IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE EBIX, INC. : CONSOLIDATED

STOCKHOLDER LITIGATION : C.A. No. 8526-VCN

MEMORANDUM OPINION AND ORDER

Date Submitted: June 10, 2015 

Date Decided: January 15, 2016

Michael Hanrahan, Esquire, Paul A. Fioravanti, Jr., Esquire, Kevin H. Davenport, 

Esquire, Eric J. Juray, Esquire, and John G. Day, Esquire of Prickett, Jones & 

Elliott, P.A., Wilmington, Delaware; Stuart M. Grant, Esquire and Michael J. 

Barry, Esquire of Grant & Eisenhofer P.A., Wilmington, Delaware; and 

Michael A. Wagner, Esquire of Kessler Topaz Meltzer & Check, LLP, Radnor, 

Pennsylvania, Attorneys for Plaintiffs.

Samuel A. Nolen, Esquire, Catherine G. Dearlove, Esquire, Susan M. Hannigan, 

Esquire, and Christopher H. Lyons, Esquire of Richards, Layton & Finger, P.A., 

Wilmington, Delaware; Charles W. Cox, Esquire of Alston & Bird LLP, Los 

Angeles, California; and John A. Jordak, Jr., Esquire of Alston & Bird LLP, 

Atlanta, Georgia, Attorneys for Defendants.

NOBLE, Vice Chancellor
1

I. INTRODUCTION

Over two years ago, a corporation attempted to complete a going-private 

merger with a financial partner. Within roughly one month of the participants’

announcement of a merger agreement, a dozen lawsuits had been filed and 

consolidated into the present action. Just as the wheels of discovery began to turn, 

however, the merger was abandoned. With a sort of Darwinian resilience, this

litigation survived this development, as well as several motions to dismiss, through 

persistent evolution.1The present motion to dismiss challenges the third iteration 

of Plaintiffs’ consolidated complaint.

This latest complaint asserts claims—some old, some new—based on 

conduct that occurred both before the abandoned merger and more than a year after 

it. In particular, plaintiffs challenge three classes of conduct: (1) directors’ 

disclosures about, as well as the adoption and maintenance of, certain executive 

compensation agreements; (2) a series of corporate actions directors took in 2014

with an alleged intent to entrench; and (3) disclosures made in a proxy statement

issued in advance of the corporation’s 2014 annual meeting. Defendants have 

 

1

The first consolidated complaint was filed June 17, 2013. In response to two 

motions to dismiss filed on July 1, 2013, plaintiffs filed a second consolidated 

complaint (“Amended Complaint”) on August 27, 2013. That complaint 

withstood, in part, a motion to dismiss filed September 26, 2013. The third 

consolidated complaint, the Verified Second Amended and Supplemented Class 

Action and Derivative Complaint (“Second Amended Complaint,” “Complaint,” or 

“Compl.”), the one the present motion challenges, was filed January 16, 2015. 
2

moved to dismiss on the grounds that two settlements approved by the United 

States District Court for the Northern District of Georgia extinguished the Second 

Amended Complaint’s counts related to executive compensation, certain claims are 

moot, and remaining counts fail under Court of Chancery Rule 12(b)(6). For 

reasons that follow, the motion is granted in part and denied in part.

II. BACKGROUND

This section assumes the reader’s familiarity with this Court’s July 24, 2014 

memorandum opinion (the “July 2014 Opinion”) that describes an appreciable 

portion of facts relevant to the present motion.2The Court cautions, however, that 

the facts stated in that opinion derive from an earlier complaint (the “Amended 

Complaint”) that is not the operative complaint that Defendants now attack, the 

Second Amended Complaint.

3

Further, the Second Amended Complaint updates

facts alleged in the Amended Complaint and subsequently described in the July 

2014 Opinion.4These differences only concern conduct that occurred during and 

before 2013 and, more importantly, do not affect the following analysis. 

Accordingly, this section only describes new factual allegations in the Second 

 

2

See In re Ebix, Inc. S’holder Litig., 2014 WL 3696655 (Del. Ch. July 24, 2014). 

3 Co-lead Plaintiffs in this action are Desert States Employers & UFCS Union 

Pension Plan (“Desert States”) and Gilbert C. Spagnola. Compl. at 1; see id.

¶¶ 11–12.

4

For example, the July 2014 Opinion states that Robin Raina, Ebix’s Chairman 

and Chief Executive Officer, and Raina’s foundation owned approximately 9.3% 

of Ebix’s stock as of June 2013. Ebix, 2014 WL 3696655, at *2. The Second 

Amended Complaint provides a 9.9% figure accurate as of 2014. Compl. ¶ 14. 
3

Amended Complaint that are not mere updates—i.e., post-2013 facts—as well as

new, relevant facts outside the Second Amended Complaint that the Court may

properly consider on a motion to dismiss.5

A. The Federal Securities Class Action Settlement and the 

Federal Derivative Action Settlement

The Second Amended Complaint contains six counts: the first three 

challenge pre-2013 conduct and the following three challenge 2014 conduct. 

Defendants6now argue that two settlements approved by the Northern District of 

Georgia contain releases that extinguish Counts I–III. This section prefaces 

discussion of those settlements by briefly summarizing Counts I–III.

The Second Amended Complaint’s first three counts concern three 

documents that either describe or purport to create certain executive compensation 

arrangements that Ebix, Inc. (“Ebix”) entered into in 2009 and 2010: (1) an 

Acquisition Bonus Agreement (“ABA”) authorized in 2009, (2) a 2010 Stock 

Incentive Plan (the “2010 Plan”), and (3) a proxy statement issued before Ebix’s 

 

5 On a motion to dismiss under Court of Chancery Rule 12(b)(6), the Court may 

consider “allegations in the Complaint, the documents integral to the Complaint, 

and those matters as to which the Court may take judicial notice under Delaware 

Uniform Rules of Evidence Rules 201 and 202.” Metro. Life Ins. Co. v. Tremont 

Gp. Hldgs., Inc., 2012 WL 6632681, at *12 (Del. Ch. Dec. 20, 2012) (taking 

judicial notice of “documents filed of record in [an action in the United States 

District Court for the Southern District of New York] that are not likely to be in 

dispute.”).

