Securities Law Alert
In This Edition:• Sixth Circuit: “Prudent-Process” Standard Applies to ERISA Claims Challenging Investment Decisions by
Fiduciaries of Employee Stock Ownership Plans• Central District of California: Rule 14e-3’s Contemporaneous Trading Requirement Can Be Met Even If(1) Defendants Did Not Purchase Stock Directly But Caused a Third Party to Purchase Stock; and(2) Defendants Traded Stock Options, Not Common Stock• Delaware Chancery Court: Under Corwin, Business Judgment Rule Governs Transactions Approvedby a Fully Informed Vote of a Majority of Disinterested Stockholders, and Plaintiffs Must Allege Gross
Negligence to Survive Dismissal
November 2015

Sixth Circuit: “PrudentProcess” Standard Applies to
ERISA Claims Challenging
Investment Decisions by
Fiduciaries of Employee Stock
Ownership Plans

Simpson Thacher’ssecurities litigationteam has “a wellestablished reputation for
its handling of high-value
litigation”—Chambers USA
2015

On November 10, 2015, the Sixth Circuit
applied a “prudent-process standard” inconsidering ERISA claims brought byinvestors in the GM Common Stock Fund,an employee stock ownership plan (“ESOP”),
against State Street Bank, the ESOP’s
fiduciary. Pfeil v. State Street Bank and Trust
Company, 2015 WL 6874769 (6th Cir. 2015)(Boggs, J.). The court found that plaintiffs
had “failed to demonstrate a genuine issueof material fact concerning the methods ofState Street’s investigation of the merits ofinvesting in GM, or the appropriateness of
those methods,” and therefore affirmed the
district court’s grant of summary judgment toState Street.
The Sixth Circuit further held that under
the Supreme Court’s decision in Fifth Third
Bancorp v. Dudenhoeffer, 134 S. Ct. 2459
(2014), “a plaintiff claiming that an ESOP’s

Simpson Thacher & Bartlett LLP

investment in a publicly traded security was
imprudent must show special circumstances
to survive a motion to dismiss.”

Background
The purpose of the GM Common Stock Fund“was to enable [p]articipants to acquire an
ownership interest in General Motors.” It was
one of various investment options offered to
GM employees.
State Street, in its capacity as fiduciary of the
GM Stock Fund, had in place “a formal, threetiered structure and process for the exclusive
purpose of monitoring and evaluating” the
GM Stock Fund, as well as the other plans
under State Street’s management. Between
January 2008 and March 31, 2009, GM’s
three committees discussed GM stock inthe context of the GM Stock Fund 58 times.
Notwithstanding “[e]vents in 2008 [that]imperiled GM’s ability to continue as agoing concern,” State Street’s Stock Review
Committee “actively decided not to stopbuying [GM stock for the GM Stock Fund],let alone to sell.” However, the Stock Review
Committee did “decide[ ] to maintain a levelof internal scrutiny on the investment.”

1

It was not until November 2008 that State
Street ceased buying GM stock for the GM
Stock Fund. On March 31, 2009, State Street
made the decision to divest the plan of GM
stock; that process was completed by April
24, 2009.
In June 2009, plaintiffs brought suit alleging
that State Street had failed to manage
the GM Stock Funds’ assets prudently,
as required under ERISA. In April 2014,
the Eastern District of Michigan granted
summary judgment to State Street basedon the presumption of prudence set forth in
Moench v. Robertson, 62 F.3d 553 (3d Cir.
1995). Two months later, the Supreme Courtin Dudenhoeffer held that ESOP fiduciaries
are not entitled to a special presumption ofprudence. The Dudenhoeffer Court stated that“the same standard of prudence applies to all
ERISA fiduciaries, including ESOP fiduciaries,
except that an ESOP fiduciary is under noduty to diversity the ESOP’s holdings.”
Following the Supreme Court’s decision in
Dudenhoeffer, plaintiffs appealed the district
court’s grant of summary judgment.

