, this Court should reverse the Court of 
Chancery’s decision to deny TNCL’s motion to dismiss pursuant to Rules 
12(b)(2) and 12(b)(4).  We have concluded that TNCL’s Rule 12(b)(6) 
motion to dismiss was properly granted.  Therefore, we do not reach the 
merits of its cross-appeal. 
Standard of Review 
 
This Court reviews de novo the dismissal of a complaint pursuant to 
Rule 12(b)(6).18 
 This Court recently summarized the criteria applicable to 
a Rule 12(b)(6) motion: 
The standards governing a motion to dismiss for failure to state 
a claim are well settled:  (i) all well-pleaded factual allegations 
are accepted as true; (ii) even vague allegations are “well-
pleaded” if they give the opposing party notice of the claim; 
                                          
 
18 Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001).  
(iii) the Court must draw all reasonable inferences in favor of 
the non-moving party; and (iv) dismissal is inappropriate unless 
the “plaintiff would not be entitled to recover under any 
reasonably conceivable set of circumstances susceptible of 
proof.”19 
 
 
In deciding a motion to dismiss under Rule 12(b)(6), a trial court must 
accept as true all of the well-pleaded allegations of fact and draw reasonable 
inferences in the plaintiff’s favor.20  A trial court is not, however, required to 
accept as true conclusory allegations “without specific supporting factual 
allegations.”21  Moreover, a trial court is required to accept only those 
“reasonable inferences that logically flow from the face of the complaint” 
and “is not required to accept every strained interpretation of the allegations 
proposed by the plaintiff.”22  We hold that the Court of Chancery properly 
applied these standards in granting all of the defendants’ Rule 12(b)(6) 
motions to dismiss. 
Matters Outside Complaint 
 
The Plaintiffs argue that the Court of Chancery committed legal error 
because it relied on matters outside of the Complaint in granting all of the 
defendants’ motions to dismiss.  The complaint generally defines the 
                                          
 
19 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (footnotes omitted). 
20 Malpiede v. Townson, 780 A.2d at 1082. 
21 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 65-66 (Del. 1995); see also 
Solomon v. Pathe Commc’ns Corp., 672 A.2d 35, 38 (Del. 1996).   
22 Malpiede v. Townson, 780 A.2d at 1083. 
universe of facts that the trial court may consider in ruling on a Rule 
12(b)(6) motion to dismiss.23  When the trial court considers matters outside 
of the complaint, a motion to dismiss is usually converted into a motion for 
summary judgment and the parties are permitted to expand the record.24  
Chancery Rule 12(b) provides: 
If, on a motion asserting the defense numbered (6) to dismiss 
for failure of the pleading to state a claim upon which relief can 
be granted, matters outside the pleading are presented to and 
not excluded by the Court, the motion shall be treated as one for 
summary judgment and disposed of as provided in Rule 56, and 
all parties shall be given reasonable opportunity to present all 
material made pertinent to such a motion by Rule 56. 
 
Accordingly, if a party presents documents in support of its Rule 12(b)(6) 
motion to dismiss and the trial court considers the documents, it generally 
must treat the motion as one for summary judgment.25  “Before a motion for 
summary judgment is ripe for decision, the non-movant normally should 
have an opportunity for some discovery.”26 
Nevertheless, in some instances and for carefully limited purposes, it 
may be proper for a trial court to decide a motion to dismiss by considering 
                                          
 
23 Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001); In re Santa Fe Pac. Corp. 
S’holder Litig., 669 A.2d 59, 65 (Del. 1995); In re Tri-Star Pictures, Inc., 634 A.2d 319, 
326 (Del. 1993). 
24 Malpiede v. Townson, 780 A.2d at 1090. 
25 Id.; In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d at 68-69; In re Tri-Star 
Pictures, Inc., 634 A.2d 319, 326 (Del. 1993). 
26 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d at 69; Malpiede v. Townson, 780 
A.2d at 1090.  See Ch. Ct. R. 56(e); Mann v. Oppenheimer & Co., 517 A.2d 1056, 1060 
(Del. 1986).   
documents referred to in a complaint.27  The trial court may also take judicial 
notice of matters that are not subject to reasonable dispute.28  In this case, the 
Defendant directors submit that the Court of Chancery’s decision properly 
rested on:  the insufficiency of the allegations in the Complaint; the entire 
contents of the Consent Solicitation alleged in the Complaint to be 
materially misleading; and facts subject to judicial notice.  We have 
concluded that the Court of Chancery properly applied this Court’s prior 
“motion to dismiss” precedents in considering matters outside of the 
Complaint.29   
Entire Consent Solicitation 
 