6 Defendants in this action are Ebix and Ebix’s board of directors. Compl. ¶¶ 13–

19. 
4

2010 annual meeting (the “2010 Proxy Statement”) in which Ebix’s board of 

directors (the “Board”) recommended approval of the 2010 Plan. In Count I, 

Plaintiffs challenge the Board members’ maintenance of the ABA as a breach of 

their fiduciary duties because, in Plaintiffs’ view, the ABA is an unreasonable 

antitakeover device by virtue of the payments it authorizes in the event of an 

acquisition. In Count II, Plaintiffs challenge the 2010 Proxy Statement as 

materially misleading and incomplete. And in Count III, Plaintiffs challenge the 

Board members’ disbursement of incentive compensation to themselves under the 

2010 Plan as a breach of fiduciary duties. These alleged facts and accompanying 

legal theories overlap with those that animated the two federal actions to some 

disputed extent.

In the first federal action, filed on November 28, 2011 (the “Federal 

Securities Class Action”), representative plaintiffs brought class action claims 

against Ebix and two individuals—Robin Raina, who served as Ebix’s CEO, 

President, and Chairman of the board, and Robert Kerris, who served as Ebix’s 

CFO—for making “materially false and misleading statements [between May 6, 

2009 and June 30, 2011] in press releases, analyst conference calls, and filing [sic] 

with the U.S. Securities and Exchange Commission (“SEC”)” in violation of 

Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, as well as 
5

Rule 10b-5.

7

In particular, the complaint alleged that defendants had artificially 

inflated Ebix’s stock price by misrepresenting certain financial figures and 

obscuring both the absence of adequate internal controls and the company’s 

participation in a “sham tax strategy.”

8 Accordingly, plaintiffs sought relief for a 

class of persons who bought Ebix’s stock when its price was artificially high and 

suffered economic harm when the price subsequently fell.9

The parties to the Federal Securities Class Action later submitted a 

stipulation of settlement (“Federal Securities Class Action Settlement”) for the 

district court’s approval.10 On June 11, 2014, the court approved the settlement 

and certified a class of “all Persons who purchased the common stock of Ebix, 

between May 6, 2009 and June 30, 2011, inclusive and who were damaged 

thereby,” excluding defendants and certain affiliates, under Federal Rule of Civil 

Procedure 23.11 Gilbert Spagnola, an Ebix shareholder who is one of the co-lead 

Plaintiffs in this action,12 opted out of the Federal Securities Class Action 

 

7

Transmittal Affidavit of Christopher H. Lyons, Esq. (“Lyons Aff.”) Ex. F 

(Federal Securities Class Action Compl.) ¶¶ 1–7, 11–17, 263–77. See infra

Part III.A.1 for discussion on this Court’s ability to consider items in the federal 

docket in the context of this motion to dismiss. 

8

Federal Securities Class Action Compl. at 18, 45, 53; id. ¶¶ 137, 271.

9

Id. at 149–50; id. ¶¶ 19–24.

10 Lyons Aff. Ex. C (Federal Securities Class Action Settlement); Lyons Aff. Ex. A 

(Federal Securities Class Action Order).

11 Federal Securities Class Action Order ¶¶ 3–5.

12 Compl. at 1. 
6

Settlement by timely requesting exclusion from the class.13 As part of the 

settlement, the court-appointed lead plaintiff and each class member discharged all 

“Released Claims,”

14 which the stipulation broadly defined as:

[A]ny and all rights, demands, claims (including “Unknown Claims” 

as defined below), liabilities, suits, debts, obligations, damages, 

losses, judgments, matters, issues, and causes of action of every nature 

and description, in law or equity, whether accrued or unaccrued, fixed 

or contingent, liquidated or un-liquidated, matured or un-matured, 

known or unknown, discoverable or undiscoverable, concealed or 

hidden, disclosed or undisclosed, whether arising under federal, state, 

local, statutory, common law, foreign law, or any other law, rule, or 

regulation, and whether class and/or individual in nature, that Lead 

Plaintiff or any Member of the Class asserted, could have asserted, or 

in the future could or might have asserted in this Litigation or any 

other action, court, tribunal, proceeding, or forum against any of the 

Released Persons arising out of, in connection with, or in any way 

relating to, directly or indirectly, the purchase, acquisition, holding, or 

sale of Ebix common stock during the Class Period or the acts, facts, 

matters, allegations, representations, transactions, events, disclosures, 

statements or omissions that were or could have been alleged or 

asserted in the Litigation.15

In its final judgment and order, however, the district court clarified that “Released 

Claims” only include claims that “arise out of the identical factual predicate as the 

claims settled in this action.”

16 The order cites two cases—Thomas v. Blue Cross 

 

13 Federal Securities Class Action Order ¶ 6, Ex. A. 

14 Id. ¶ 6.

15 Federal Securities Class Action Settlement ¶ 1.21.

16 Federal Securities Class Action Order ¶ 6 n.1. Desert States objected to the 

settlement in the Federal Securities Class Action “on the ground that the Proposed 

Settlement may release completely unrelated claims currently being litigated in” 

this action. Lyons Aff. Ex. G 1–2. After conducting a fairness hearing at which 

Desert States appeared, the Northern District approved the settlement over Desert 
7

& Blue Shield17 and TBK Partners Ltd. v. Western Union Corp.

18—as authority for 

that proviso.19

The second federal action, filed in the same court on May 20, 2013 (the 

“Federal Derivative Action”), brought both derivative and class action claims 

against Kerris and the Board (including Raina), and on behalf of Ebix as nominal 

defendant.20 As with the Federal Securities Class Action, the Federal Derivative 

Action took issue with certain disclosures transmitted between May 2009 and June 

2011 that, in plaintiffs’ view, “falsely portrayed the financial condition of the 

Company.”

21 Further, the complaint asserted that because several proxy 

statements, including the 2010 Proxy Statement, “contained false and misleading 

statements regarding Ebix’s corporate governance, risk management, and the 

accuracy of Ebix’s financial statements,”22 equitable relief was appropriate, 

including “an order invalidating the shareholder vote on the [2010 Plan].”23 In 

 

States’ objection but modified its terms to add the above-quoted proviso. See

Lyons Aff. Ex. I; Day Aff. Ex. C 17–18. Desert States did not opt out of that 

settlement. See Federal Securities Class Action Order ¶ 6, Ex. A. 

17 333 F. App’x 414, 420 (11th Cir. 2009).

18 675 F.2d 456, 460 (2d Cir. 1982).