Sixth Circuit Applies a “PrudentProcess” Standard to State Street’s
Investment Decisions
On appeal, the Sixth Circuit explained thatin light of Dudenhoeffer, it could not apply
a presumption of prudence to State Street’s
investment decisions. The Sixth Circuit
instead “evaluate[d] State Street’s actions
according to a prudent-process standard.”
The court stated that this test “‘focus[es]… on whether the fiduciary engaged in areasoned decision-making process, consistent
with that of a prudent man acting in a like
capacity’” (quoting Tatum v. RJR Pension
Inv. Comm., 761 F.3d 346 (4th Cir. 2014)).
The Sixth Circuit noted that “‘courts havereadily determined that fiduciaries who
act reasonably—i.e., who appropriately
investigate the merits of an investment
decision prior to acting—easily clear this bar”
(quoting Tatum, 761 F.3d 346 (emphasis
added)).
Applying this “prudent-process” standard,
the Sixth Circuit found that “State Street[had] discussed GM stock scores of times
during the class period.” The court pointed
out that “State Street’s Independent Fiduciary
Committee [had] held more than forty

meetings during the [c]lass [p]eriod of lessthan nine months to discuss whether toretain GM stock.” In addition, State Street
had sought the advice of outside legal andfinancial advisors in making its investment
decisions. Given what the court found to be“the prudent process in which State Street
engaged,” the Sixth Circuit determinedthat plaintiffs had “failed to demonstrate agenuine issue as to whether State Street [had]satisfied its duty of prudence.”
Significantly, the Sixth Circuit found “themere fact that GM’s stock value decreased
after certain dates” on which State Street
continued to hold GM stock did not“affect [the court’s] judgment.” The courtemphasized that “State Street’s decisions
were not imprudent or unreasonable simply
because it could have made a different
decision in response to GM’s financial
difficulties.” The Sixth Circuit explained that it
had to “evaluate the prudence or imprudenceof State Street’s conduct as of ‘the time it
occurred,’ not ‘post facto.’”Sixth Circuit Holds That a Plaintiff
Asserting ERISA Claims Basedon the Alleged Imprudence of an
Investment in a Publicly-Traded
Security Must Show “Special
Circumstances” to Survive a Motion
to Dismiss
In Dudenhoeffer, the Supreme Court
stated that “where a stock is publicly
traded, allegations that a fiduciary shouldhave recognized from publicly available
information alone that the market was overor undervaluing the stock are implausible as a
general rule, at least in the absence of special
circumstances.” The Court explained that “afiduciary usually is not imprudent to assume
that a major stock market … provides the best
estimate of the value of the stocks traded on itthat is available to him.”
Relying on this language from theDudenhoeffer opinion, the Sixth Circuitin Pfeil held that “a plaintiff claiming thatan ESOP’s investment in a publicly tradedsecurity was imprudent must show special
circumstances to survive a motion todismiss.” The court noted that the Southern
District of New York recently reached thesame conclusion in In re Citigroup ERISA
Litig., 2015 WL 2226291 (S.D.N.Y. May 13,2015) (interpreting Dudenhoeffer to find that2

“fiduciaries may rely on the market price,absent any special circumstances affecting
the reliability of the market price”). The Sixth
Circuit reasoned that “[t]his rule accords
with Modern Portfolio Theory (MPT),”
which “rests on the understanding thatorganized securities markets are so efficient
at discounting securities prices that thecurrent market price of a security is highly
likely already to impound the informationthat is known or knowable about the future
prospects of that security.”
Applying this “special circumstances”
requirement, the Sixth Circuit deemed“implausible” plaintiffs’ contention that “State
Street’s investment strategy [had] failed tofunction as a prudent process [because] it did
not recognize ‘that the market was over- or
undervaluing’ GM common stock.” The court
found that plaintiffs had “failed to show a
special circumstance such that State Street
should not have relied on market pricing” ofGM stock in making its investment decisions.
The Sixth Circuit concluded that “State
Street’s actions were not actionably
imprudent,” and affirmed the district court’s
grant of summary judgment to State Street.