The Complaint challenged the adequacy of disclosures to GM’s 
stockholders in the Consent Solicitation.  When a complaint partially quotes 
or characterizes what a disclosure document says, a defendant is entitled to 
show the trial court the actual language or the complete context in which it 
                                          
 
27 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d at 69. 
28 Delaware Rule of Evidence 201(b) provides:  “A judicially noticed fact must be one 
not subject to reasonable dispute in that it is either (1) generally known within the 
territorial jurisdiction of the trial court or (2) capable of accurate and ready determination 
by resort to sources whose accuracy cannot reasonably be questioned.” 
29 See, e.g., Malpiede v. Townson, 780 A.2d 1075 (Del. 2001); Brehm v. Eisner, 746 A.2d 
244 (Del. 2000); McMullin v. Beran, 765 A.2d 910 (Del. 2000); Solomon v. Armstrong, 
747 A.2d 1098 (Del. Ch. 1999); Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135 
(Del. 1997); Solomon v. Pathe Commc’ns Corp., 672 A.2d 35 (Del. 1996); In re Santa Fe 
Pac. Corp. S’holder Litig., 669 A.2d 59 (Del. 1995).  
was used.30  Similarly, where a complaint alleges the omission of some 
material fact, a defendant is entitled to show that the disclosure was made in 
the document.31  Therefore, the Court of Chancery properly considered the 
entire contents of the Consent Solicitation in determining whether the 
allegations in the Complaint stated a claim that the document was materially 
misleading.32  The Court of Chancery was not obligated to accept as true 
allegations that misstated or mischaracterized the entire Consent 
Solicitation.33   
It is well established that “a claim may be dismissed if allegations in 
the complaint or in the exhibits incorporated into the complaint effectively 
negate the claim as a matter of law.34  “Without the ability to consider the 
document at issue in its entirety, ‘complaints that quoted only selected and 
misleading portions of such documents could not be dismissed under Rule 
12(b)(6) even though they would be doomed to failure.’”35  The Court of 
                                          
 
30 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 69-70 (Del. 1995). 
31 Malpiede v. Townson, 780 A.2d 1075, 1091-92 (Del. 2001); In re Santa Fe Pac. Corp. 
S’holder Litig., 669 A.2d 59 (Del. 1995).   
32 See, e.g., In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d at 69-70. 
33 Malpiede v. Townson, 780 A.2d 1075 (Del. 2001); In re Santa Fe Pac. Corp. S’holder 
Litig., 669 A.2d 59 (Del. 1995).   
34 Malpiede v. Townson, 780 A.2d at 1083. 
35 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d at 70 (quoting Kramer v. Time 
Warner, Inc., 937 F.2d 767, 774 (2d Cir. 1991).  
Chancery properly applied these standards when it considered the entire 
Consent Solicitation in this proceeding.36 
Judicial Notice Proper 
 
In deciding a motion to dismiss, the Court of Chancery acknowledged 
that it is generally limited to the factual allegations contained in the 
Complaint.37  The Court of Chancery concluded, however, that it was 
entitled to take judicial notice of “publicly available facts that show that both 
classes of GM stockholders voted to approve the Hughes Transactions.”  
Those “publicly available facts” consist of GM’s statements in a Form 10-Q 
that it filed with the Securities and Exchange Commission (“SEC”), 
asserting what GM claimed were the results of the vote.38  In reaching that 
conclusion, the Court of Chancery stated: 
Because there are no allegations in the Complaint that challenge 
whether the conditions necessary to consummate the transaction 
                                          