19 Federal Securities Class Action Order ¶ 6 n.1.

20 Lyons Aff. Ex. E (Federal Derivative Action Compl.) ¶¶ 22–30.

21 Id. at 4.

22 Id. ¶¶ 137–39.

23 Id. at 72; see also id. ¶ 138 (“The misrepresentation [sic] and omissions in the 

2010, 2011, and 2012 Proxy Statements were material and were an essential link in 

the reelection of the Individual Defendants, the ratification of CBH as Ebix’s 
8

addition to disclosure-based claims, the Federal Derivative Action asserted that 

Ebix’s directors breached their fiduciary duties in at least two ways: (1) causing 

Ebix to commit waste by commencing a stock repurchase while its stock price was 

artificially inflated24 and (2) pressing the Abandoned Merger forward for selfinterested purposes, including avoiding “personal liability arising from their 

participation in the illegal conduct which is at issue in the derivative litigation 

already pending against the [board]”25 and “reaping massive financial benefits for 

themselves.”26 The complaint also noted that Ebix’s sale would net Raina “tens of 

millions of dollars from a change-in-control bonus,” a larger ownership stake in 

Ebix, and continued employment as CEO.27

Parties to the Federal Derivative Action eventually agreed to a stipulated 

settlement (the “Federal Derivative Action Settlement”)28 that the district court 

approved in a final order and judgment issued December 2, 2014.29 Although 

plaintiffs had designated several counts in the complaint as class claims, the order 

expressly approved the settlement pursuant to Federal Rule of Civil Procedure 23.1

 

auditor, approval of the Stock Incentive Plan, and approval of the 2010 and 2011 

executive officer compensation plan, as alleged herein.”).

24 Id. ¶ 126.

25 Id. ¶¶ 142–43.

26 Id. ¶ 13.

27 Id. ¶¶ 24, 95.

28 Lyons Aff. Ex. D (Federal Derivative Action Settlement).

29 Lyons Aff. Ex. B (Federal Derivative Action Order).
9

and found that notice of the proposed settlement was sufficient under that rule.30

Further, the parties discharging the so-termed “Released Claims” were two 

representative plaintiffs31 “acting on their own behalf and derivatively on behalf of 

Ebix,” Ebix, and “each Ebix stockholder.”

32

This time, “Released Claims” were defined as:

[A]ny and all claims or causes of action (including Unknown Claims), 

debts, demands, disputes, rights, suits, matters, issues, damages, 

obligations, or liabilities of any kind, nature, and/or character 

whatsoever (including, but not limited to, any claims for damages, 

interest, attorneys’ fees, expert, or consulting fees, and any and all 

other costs, expenses, or liabilities whatsoever), whether known or 

unknown, whether under federal, state, local, statutory, common law, 

foreign law, or any other law, rule, or regulation, whether fixed or 

contingent or absolute, accrued or unaccrued, liquidated or 

unliquidated, at law or in equity, matured or unmatured, discoverable 

or undiscoverable, concealed or hidden, asserted, or that have been 

could or might have been, or in the future might be asserted by 

Plaintiffs (both individually and derivatively on behalf of Ebix), Ebix, 

or Ebix’s Stockholders, or any of them, against the Released Persons 

based upon, arising out of, or related to (a) the facts, transactions, 

events, occurrences, disclosures, statements, alleged mismanagement 

and/or misconduct, acts, omissions, or failures to act, statement, 

concealment, misrepresentation, sale of stock, violation of law, or 

other matter which was or could have been alleged in or encompassed 

by the Actions, regardless of upon what legal theory based, including, 

without limitation, claims for negligence, gross negligence, 

recklessness, fraud, breach of fiduciary duty, breach of duty of care 

and/or loyalty, or violations of the common law, administrative rule or 

 

30 See id. ¶¶ 3, 7. 

31 See id. ¶ 5; Federal Derivative Action Settlement ¶¶ 1.9, 1.16, 1.28 (defining the 

term “Plaintiffs”).

32 Federal Derivative Action Order ¶ 5. As is discussed below, however, “Released 

Claims” do not include direct claims of Ebix stockholders; only derivative ones. 

See infra Part III.A.2.
10

regulation, tort, contract, equity, or otherwise of any state or federal 

statutes, rules, regulations, or common law, or the law of any foreign 

jurisdiction; or (b) the defense or Settlement of the Actions and or the 

Released Claims, including the payments provided herein. Nothing 

set forth herein shall constitute a release by or among the Company 

and the Individual Defendants or Released Persons of the rights and 

obligations relating to indemnification and advancement of defense 

costs arising from the Company’s or any of its subsidiary’s, 

division’s, or related or affiliated entity’s certificate of incorporation 

or bylaws, Delaware law, or any indemnification agreement or similar 

agreement. For purposes of clarity, and without narrowing the 

scope of the releases provided herein, “Released Claims” only 

include those claims that can be released under applicable law. 

See, e.g., Thomas v. Blue Cross & Blue Shield, 333 Fed. App’x 414, 

420 (11th Cir. 2009). Nothing set forth herein shall constitute a 

release by the Settling Parties of any rights or obligations to enforce 

the terms of the Settlement embodied in this Stipulation.33

The Federal Derivative Action Order repeated the stipulation’s disclaimer that 

“Released Claims only include those claims that can be released under applicable 

law,” before citing the same Thomas v. Blue Cross & Blue Shield case.

34

B. The 2014 Corporate Actions

After this Court’s July 2014 Opinion constrained Plaintiffs’ ability to 

challenge pre-2014 conduct by dismissing certain claims, Plaintiffs amended their 

complaint to include two new counts (Counts IV and V) based on actions 

Defendants took between August and December, 2014, and a third new count 

(Count VI) based on disclosures made in a proxy statement issued in advance of 

Ebix’s 2014 annual meeting (the “2014 Proxy Statement”). Counts IV and V 

 

33 Federal Derivative Action Settlement ¶ 1.20 (emphasis added).

34 Federal Derivative Action Order ¶ 5 n.1.
11

challenge three actions in particular: (1) Ebix’s execution of a Credit Agreement 

containing a “proxy put” provision (the “Proxy Put”), (2) Ebix’s entry into a 

Director Nomination Agreement with a dissenting shareholder, and (3) the Board’s 

unilateral adoption of a bundle of bylaws (together, the “2014 Corporate Actions”). 

Plaintiffs characterize each action as an “entrenchment device”

35—that is, a 

mechanism the directors endorsed because of its functional capacity to help them

maintain control of the company or otherwise keep their jobs. This conjecture

drives Count IV’s assertion that the Board’s approval of each 2014 Corporate 

Action amounts to a breach of fiduciary duty.

36 Count V asserts that the Bylaw 

Amendments are invalid.37

The first 2014 Corporate Action Plaintiffs challenge is the Board’s adoption 

of the Credit Agreement containing the Proxy Put. On August 5, 2014, Ebix, 

certain Ebix subsidiaries, and various lenders executed a Credit Agreement for a 

$150 million credit facility.38 A Proxy Put provision in that agreement enabled

lenders to accelerate repayment if a majority of incumbent directors were replaced 

with persons either the incumbents did not approve or who received a nomination 

 

35 E.g., Compl. ¶ 73. 

36 Id. ¶ 133 (asserting that the board’s “adoption of additional anti-takeover devices 

warrants strict scrutiny”).