Judge White, Dissenting,Expresses Her View That an ESOP
Fiduciary’s Investment Decisions
May Be Actionably Imprudent
Even If the Fiduciary Conducted a
Reasonable Investigation
In a dissenting opinion, Judge Helene N.
White stated that “[o]ne can concede that themarket is generally efficient in pricing stocks
without concluding that all decisions to buy,sell or hold are therefore prudent.” She wrotethat “the fact that a stock’s price accuratelyreflects the company’s risk of failing does notmean that it is prudent to retain the stockas that possibility becomes more and morecertain and buyers are willing to pay less andless for a stake in the upside potential.”
With respect to the majority’s finding that“the process employed by State Street wasprudent as a matter of law,” Judge White
stated that she “might agree were it not for
the fact that [p]laintiffs [had] presented
evidence that the decision makers wereoperating under an incorrect standard.”
Judge White wrote that “[a] necessary partof a prudent decision-making process is theyardstick applied to the information yieldedby prudent investigation and consideration.”Central District ofCalifornia: Rule 14e-3’s
Contemporaneous Trading
Requirement Can Be Met
Even If (1) Defendants Did
Not Purchase Stock Directly
But Caused a Third Party
to Purchase Stock; and (2)Defendants Traded Stock
Options, Not Common Stock
Section 14(e) of the Securities Exchange Act
and corresponding SEC Rule 14e-3“prohibit[ ] trading while in possessionof nonpublic information in connection
with a tender offer.” Basile v. Valeant
Pharmaceutical Int’l, Inc., 2015 WL 7352005(C.D. Cal. 2015) (Carter, J.). “Private plaintiffs
may bring an insider suit only if they traded‘contemporaneously’ with the defendant”(quoting § 20A of the Exchange Act).
On November 9, 2015, the Central Districtof California held that the contemporaneoustrading requirement for insider trading claims
brought under Rule 14e-3 can be met even if
defendants caused a third party to purchasestock and then traded with that third party,
rather than buying stock in the market
directly. The court further held that stock
options are part of the “same class” of security
as common stock for purposes of § 20A’s
contemporaneous trading requirement.

Background
On February 25, 2014, Valeant
Pharmaceuticals International and hedge
fund management company Pershing Square
Capital Management, L.P., entered into a
relationship agreement to pursue a merger
between Valeant and Allergan. Over the next
several months, a newly-created Pershing
Square-owned entity, PS Fund 1, acquired
9.7% of Allergan’s shares through a seriesof transactions, including over-the-countercall options executed through Nomura
International plc, as well as through an
equity forward contract between PS Fund 1
and Nomura.
3

On April 21, 2014, PS Fund 1 publicly
disclosed its 9.7% stake in Allergan througha Schedule 13D filing. The following day,Valeant submitted an unsolicited merger
offer to Allergan. On June 17, 2014, Valeantannounced a tender offer for Allergan.
On December 16, 2014, plaintiffs who
had sold Allergan common stock between
February 25 and April 21, 2014 brought asecurities fraud class action against various
defendants, including Valeant, Pershing
Square, and PS Fund 1. Among other claims,
plaintiffs alleged that defendants had
engaged in insider trading in violation of§ 14(e) of the Securities Exchange Act andRule 14(e)-3. Defendants moved to dismiss
plaintiffs’ claims on the grounds that, interalia, plaintiffs could not meet § 20A’s
contemporaneous trading requirement for
insider trading claims.1

Court Finds PS Fund 1’s Private
Trades with Nomura May Be
Considered for Purposes of theContemporaneous Trading Analysis
Because PS Fund 1 Caused Nomura
to Purchase Allergan Stock within
the Meaning of Rule 14e-3
Defendants contended that PS Fund 1’s tradeswith Nomura could not be considered for
purposes of the contemporaneous trading
analysis. The court found that the “limited
authority on this issue suggest[ed] otherwise.”
The court explained that “Rule 14e-3 prohibits
an insider with nonpublic information
related to a tender offer from purchasing‘or caus[ing] to be purchased … any of suchsecurities … unless within a reasonable timeprior to any purchase or sale such informationand its source are publicly disclosed by press
release or otherwise’” (quoting Rule 14e-3(emphasis added)). The court determined that
“under the plain language of Rule 14e-3 andthe accompanying regulations, entities canbe held liable for causing others to purchasesecurities on their behalf.”
Here, the court found that plaintiffs
alleged that “[d]efendants, using nonpublic
1. Section 20(A) provides that “[a]ny person who violates any
provision of this chapter or the rules or regulations thereunder bypurchasing or selling a security while in possession of material,
nonpublic information shall be liable … to any person who,
contemporaneously with the purchase or sale of securities that is
the subject of such violation, has purchased … or sold … securitiesof the same class” (emphasis added).