 
36 Malpiede v. Townson, 780 A.2d 1075 (Del. 2001); In re Santa Fe Pac. Corp. S’holder 
Litig., 669 A.2d 59 (Del. 1995).   
37 McMullin v. Beran, 765 A.2d 910, 916 (Del. 2000). 
38 On October 3, 2003, the holders of a majority of both GM and GMH stock voted 
overwhelmingly to approve and ratify the Hughes Transactions.  See GM SEC Form 10-
Q, filed 11/13/03.  Specifically, 77% of the GMH stockholders voted to ratify the new 
Hughes certificate of incorporation, including the “excess stock” and staggered board 
provisions that TNCL had negotiated for, as compared to the 2% that responded to the 
Consent Solicitation by voting against the transaction or abstaining.  Id.  In addition, 
77.1% of the GMH stockholders voted to ratify the Split-Off, including the $275 million 
Special Dividend, as compared to the 1.9% that responded to the Consent Solicitation by 
voting against the transaction or abstaining.  Id.  Moreover, 75.5% of the GMH 
stockholders voted to ratify the Stock Purchase and the Merger, as compared to the 3.5% 
that responded to the Consent Solicitation by voting against the transaction or abstaining.  
Id.  On December 22, 2003, the Hughes Transactions closed. 
were actually met, (i.e., a majority vote of holders of each class 
of GM stock), those facts are not subject to reasonable dispute 
and it is appropriate to take judicial notice of the voting 
percentages of each class of GM stock. 
 
 
This Court has recognized that, in acting on a Rule 12(b)(6) motion to 
dismiss, trial courts may consider hearsay in SEC filings “to ascertain facts 
appropriate for judicial notice under [Delaware Rule of Evidence] 201.”39  
The Court of Chancery recognized, however, that it could only take judicial 
notice of facts “not subject to reasonable dispute.”40  According to the 
Plaintiffs, the results of the vote are “subject to reasonable dispute” because 
GM relies solely on its own “self-serving 10-Q” regarding the vote.   
The Plaintiffs’ argument that there was a “reasonable dispute” about 
the shareholder vote is contradicted by the Complaint.  The Complaint 
acknowledges that GM could not close the transactions unless it obtained the 
required approvals by a majority vote of holders of each class of GM stock.  
The Complaint alleges that the transactions, which were conditioned on 
those majority approvals, actually closed on December 22, 2003.  
Consequently, the relevant allegations in the Complaint were a three-fold 
attack that assumed the majority votes had been cast in favor of the 
transactions:  first, that the majority votes were uninformed; second, that the 
                                          
 
39 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 70 n.9 (Del. 1995). 
40 D.R.E. 201 (emphasis added); see also In re Santa Fe Pac. Corp. S’holder Litig., 669 
A.2d at 70. 
majority votes were manipulated; and third, that a supermajority vote rather 
than a majority vote was actually required.   
The record supports the Court of Chancery’s determination that there 
are no allegations in the Complaint that challenge “whether the conditions 
necessary to consummate the transaction were actually met (i.e., a majority 
vote of holders of each class of GM stock).”  Moreover, at the oral argument 
in the Court of Chancery, the Plaintiffs’ counsel stated that they “have no 
reason to dispute that [defendants’] disclosures regarding their vote totals are 
correct.”  Under these two circumstances, it was proper for the Court of 
Chancery to take judicial notice of the publicly available fact, reported by 
GM in a Form 10-Q filed with the SEC, that a majority of both classes of 
GM stockholders voted to approve the Hughes transactions.41  
Discovery Properly Denied 
In this Court, in a footnote, the Plaintiffs assert they could not contest 
that a majority of both classes of GM shareholders approved the transaction 
because they were “denied discovery regarding the vote.”  This Court has 
frequently stated that plaintiffs must use the “tools at hand” to develop the 
                                          