37 Id. ¶ 136. 

38 Id. ¶ 74. 
12

due to an actual or threatened proxy contest.39 Recent amendments to the Credit 

Agreement, however, removed the Proxy Put.40

The second challenged action took place shortly after November 11, 2014, 

the date on which an activist shareholder, Barrington Capital Group, L.P. 

(“Barrington”), conveyed an intent to replace four of Ebix’s six directors.41 That 

shareholder sent a letter to Raina attributing Ebix’s low stock price to pending 

 

39 Id. ¶¶ 74–75. 

40 Lyons Aff. Ex. J (Feb. 2015 Form 8-K) Ex. 10.1 § 2(a). This fact is not in 

dispute. See Opening Br. in Supp. of Defs.’ Mot. to Dismiss the Second Am. 

Compl. (Opening Br.) 25–27; Pls.’ Answering Br. in Opp’n to Defs.’ Mot. to 

Dismiss (Answering Br.) 8 (conceding that “Defendants have since mooted this 

claim by removing the proxy put”). On a motion to dismiss, the Court may 

consider “uncontested factual admissions of the parties contained in the record.”

Berger v. Intelident Solutions, Inc., 911 A.2d 1164, 1166 n.1 (Del. Ch. 2006). 

41 See Compl. ¶¶ 78, 81, 103. Relevant passages in the Second Amended 

Complaint do not clearly indicate whether Barrington’s plan was to replace four 

incumbents, place four new directors on the board by adding seats, or otherwise 

gain control of four board seats through some combination of the two. This detail 

matters, of course, because the first scenario would win Barrington majority 

control of Ebix’s six-member Board, while the second would not and third might 

not. The ambiguity arises because the Second Amended Complaint describes 

Barrington’s announcement as conveying a plan to “propose four new directors” or 

“place four independent directors to the Ebix Board”—neither of which clearly 

denotes replacement. Id. ¶¶ 78, 103. The Complaint does, however, state that 

Barrington had “announced a proxy contest” and characterizes Barrington’s 

actions—albeit in conclusory fashion—as amounting to a “threat to [the Board’s] 

control of Ebix.” See id. ¶¶ 10, 81. These allegations, viewed in a light most 

favorable to Plaintiffs, permit a logical inference that Barrington planned to win 

majority control of Ebix’s Board by replacing incumbents with independent 

nominees. See In re Gen. Motors S’holder Litig., 897 A.2d 162, 168 (Del. 2006) 

(stating the well-established rule that, in the context of a Rule 12(b)(6) proceeding, 

a trial court need not accept “every strained interpretation of the allegations 

proposed by the plaintiff,” but rather must “draw reasonable inferences in the 

plaintiff’s favor”). 
13

litigation and investigations, poor financial reporting, substandard corporate 

governance and a lack of independent directors, and the Abandoned Merger.

42

Further, Barrington recommended termination of the ABA, which the letter 

characterized as “egregious.”

43 Barrington indicted the ABA’s “extremely 

depressed base price,” capacity to be triggered whether or not Raina remained

employed by Ebix, functional grant to Raina of a de facto “personal veto” over 

acquisition offers, and contribution to Raina’s ability to negotiate favorable terms 

for himself before the 2013 merger was abandoned.

44

On November 26, 2014, Ebix entered into a Director Nomination Agreement 

with Barrington that contemplated expanding Ebix’s six-member board to eight,

filling the two new seats with Barrington designees, and renominating all six 

incumbents. It further obligated the Board to support the two Barrington designees

and pay Barrington $140,000, and required Barrington to withdraw its prior 

nominees and vote its shares in favor of Ebix’s six renominated incumbents.

45

Further, Barrington relinquished the ability to engage in certain forms of dissenting 

conduct during an extendable “standstill period.”46 During this period, Barrington 

must vote all of its stock for the Board’s nominees and in harmony with Board 

 

42 Compl. ¶ 78. 

43 Id. ¶ 79.

44 Id. ¶¶ 79–80.

45 Id. ¶ 81.

46 Id. ¶¶ 81, 83. 
14

recommendations on matters that include advisory executive compensation votes, 

as well as refrain from soliciting proxies, presenting proposals, or initiating 

litigation.47 The standstill period lasted until the earlier of ninety days before 

Ebix’s 2015 annual meeting and ten days before any advance notice deadline for 

making director nominations.48 Ebix could extend this period to an equivalent time

frame surrounding the 2016 annual meeting, however, by recommending or 

committing to recommend re-election of Barrington’s designees.49

The third subset of challenged conduct is Defendants’ adoption of a series of 

bylaws (the “Bylaw Amendments”) that had been prepared on November 17, 2014 

and adopted on December 19, 2014.50 A December 1, 2014 Form 8-K discloses 

Ebix’s entry into the Director Nomination Agreement, but no “other planned 

defensive measures.”51 Nor did a number of other intermediate disclosures 

mention the Bylaw Amendments, including a December 1, 2014 Joint Press 

Release of Barrington and Ebix, a December 16, 2014 notice of annual meeting, 

and the 2014 Proxy Statement.52 The disclosure revealing the amendments, a 

 

47 Id.

48 Id. ¶ 83.

49 Id. 

50 Id. ¶ 84. 

51 Id. ¶ 85. 

52 Id. ¶¶ 84–85.
15

December 24, 2014 Form 8-K, was not sent to stockholders.53 The bylaws 

implement various reforms as described below.

A “Special Meeting Bylaw” regulates stockholders’ ability to call and 

conduct business at special meetings. It provides that, in the event stockholders 

owning 10% of Ebix’s stock request a special meeting, Ebix’s Board will 

determine the meeting’s location and schedule the meeting for a date no later than

120 days after the request.54 Stockholders submitting the request must describe the 

business to be conducted, provide the text of any resolutions, agree that disposition 

of shares before the record date “revokes the special meeting request as to those 

shares,” update information previously provided within five days of the record 

date, and provide other information reasonably requested by Ebix.