information relating to a tender offer,deliberately caused Nomura to purchaseAllergan stock on their behalf.” While“[p]laintiffs may not have traded faceto-face with [d]efendants on the open
market,” the court explained that plaintiffs“could have traded directly with Nomura, whoallegedly purchased Allergan stock at[d]efendants’ behest.” The court concluded
that “[d]efendants’ private trades with
Nomura involving Allergan stock should beconsidered as part of the contemporaneoustrading analysis.”
In so holding, the court found persuasive
the Central District of California’s reasoning
in Johnson v. Aljian, 257 F.R.D. 587 (C.D.
Cal. 2009). The Johnson court rejected
defendants’ argument that their private
stock sales with a bank should be excluded
from the contemporaneous trading analysis
for purposes of § 20A. The Johnson court
reasoned that “if [d]efendants’ argument wereadopted as law, then all a person would needto do to avoid liability under § 20A would be
to funnel sales of shares through a broker.”
The Valeant court found “the logic of Johnson
directly applicable here,” and emphasizedthat “individuals and entities should not be
permitted to use third parties in order toavoid liability under the insider trading laws.”
The Valeant court also deemed meritlessdefendants’ contention that PS Fund 1’s
trades with Nomura should be excluded
from the contemporaneous trading analysis
because plaintiffs did “not allege a formal
broker relationship between PS Fund 1 andNomura.” The court explained that Rule 14e-3
does not “require a formal agency relationshipbetween the insider and the person orentity caused to purchase securities” on theinsider’s behalf.
The court found the allegations in thecomplaint sufficient for purposes of Rule
14e-3 to “establish [that] PS Fund 1 [had]used Nomura to acquire shares on its behalf.”
The court pointed to allegations that “PS
Fund 1 [had] solely traded with Nomura
to minimize its risk; Nomura [had] acted‘just like a broker’ for PS Fund 1; and that
[Pershing Square’s CEO had] referred to these
trades as ‘our purchases.’” The court therefore
determined that it could and should consider
PS Fund 1’s trades with Nomura for purposesof the contemporaneous trading analysis.

4Court Finds the “Same Class”
Element of the Contemporaneous
Trading Requirement Met Even
Though Plaintiffs Sold Common
Stock While Defendants Purchased
Stock Options
Defendants further argued that thecontemporaneous trading requirement
was not met because plaintiffs did not sell
securities of the “same class” that defendantspurchased, as required under § 20A.
Defendants claimed that “since [p]laintiffs
traded only in [Allergan] common stock,
they [could not] establish standing based on
PS Fund 1’s purchase of [over the counter]
options and equity forward contracts.”
Rejecting this “narrow interpretation of theinsider trading laws,” the court found that“the correct reading of § 20(A) … is thatplaintiffs who trade in common stock havestanding to pursue insider trading claims
against insiders who trade in stock options.”
The court noted that in Clay v. Riverwood
International Corp., 157 F.3d 1259 (11th Cir.
1998), the Eleventh Circuit explained that“[i]nsider trading in options could have adamaging effect on common stock” because“after exercising [a stock option], the investor
must still sell his shares through the market inorder to realize his profit.” The Valeant court
found that the Eleventh Circuit’s analysis“[bore] directly” on the question of whether“stock options … should be considered partof the ‘same class’ as common stock.” The
Valeant court concluded that claims involving
an insider’s purchase or sale of stock options“should not be dismissed ‘absent someevidence that the stock and options markets …
[were] not part of interdependent markets.’”
Moreover, the court explained that even if itwere to “[a]dopt[ ] [d]efendants’ distinction
between common stocks and options,”
it would still conclude that plaintiffs had
standing based on allegations that“[d]efendants caused Nomura to purchasecommon stocks of Allergan on the open
market.”
The court therefore denied defendants’
motion to dismiss plaintiffs’ claims under§ 14(e) and Rule 14(e)-3.