 
41 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d at 70 n.9.  See also Solomon v. 
Armstrong, 747 A.2d 1098, 1109, 1110 n.20 (Del. Ch. 1999); In re GM Class H 
S’holders Litig., 734 A.2d 611, 615 (Del. Ch. 1999). 
necessary facts for pleading purposes.42  In this case, in a letter to the 
Plaintiffs’ attorney, the Court of Chancery noted it had little regard for the 
Plaintiffs’ discovery requests when “they seemed either unable or simply 
unwilling to use even the most basic means of gathering publicly available 
information.”  We quote that letter in its entirety because it reflects the Court 
of Chancery’s concerns about the Plaintiffs’ initial efforts to enjoin a 
“proposed transaction” that had already closed: 
Dear [Plaintiffs’ counsel]: 
 
 
I am concerned with the proposed amended complaint.  
Since the filing of the original complaint in this action, several 
events relating to this dispute have transpired.  First, 
shareholders appear to have approved the deal.  Second, the 
FCC approved the transaction subject to known conditions.  
Third, the transaction was consummated.  Reading the amended 
complaint, however, gives one the clear impression that this 
deal has not closed.  In fact, the amended complaint rather 
bizarrely requests this Court to enjoin the “proposed 
transaction.” 
 
 
While plaintiffs’ reservations regarding the consent 
solicitation and record date are duly noted, I cannot fathom how 
other facts could be the subject of dispute.  For example, 
plaintiffs feign ignorance of the FCC’s approval of the Hughes 
transaction in their reply brief of January 28, 2004, when after 
only seconds of [I]nternet research I was able to ascertain those 
conditions.  The FCC provided public notice of its conditioned 
approval on December 19, 2003.  On the same web page where 
the FCC’s conditions are provided, there is a notice of 
“consummation” filed by GM on December 23, 2003.   
 
                                          
 
42 Brehm v. Eisner, 746 A.2d 244, 266 (Del. 2000). 
 
You stated in a letter to opposing counsel that you were, 
as of December 30, 2003 (when plaintiffs moved to amend the 
complaint), “frankly unaware that the transactions had closed.”  
I assume, however, that plaintiffs are now aware of the salient 
facts.  Given this newfound knowledge, is there any good-faith 
basis for continuing to ignore the fact that this deal has been 
consummated?  How is the integrity of the judicial process 
enhanced by proceeding with a complaint that is misleading? 
 
The Plaintiffs did not provide the Court of Chancery, and have not 
provided this Court, with any good faith basis for questioning the vote totals 
reported by GM in a Form Q-10 filed with the SEC.  In Malpiede v. 
Townson, this Court noted that a party may be entitled to discovery when the 
trial court considers a matter outside of the complaint in ruling on a motion 
to dismiss and that motion to dismiss will be converted into a motion for 
summary judgment by “clear force of the pleading rules.”43  However, where 
a plaintiff has no good faith basis for challenging the authenticity or 
legitimacy of an extraneous fact, that is otherwise subject to judicial 
notice,44 the trial court may properly consider such fact in ruling on a motion 
to dismiss without affording the plaintiff an opportunity to take discovery.   
Complaint Properly Dismissed 
 
We have concluded that the Court of Chancery properly considered 
the Consent Solicitation in its entirety and properly took judicial notice of 
                                          
 
43 Malpiede v. Townson, 780 A.2d 1075, 1091-92 (Del. 2001). 
44 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 70 n.9 (Del. 1995). 
the shareholder votes.  We have concluded that the Plaintiffs’ discovery 
request was properly denied.  We have also concluded that the Court of 
Chancery then properly applied well-settled principles of Delaware law to 
the facts that were properly before it when it decided the other substantive 
issues that the Plaintiffs challenge in this appeal.  Accordingly, we have 
determined that the final judgments of the Court of Chancery should be 
affirmed on the basis of and for the reasons assigned by the Court of 
Chancery in its well-reasoned decision dated May 4, 2005.45 
Conclusion 
 
The final judgments of the Court of Chancery, that granted all of the 
defendants’ Rule 12(b)(6) motions to dismiss, are affirmed. 
 
 
                                          
 
45 In re General Motors S’holder Litig., 2005 WL 1089021 (Del. Ch. May 4, 2005).