55 The Board 

may add its own matters to the agenda and a Board member sitting as the special 

meeting’s chairman conducts the meeting, decides what business is properly before 

the meeting, and decides whether to adjourn.56 Finally, the Board can deny a 

special meeting request for seven reasons, including (1) if the request is made

“during the period from 120 days prior to the anniversary of the last annual 

meeting through the earlier of the next annual meeting or 30 days after that 

anniversary”; (2) if, in the Board’s judgment, a “Similar Item” not including the 

 

53 Id.

54 Id. ¶ 86. 

55 Id.

56 Id.
16

election of directors was raised at a meeting within twelve months before the 

request or a “Similar Item” including an election of directors was presented within 

120 days before the request; and (3) if a “Similar Item” appears in the notice “of an 

annual or special meeting that has been called but not yet held or that is called for a 

date within 120 days of the request.”57 These requirements are said to enable the 

Board to prevent stockholders from ever electing directors at a special meeting.58

The “Control of Meeting Bylaw” gives a meeting chairman—either the 

Chairman of the Board or the Board’s designee—discretionary authority over how 

the meeting is run.59 The meeting chairman has authority over who may attend, as 

well as opening and closing of the polls.60

The “Advance Notice Bylaws” impose certain conditions on a stockholder’s 

ability to make a proposal or nominate a director. Two features of these bylaws 

are noteworthy: timing requirements and information requirements. First, the 

Advance Notice Bylaws create, in certain circumstances, a 30-day window during 

which stockholders must give notice of proposals and nominations. That is, if the 

annual meeting is called to occur on a date within 25 days of the 1-year 

 

57 Id. ¶ 87 (internal quotation marks omitted). 

58 Id. ¶ 89. This result does not automatically obtain. However, Plaintiffs allege 

that it might if the Board implements the Special Meeting Bylaw’s terms, as stated 

in the Second Amended Complaint, in a strategic manner. The pleadings can be 

reasonably read as supporting that comparatively modest inference.

59 Id. ¶ 95.

60 Id.
17

anniversary of the previous annual meeting, a stockholder’s notice of a proposal or 

director nomination “must be received not fewer than 90 days nor more than 

120 days prior to that anniversary.”61 Ebix may then postpone or adjourn the 

meeting.62 Second, a stockholder seeking to make a proposal or nomination must 

disclose certain information about whether and the extent to which that 

stockholder, its nominee, and/or certain affiliated parties have (i) entered into any 

transaction, such as an option or short interest, “with respect to” Ebix stock, or 

(ii) any other arrangement, such as a short position, made to manage risk or 

increase or decrease voting power or economic interest.63 Further, stockholders 

providing such notice must update and supplement information they provide.64 

The chairman of the meeting may decide to bar presentation of a stockholder 

proposal or nominee, as well as decide whether the bylaws are satisfied.65

The “Consent Bylaw” requires a stockholder seeking action by consent to 

request the Board to specify a record date. The Board then has 10 days from 

receipt of that request to set a record date.

66 Because the Board may fix a record 

date occurring up to 10 days after it decides to pass the resolution setting that date, 

 

61 Id. ¶ 93. 

62 Id.

63 Id. ¶ 94.

64 Id. ¶ 95.

65 Id.

66 Id. ¶ 97.
18

the Consent Bylaw allows action by stockholder consent to be delayed up to 

20 days.

67

 

The “Indemnification Bylaw” bars “advancement or indemnification of any 

director who brings an action against the Corporation, including a counterclaim for 

contribution.”68

C. The 2014 Proxy Statement

The last new claim the Second Amended Complaint levies is Count VI’s 

assertion that the Board members breached their fiduciary duties by “issuing the 

materially misleading and incomplete 2014 Proxy Statement.”69 The 2014 Proxy 

Statement was issued on December 16, 2014 (three days before the Board adopted 

the Bylaw Amendments) and set a record date of November 13, 2014 for the next 

annual meeting (the “2014 Annual Meeting”), which was scheduled for January 9, 

2015.70 At the 2014 Annual Meeting, Ebix stockholders were to vote on certain 

issues, including the proposed reelection of directors and advisory say-on-pay.

71

The 2014 Proxy Statement allegedly makes the following misstatements and

omissions:

 

67 Id.

68 Id. ¶ 98. 

69 Id. ¶ 139. 

70 Id. ¶¶ 84, 99.

71 See id. ¶¶ 99, 104; id. at 2, 68. 
19

 Does not mention the Proxy Put or any implications adding Barrington’s 

designees would have on triggering the Proxy Put;72

 Describes the Director Nomination Agreement, but does not describe 

Barrington’s letter, Barrington’s plan to propose four new directors, or the 

Bylaw Amendments;73

 Provides information on Raina’s compensation between 2011 and 2013, but 

not 2014;74

 Discloses Raina’s receipt of a $1.2 million retention bonus designed to keep 

him aboard through the 2013 Abandoned Merger, but obscures other details 

about what Raina bargained for during negotiations, such as the fact that he 

would receive a larger equity interest;

75

 Provides procedural guidance in apparent tension with Ebix’s bylaws.

76

 

72 Id. ¶ 101.

73 Id. ¶¶ 102–03.

74 Id. ¶ 104.

75 Id. ¶ 104.

76 Id. ¶ 106. Plaintiffs allege that the 2014 Proxy Statement’s procedural guidance 

is incorrect in three ways. First, the Complaint asserts that it provides incorrect 

information concerning the date by which nominations for the 2015 annual 

meeting must be received. As of December 16, 2014, Ebix’s bylaws contained no 

advance notice bylaw. Three days later, the newly-enacted Advance Notice Bylaw 

required that notice of nominations and proposals be given within a certain thirtyday window. In Plaintiffs’ view, the 2014 Proxy Statement’s directive that 

nominations “must be received by August 15, 2015” comports with neither bylaw 

regime. Second, Plaintiffs assert that the 2014 Proxy Statement’s claim that “[t]he 

Board applies the same standards in considering candidates submitted by 

stockholders as it does in evaluating candidates submitted by members of the 
20

In light of these disclosures, Plaintiffs seek a declaration from this Court that the 

2014 Proxy Statement is materially misleading and incomplete and that actions 

approved at the 2014 Annual Meeting, including the election of directors, are 

invalid, as well as an order requiring Ebix to hold a new annual meeting at which 

stockholders may make nominations and proposals.77

III. DISCUSSION

Defendants’ motion to dismiss raises three principal questions. First, do the 

settlements approved by the United States District Court for the Northern District 

of Georgia extinguish some or all of the claims presented in Counts I–III? Second, 

do Plaintiffs’ various challenges to the 2014 Corporate Actions as improper

entrenchment devices fail as moot or under Court of Chancery Rule 12(b)(6) for 

failure to state a claim? Finally, does Plaintiffs’ assertion that the 2014 Proxy 

Statement contains materially false and misleading disclosures fail under 

Rule 12(b)(6)? Each is addressed in turn.