Delaware Chancery Court:
Under Corwin, Business
Judgment Rule Governs
Transactions Approved bya Fully Informed Vote of a
Majority of Disinterested
Stockholders, and Plaintiffs
Must Allege Gross Negligenceto Survive Dismissal
On October 29, 2015, on a motion forreconsideration of In re Zale Corp. S’holdrs.
Litig., 2015 WL 5853693 (Del. Ch. 2015)(Parsons, V.C.) (Zale I) in light of theDelaware Supreme Court’s decision in Corwin
v. KKR Financial Holdings LLC, 2015 WL
5772262 (Del. Oct. 2, 2015) (Strine, C.J.)(Corwin), the Chancery Court dismissed
claims alleging that Merrill Lynch had aided
and abetted breaches of the duty of care by
the directors of Zale in connection with its
merger with Signet Jewelers. In re Zale Corp.
S’holdrs. Litig., 2015 WL 6551418 (Del. Ch.
2015) (Parsons, Jr., V.C.) (Zale II). The Zale II
court concluded that it had “misapprehended
the law” and “incorrectly applied” the Revlon
enhanced scrutiny standard of review inZale I rather than the business judgment rule
standard of review in considering whether
plaintiffs had pled any predicate duty of carebreaches by Zale’s directors.
The Zale II court further found that “underCorwin the gross negligence standard for a
duty of care breach” applies and it was “notreasonably conceivable” that Zale’s directors
had “breached their duty of care by acting
in a grossly negligent manner as to their
engagement of Merrill Lynch.”

Background
In Zale I, plaintiffs alleged, inter alia, that
Zale’s directors had breached their duty ofcare by failing to “act in an informed manner”
when they retained Merrill Lynch to act as
the board’s financial advisor in connection
with the company’s merger with Signet,
and further alleged that Merrill Lynch had
aided and abetted those breaches. Merrill
Lynch had represented to Zale’s directorsthat it had “limited prior relationships andno conflicts with Signet,” when “[i]n fact
Merrill Lynch [had] received approximately$2 million in fees from Signet from 20125

to 2013.” According to plaintiffs, prior to
the board’s retention of Merrill Lynch asits financial advisor, Merrill Lynch did notinform Zale’s directors that the firm had madea presentation to Signet’s CFO regarding
a possible acquisition of Zale at a price ofbetween $17 and $21 per share and that a
Merrill Lynch managing director who servedon the team presenting to Signet, also servedon the team that advised the Zale board
during the merger with Signet. Plaintiffs
alleged that the Signet presentation was notdisclosed to Zale’s directors until after themerger agreement was signed.
In its October 1, 2015 decision, the Chancery
Court determined that the Revlon enhanced
scrutiny standard applied to plaintiffs’ claims
against Zale’s directors even though the court
found that a majority of Zale’s disinterested
stockholders had approved the merger in a
fully informed vote. The Zale I court declined
to follow the Chancery Court’s approach in In
re KKR Financial Holdings LLC Shareholder
Litigation, 101 A.3d 980 (Del. Ch. 2014)(KKR Financial), which held that the businessjudgment rule governs transactions approvedby a fully informed vote of a majority ofdisinterested stockholders. The Zale I court
found that Delaware law on this issue was“unsettled.” The Zale I court explainedthat “[u]ntil the Delaware Supreme Court
signal[ed] otherwise,” it would apply a “strictreading” of the Delaware Supreme Court’s
decision in Gantler v. Stephens, 965 A.2d695 (Del. 2009). The Zale I court interpreted
Gantler as holding that “an enhanced
standard of review cannot be pared down tothe business judgment rule as a result of astatutorily required vote, even one rendered
by a fully informed, disinterested majority ofstockholders.” The Zale I court “conclude[d]that where, as here, the merger consideration
paid to the target company’s shareholders[was] cash, Revlon enhanced scrutiny
applie[d], even after the merger ha[d] been
approved by a fully informed, disinterested
majority of stockholders.”
Turning to the allegations of the complaint,
the court found it “reasonably conceivable”
that the Zale directors’ reliance “without
question” on Merrill Lynch’s representations
regarding its prior relationship with Signet“could constitute a breach of their duty ofcare in this Revlon context.” The Zale I court
observed that in In re Rural Metro Corp.,
88 A.3d 54 (Del. Ch. 2014), Vice Chancellor

Laster had underscored that given the“central role played by investment banks” inthe transactional process, “directors must
act reasonably to identify and consider the
implications of the investment banker’s …
relationships, and potential conflicts.” The
Zale I court explained that “[i]n the context ofdetecting a preexisting conflict when engaging
a financial advisor, this oversight duty could
include negotiating for representations andwarranties in the engagement letter as wellas asking probing questions to determine
what sorts of past interactions the advisor
has had with known potential buyers, such as
Signet here.”
The Zale I court further determined that
it was “reasonably conceivable” that thealleged failure by Merrill Lynch to disclosethat it had previously made a presentation to
Signet about a potential acquisition of Zaleat a price between $17 and $21 per share had“hampered the ability of Merrill Lynch and,
consequently, the Board to seek a higher pricefor Zale’s stockholders.”
While the Zale I court determined that Zale’s
Section 102(b)(7) exculpatory provision
shielded Zale’s directors from monetaryliability for breaches of the duty of care, thecourt found that plaintiffs had adequately
stated a claim against Merrill Lynch for aiding
and abetting those breaches and therefore
denied Merrill Lynch’s motion to dismiss
plaintiffs’ claims.

Merrill Lynch Moves for
Reconsideration Following theDelaware Supreme Court’s Decisionin Corwin
The day after the Zale I court issued its
decision, the Delaware Supreme Court
affirmed the Chancery Court’s approach in
KKR Financial. The Delaware Supreme Court
held in Corwin that “when a transaction
not subject to the entire fairness standard isapproved by a fully informed, uncoerced voteof the disinterested stockholders, the businessjudgment rule applies.” The Corwin court also
clarified that Gantler did not focus on “thequestion of what standard of review applies
if a transaction not subject to the entire
fairness standard is approved by an informed,
voluntary vote of disinterested stockholders.”
Merrill Lynch subsequently moved forreconsideration of the Chancery Court’s
6decision in Zale I. Merrill Lynch contended
that the court should have applied thebusiness judgment rule standard of review
rather than the Revlon enhanced scrutiny
standard when determining whether plaintiffs
had adequately alleged a predicate breach of
the duty of care by Zale’s directors. In a letter
opinion dated October 29, 2015, the Chancery
Court granted Merrill Lynch’s motion
for reconsideration.

Chancery Court Finds Gross
Negligence Is the Standard
for Duty of Care Claims inTransactions Approved by a
Fully Informed Majority ofDisinterested Stockholders
On reconsideration in light of KKR II, theChancery Court in Zale II determined that thebusiness judgment rule was the appropriate
standard of review given that a majorityof Zale’s disinterested stockholders had
approved the merger in a fully informed vote.
The Zale II court then considered theappropriate standard of review for rebutting
the business judgment presumption andfinding a breach of the duty of care incases where, as here, “the merger has been
approved by a majority of disinterested
stockholders in a fully informed vote.” The
Zale II court noted that in KKR Financial,
Chancellor Bouchard stated that “the businessjudgment rule applies and insulates thetransaction from all attacks other than on
the grounds of waste.” However, the Zale II
court found that in Corwin, the Delaware
Supreme Court “suggested that ‘the grossnegligence standard for director due careliability under Van Gorkom’ is the proper
standard for evaluating ‘post-closing money
damages claims’” (quoting Corwin, 2015 WL
5772262). The Zale II court also observed thatin In re TIBCO Software, Inc. Stockholders
Litigation, 2015 WL 6155894 (Del. Ch. Oct.
20, 2015) (TIBCO), a post-Corwin decision,
the Chancery Court had applied a grossnegligence standard in considering a motion
to dismiss breach of the duty of care claims.
The Zale II court “conclud[ed] that whenreviewing a board of directors’ actions during
a merger process after the merger has been
approved by a majority of disinterested
stockholders in a fully informed vote, thestandard for finding a breach of the duty ofcare under [the business judgment rule] isgross negligence.” The Zale II court explainedthat in order “[t]o support an inference ofgross negligence, ‘the decision has to be sogrossly off-the-mark as to amount to reckless
indifference or a gross abuse of discretion’”(quoting Solash v. Telex Corp., 1988 WL
3587 (Del. Ch.1988)). The Zale II courtemphasized that “gross negligence ‘requires
the articulation of facts that suggest a wide
disparity between the process the directors
used … and [a process] which would have been
rational’” (quoting TIBCO, 2015 WL 6155894).