 

Board” conflicts with the Advance Notice Bylaws. Third, the Complaint 

challenges deadlines the 2014 Proxy Statement provides by which stockholders 

must submit proposals under Rule 14a-8 and 14a-4(c); complying with these 

deadlines, argue Plaintiffs, “would appear to render the stockholder’s proposals 

invalid under the Advance Notice Bylaws.” Id. ¶ 106. Some of these allegations 

are factual and others are conclusory. It is not necessary to make those 

classifications at this juncture.

77 Id. at 68. 
21

A. The Effect of the Federal Settlements on Plaintiffs’ Claims

Because the releases in both the Federal Securities Class Action Settlement 

and the Federal Derivative Action Settlement contain broadly inclusive language, 

Defendants argue that each precludes claims asserted in this action. Plaintiffs 

counter with five arguments: (1) Defendants cannot raise the affirmative defense of 

release in the context of this Rule 12(b)(6) motion; (2) the Federal Derivative 

Action Settlement cannot release any of Plaintiffs’ class claims due to a blackletter law preventing derivative settlements from releasing class claims; (3) neither 

release has the legal capacity to release Plaintiffs’ claims in light of applicable law 

prohibiting settled claims from releasing class claims that are not based on an 

identical factual predicate; (4) the Federal Securities Class Action Settlement does 

not apply to Spagnola and other unspecified class members in this action because 

this action’s putative class diverges from the class certified in the Federal 

Securities Class Action; and (5) the releases in fact fail to extend to certain claims 

because the parties did not intend them to.

This section assesses the effect of the federal settlements by proceeding in 

that order. This Opinion does not address arguments (4) or (5), however, because 

conclusions reached upon consideration of argument (3) render that exercise 

unnecessary. 
22

1. Whether Defendants May Raise a Defense of Release 

in the Context of this Motion to Dismiss

Plaintiffs’ first argument attempts to avoid Defendants’ release defense in its 

entirety by asserting that this Court may not consider that defense’s factual bases—

neither the settlement documents themselves nor the various public filings and 

letters Defendants have also proffered—given this proceeding’s procedural 

posture. According to Plaintiffs, relevant precedent teaches that if the factual bases 

for affirmative defenses asserted through a motion to dismiss are not 

“incontrovertibly established by” the pleadings, the tribunal may deny the motion.

Accordingly, Plaintiffs argue that dismissal is inappropriate here because the 

Second Amended Complaint makes no mention of any document—most notably, 

the releases themselves—upon which Defendants rely. Plaintiffs further argue that 

Defendants’ attempt to use these documents converts their motion to dismiss into a 

motion for summary judgment, thereby warranting rejection of Defendants’ motion

to afford Plaintiffs the chance for discovery. Plaintiffs’ construction of applicable 

law, however, is too narrow.

Ordinarily, “the existence of a release is an affirmative defense that must be 

asserted in a responsive pleading.”78 Nonetheless, this Court has, on multiple 

occasions, considered releases in deciding motions to dismiss where the complaint 

 

78 Seven Invs., LLC v. AD Capital, LLC, 32 A.3d 391, 396 (Del. Ch. 2011); see 

also Ct. Ch. R. 8(c).
23

referenced or otherwise relied upon the release at issue.79 Courts in those cases did 

not, however, explicitly consider the conceptually distinct question posed here: 

whether the Court may consider a release in the event the complaint fails to 

reference it at all. 

The answer to that question is a qualified “yes” for the simple reason that the 

decisions referenced above are properly read as following a broader rule of law

which this Court has previously explained as follows:

Court of Chancery Rule 12(b) provides that if “matters outside the 

pleading are presented to and not excluded by the Court, the motion 

[under Rule 12(b)(6)] shall be treated as one for summary judgment 

and disposed of as provided in Rule 56.” If purportedly extraneous 

matter is presented, Rule 12(b) implies that the Court may, sua sponte,

exclude it and hear the motion to dismiss, consider it and convert the 

motion into one for summary judgment, or conclude it is not 

extraneous but rather integral to the claims and then proceed with the 

motion to dismiss. Indeed, this Court frequently does determine these 

issues sua sponte in its disposition of the underlying motion.

80

 

79 See, e.g., Seven Invs., 32 A.3d at 396. (“The General Release nevertheless can 

be considered on a 12(b)(6) motion because the Complaint incorporates the 

Termination Agreement by reference.”); see also Canadian Commercial Workers 

Indus. Pension Plan v. Alden, 2006 WL 456786, at *2 n.9, (Del. Ch. Feb. 22, 2006) 

(“The Court may consider the Release in deciding a motion to dismiss because the 

Complaint makes reference to it.”).

80 In re Gardner Denver, Inc., 2014 WL 715705, at *4 (Del. Ch. Feb. 21, 2014)

(citations omitted) (alteration in original).
24

The record properly before the court on a motion to dismiss under 

Rule 12(b)(6) includes “allegations in the Complaint, the documents integral to the 

Complaint, and those matters as to which the Court may take judicial notice under 

Delaware Uniform Rules of Evidence Rules 201 and 202.”81 This Court has 

repeatedly held federal court decisions, orders, and filings judicially noticeable.82

Although Plaintiffs challenge Defendants’ alleged reliance on public filings to 

build their release defense, Defendants submit that this Court need not look beyond 

the federal court filings to find in their favor.83 Because this Court takes judicial 

notice of filings of record in the two Northern District of Georgia actions, it may 

consider the release defense. Accordingly, Plaintiffs’ attempt to nip Defendants’ 

release defense in the bud fails.

2. Whether the Federal Derivative Action Release May Release 

Direct Claims Asserted by Co-Lead Plaintiffs

Plaintiffs’ next argument seeks to accomplish comparatively less. Instead of 

taking aim at Defendants’ release defense in its entirety, their second argument

asserts that the Federal Derivative Action Release cannot bar any of Plaintiff’s 

class claims. The Federal Derivative Action Settlement’s broad definition of 

 

81 Metro. Life, 2012 WL 6632681, at *12 (considering “documents filed of record” 

in federal court “that are not likely to be in dispute”).

82 See, e.g., id.; Beiser v. PMC-Sierra, Inc., 2009 WL 483321, at *1 & n.2 (Del. 

Ch. Feb. 26, 2009) (collecting cases); W. Coast Mgmt. & Capital, LLC v. Carrier 

Access Corp., 914 A.2d 636, 641 (Del. Ch. 2006).

83 Tr. of Oral Arg. Def.’s Mot. to Dismiss (“Tr.”) 15–16. 
25

“Released Claims” might be read as including direct claims; its express terms 

provide that “Released Claims” include “any and all claims or causes of action . . . 

that have been could or might have been, or in the future might be asserted by 

Plaintiffs (both individually and derivatively on behalf of Ebix), Ebix, or Ebix’s 

Stockholders . . . .”84 The Federal Derivative Action Order, however, constrains 

that definition by clarifying that “Released Claims only include claims that can be 

released under applicable law.”85 Plaintiffs assert that because a black letter tenet 

of applicable law is that representative shareholders in derivative actions cannot 

release direct claims belonging to absent stockholders, “Released Claims” do not 

include Plaintiffs’ direct claims.

Defendants dispute neither the existence of this rule as phrased nor its 

pertinence as “applicable law.” Instead, Defendants argue that the Co-lead 

Plaintiffs in this case, Spagnola and Desert States, should nonetheless be barred 

from bringing claims because they are not the sort of “people that this general rule 

is designed to protect.”

86 In support of that contention, Defendants assert that 

Spagnola and Desert States had actual notice of the Federal Derivative Action 

Settlement but “[sat] on their hands.”87 Accordingly, argue Defendants, Spagnola 

 

84 Federal Derivative Action Settlement ¶ 1.20. 

85 Federal Derivative Action Order ¶ 5 n.1.

86 Reply Br. in Further Supp. of Defs.’ Mot. to Dismiss the Second Am. Compl. 

(“Reply Br.”) 7.

87 Id.
26

and Desert States remain bound by the release and the direct claims asserted in 

Counts I and II fail as a matter of law for lack of a lead plaintiff.

“The judgment in a derivative suit will not preclude any right of action that 

an absent stockholder might have in the stockholder’s individual capacity against 

the corporation or the real defendants in the derivative suit.”88 Delaware courts 

have applied this general rule in the context of settlement fairness hearings under 

Court of Chancery Rule 23.1 by declining to approve derivative settlements 

purporting to release claims owned by individuals.89 Discussion on the rationale 

underlying this rule appears in Carlton Investments v. TLC Beatrice Holdings, 

Inc.,

90 where the Court contrasted structural protections that inhere in Rule 23 class

action settlements with those that inhere in Rule 23.1 derivative action settlements. 

 

88 7C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure

§ 1840 (1969–1985). A conceptual knot this Court need not attempt to untangle at

present is how this rule might apply in the context of a claim that is simultaneously 

direct and derivative. See, e.g., Gentile v. Rossette, 906 A.2d 91 (Del. 2006). 

Cleanly applying a bright-line rule may prove problematic in contexts where, as in 

the case of classifying a given claim as direct or derivative, the lines creating the 

operative distinction themselves may blur. See Tooley v. Donaldson, Lufkin & 

Jenrette, Inc., 825 A.2d 1031, 1032 (Del. 2004) (cautioning, before clarifying the 

applicable standard, that “[d]etermining whether an action is derivative or direct is 

sometimes difficult . . . .”).

89 In re La.-Pac. Corp. Deriv. Litig., 705 A.2d 238, 239–41 (Del. Ch. 1997); 

Carlton Invs. v. TLC Beatrice Hldgs., Inc., 1997 WL 208962, at *1–2 (Del. Ch. 

Apr. 21, 1997) (“What the court has no authority to do in this or any other 

derivative action (putting aside instances of counter or cross claims) is to 

adjudicate or release claims belonging to persons other than the corporate 

defendant or those defendants who are validly subject to its jurisdiction and against 

whom claims have been stated.”).

90 1997 WL 208962, at *2.
27

The Carlton court explained that the existence of a rule preventing a board that has 

seized control of a derivative claim brought on behalf of the corporation from

settling direct claims

. . . should be obvious, but it may be obscured by the practice in class 

actions in which the doctrine of virtual representation does allow the 

rights of a class member to be affected over their objection. But the 

distinction between class actions (especially (b)(1) and (b)(2) actions 

where no opt-out rights are provided) and this action is that in the 

class action setting the party presenting the proposed settlement 

satisfies all of the requirements of Rule 23 and thus offers protections 

of the shared right that is subject of the settlement and the settlement 

will contemplate consideration of some type flowing directly to class 

members in exchange for the release of their claim. In the derivative

action, the corporation does not share rights in the property of its 

shareholders and may not release or assign that property as part of a 

settlement of claims that it owns. Nor in the derivative suit settlement 

does consideration flow directly to shareholders as arguably 

consideration for the release of their individual claims.91

The “property” to which the Carlton court referred is the shareholders’ right to 

bring claims on their own behalf—not on behalf of the corporation.92

Defendants appear to have obscured the effects of Rule 23 as hypothesized 

in Carlton. Their suggestion that an absentee direct shareholder plaintiff assumed 

to have actual notice93 falls outside the ambit of the general rule stated above both 

contradicts settled law and assuages neither concern noted in Carlton concerning 

 

91 Id. (internal citations omitted).

92 Id.

93 The Court need not decide this factual issue and instead assumes it arguendo.
28

the relinquishment of another’s property and the absence of consideration.

94 When 

parties to the Federal Derivative Action settled, “applicable law” enabled them to

release claims owned by the corporation, not claims owned by Spagnola and 

Desert States. Accordingly, Plaintiffs are correct that the Federal Derivative 

Action Settlement does not bar any direct claims asserted in Counts I–III.

This Court has previously held that Count II’s disclosure-based claim is 

direct and Count III’s self-payment-based claim is derivative.95 In light of the 

above, the Federal Derivative Action Settlement cannot affect Count II but might, 

subject to additional analysis, release Count III. For reasons stated below, 

however, neither federal settlement releases Count I. Thus, the Court need not 

decide its nature as direct or derivative at this juncture.

3. Whether Claims in Counts I–III Fall Within the Scope 

of the Federal Settlement Releases

Both federal settlements’ capacity to extinguish this action’s state law claims

depends on whether settled claims are “based on the ‘same identical factual 

predicate’ or the ‘same set of operative facts’ as the underlying action.”96 Each 

court-approved settlement release limits its own reach by announcing adherence to

 

94 These two considerations were also deemed critical in La.-Pac. Corp., 705 A.2d 

at 240.