Chancery Court in Zale II Dismisses
Aiding and Abetting Claims Against
Merrill Lynch Because There Were
No Allegations That Zale’s Directors
Had Been “Grossly Negligent”
Applying this standard to the allegations of
the complaint, the Zale II court determinedthat it was “not reasonably conceivablethat the Zale [d]irector [d]efendants [had]breached their duty of care by acting ina grossly negligent manner as to their
engagement of Merrill Lynch.” Since the court
found “no basis for a predicate fiduciary duty
breach,” the court held that “the [c]omplaintalso fail[ed] to allege that Merrill Lynch [had]aided and abetted such a breach.”7New York

Los Angeles

Mark G. Cunha+1-212-455-3475
mcunha@stblaw.com

Lynn K. Neuner+1-212-455-2696
lneuner@stblaw.com

Michael D. Kibler+1-310-407-7515
mkibler@stblaw.com

Paul C. Curnin+1-212-455-2519
pcurnin@stblaw.com

Thomas C. Rice
+1-212-455-3040
trice@stblaw.com

Chet A. Kronenberg+1-310-407-7557
ckronenberg@stblaw.com

Michael J. Garvey+1-212-455-7358
mgarvey@stblaw.com

Mark J. Stein+1-212-455-2310
mstein@stblaw.com

Palo AltoPaul C. Gluckow+1-212-455-2653
pgluckow@stblaw.com

Alan C. Turner+1-212-455-2472
aturner@stblaw.com

Nicholas S. Goldin+1-212-455-3685
ngoldin@stblaw.com

Mary Kay Vyskocil+1-212-455-3093
mvyskocil@stblaw.com

David W. Ichel+1-212-455-2563
dichel@stblaw.com

Craig S. Waldman+1-212-455-2881
cwaldman@stblaw.com

Peter E. Kazanoff+1-212-455-3525
pkazanoff@stblaw.com

George S. Wang
+1-212-455-2228
gwang@stblaw.com

Joshua A. Levine+1-212-455-7694
jlevine@stblaw.com

David J. Woll
+1-212-455-3136
dwoll@stblaw.com

Joseph M. McLaughlin+1-212-455-3242
jmclaughlin@stblaw.com

Jonathan K. Youngwood+1-212-455-3539
jyoungwood@stblaw.com

Alexis S. Coll-Very+1-650-251-5201
acoll-very@stblaw.com
James G. Kreissman+1-650-251-5080
jkreissman@stblaw.com

Washington, D.C.
Peter H. Bresnan+1-202-636-5569
pbresnan@stblaw.com
Jeffrey H. Knox
+1-202-636-5532
jeffrey.knox@stblaw.com
Cheryl J. Scarboro+1-202-636-5529
cscarboro@stblaw.com
Peter C. Thomas+1-202-636-5535
pthomas@stblaw.com

The contents of this publication are for informational purposes only. Neither this publication nor the
lawyers who authored it are rendering legal or other professional advice or opinions on specific facts
or matters, nor does the distribution of this publication to any person constitute the establishment of an
attorney-client relationship. Simpson Thacher & Bartlett LLP assumes no liability in connection withthe use of this publication. Please contact your relationship partner if we can be of assistance regardingthese important developments. The names and office locations of all of our partners, as well as ourrecent memoranda, can be obtained from our website, www.simpsonthacher.com.
8SimpsonThacherWorldwide

UNITED STATESEUROPE

SOUTH AMERICANew York
425 Lexington Avenue
New York, NY 10017+1-212-455-2000

LondonCityPoint
One Ropemaker Street
London EC2Y 9HUEngland+44-(0)20-7275-6500

São Paulo
Av. Presidente Juscelino
Kubitschek, 1455
São Paulo, SP 04543-011
Brazil+55-11-3546-1000

Houston
600 Travis Street, Suite 5400
Houston, TX 77002+1-713-821-5650
Los Angeles
1999 Avenue of the Stars
Los Angeles, CA 90067+1-310-407-7500
Palo Alto
2475 Hanover Street
Palo Alto, CA 94304+1-650-251-5000
Washington, D.C.
900 G Street, NW
Washington, D.C. 20001+1-202-636-5500

ASIA

Beijing
3901 China World Tower
1 Jian Guo Men Wai Avenue
Beijing 100004
China+86-10-5965-2999
Hong Kong
ICBC Tower
3 Garden Road, Central
Hong Kong+852-2514-7600
Seoul
25th Floor, West Tower
Mirae Asset Center 1
26 Eulji-ro 5-gil, Jung-gu
Seoul 100-210
Korea+82-2-6030-3800
Tokyo
Ark Hills Sengokuyama Mori Tower
9-10, Roppongi 1-Chome
Minato-Ku, Tokyo 106-0032
Japan+81-3-5562-6200
9