95 Ebix, 2014 WL 3696655, at *18.

96 In re Phila. Stock Exch., Inc., 945 A.2d 1123, 1146 (Del. 2008) (quoting 

UniSuper Ltd. v. News Corp., 898 A.2d 344, 347 (Del. Ch. 2006)); see also 

Nottingham P’rs v. Dana, 564 A.2d 1089, 1106–07 (Del. 1989) (providing the 

standard followed in both Philadelphia Stock Exchange and UniSuper).
29

this rule. The Federal Class Action Settlement states that it does not purport to 

release:

any claim that does not arise out of the identical factual predicate as 

the claims settled in this action. Thomas v. Blue Cross & Blue Shield, 

333 Fed. App’x 414, 420 (11th Cir. 2009); TBK Partners Ltd. v. 

Western Union Corp., 675 F.2d 456, 460 (2d Cir. 1982).97

Similarly, the Federal Derivative Action Settlement states that it only releases:

those claims that can be released under applicable law. See, e.g., 

Thomas v. Blue Cross & Blue Shield, 333 Fed. App’x 414, 420 (11th

Cir. 2009).98

The Thomas case cited in both orders provides, at the pinpoint citation specified in 

both provisos, the following rule that also appears in the TBK Partners case cited 

in the Federal Securities Class Action proviso: 

[A] court may permit the release of a claim based on the identical 

factual predicate as that underlying the claims in the settled class 

action even though the claim was not presented and might not have 

been presentable in the class action.99

“Delaware law favors settlements and treats them as binding contracts.”100 

The federal orders will be interpreted using principles of contract interpretation.101 

 

97 Federal Securities Class Action Order ¶ 6 n.1. 

98 Federal Derivative Action Order ¶ 5 n.1. 

99 Thomas, 333 F. App’x at 420.

100 Christiana Care Health Servs. v. Davis, 2015 WL 6689642, at *3 n.27 (Del. 

Nov. 3, 2015) (quoting Crescent/Mach I P’rs, L.P. v. Dr. Pepper Bottling Co. of 

Tex., 962 A.2d 205, 208 (Del. 2008)).

101 See In re Heizer Corp., 1991 WL 24736, at *2 (Del. Ch. Feb. 25, 1991) (“As a 

matter of contract interpretation, I have no hesitation in finding that the definition 

of liquidation value in [a previous order entered by the Court of Chancery] does 
30

The issue for this Court, then, is whether either federal settlement could have

released claims Plaintiffs have brought in this action by virtue of sharing an 

identical factual predicate within the meaning of TBK Partners, and thereby did or 

did not achieve as much pursuant to the express contractual terms quoted above. 

A given claim in this action will be deemed released if either the Federal Securities 

Action Settlement’s release or the Federal Derivative Action Settlement’s release 

properly applies.

In TBK Partners, the United States Court of Appeals for the Second Circuit 

applied the “identical factual predicate” test in the context of a dispute over the 

value of minority shareholders’ interest in a target company absorbed in a shortform merger. There, a representative plaintiff, acting on behalf of a class of 

minority shareholders, challenged the price offered for the class’s stake as too low 

and brought federal claims on three legal theories: that the acquirer (1) violated 

federal securities laws by making certain deficient disclosures concerning the 

minority interest’s value, (2) violated its fiduciary duty to the target, in which it 

owned a 95.3% stake, by effecting a merger on terms that undervalued the minority 

interest, and (3) violated the terms of a lease by depriving the minority full value 

 

not encompass the environmental claim”); cf. In re Transamerica Airlines, Inc., 

2009 WL 2217748, at *4 (Del. Ch. July 22, 2009), aff’d sub nom. Transamerica 

Airlines, Inc. v. Akande, 991 A.2d 19 (Del. 2010).
31

for their interest.102 The parties eventually agreed to a settlement including a 

release that had the effect of enjoining class members from bringing state law 

appraisal claims.103 Objectors to the settlement argued that the district court lacked 

authority to extinguish the state law claims that were not and could not have been 

brought in the federal action.104 Nonetheless, the district court upheld the 

settlement and the Second Circuit affirmed, reasoning that “both the class action 

and the state appraisal proceeding hinge[d] on the identical operative factual 

predicate: the correct valuation of [the minority interest].”105

The TBK Partners court explained that barring claims under the “identical 

factual predicate” rule is analogous to “barring claims that could have been 

asserted in the class action” so long as “there is a realistic identity of issues 

between the settled class action and the subsequent suit, and . . . the relationship 

between the suits is at the time foreseeably obvious to notified class members.”106 

Accordingly, the court assessed whether the “gravamen” or “[core] settled 

questions” of the class action, considered alongside the notice describing the 

settlement sent to class members, simultaneously enabled objectors to anticipate

 

102 TBK P’rs, 675 F.2d at 458–59.

103 Id. at 459.

104 Id. at 459–60.

105 Id. at 460.

106 Id. at 461.
32

that their claims would be adjudicated and provided full opportunity to object.107 

The Second Circuit held that the objectors in TBK Partners were “fairly apprised” 

of the fact that their appraisal claims would be extinguished because (1) they were 

warned that the settlement would broadly release “any claim arising out of or 

connected with” the federal claims and (2) the federal and state claims were 

“tightly connected.”108 Because objectors also received full opportunity to object, 

the settlement justifiably precluded their state law appraisal claims.109 The Second 

Circuit characterized operation of the identical factual predicate inquiry as serving 

the twin goals of “prevent[ing] relitigation of settled questions at the core of a class 

action” and, more generally, “encouraging settlements.”110

The Delaware Supreme Court clarified the test’s applicability in the context 

of disclosure claims in Nottingham Partners v. Dana.

111 In Nottingham, the Court

affirmed the Court of Chancery’s holding that allegations attacking different 

particular disclosures were nonetheless based on an identical factual predicate 

because they challenged the same transaction.112 The defendant corporation in 

Nottingham issued a proxy statement recommending that stockholders approve a

 

107 See id. at 460–61.

108 Id. (“It would be hard to imagine a claim that would be more tightly connected 

to those asserted in the class action than a claim in an appraisal proceeding that 

[defendant] had undervalued the [minority’s interest].”).

109 Id. at 461–62.

110 Id. at 460–61.

111 564 A.2d 1089 (Del. 1989).

112 Id. at 1106–07. 
33

Class B Stock recapitalization and related charter amendments.

113 After the 

shareholders approved the transaction, two lawsuits—one bringing federal claims, 

the other state claims—attacked the proxy statement as materially misleading and 

challenged the recapitalization and amendments as invalid.

114

 Parties in the state 

action reached a settlement, but federal plaintiffs objected on the ground that the 

Court of Chancery lacked authority to release their disclosure claims because they 

were not based on the same set of operative facts. Although plaintiffs in the state 

action conceded that “the disclosure allegations we made were not precisely the 

same as what [federal plaintiffs] made,”115 the Court of Chancery concluded that 

the two actions were based on an identical factual predicate, noting that “the fact 

that two actions may not involve the precisely identical disclosure claim is not 

determinative.”116 Instead, the Court of Chancery focused on both suits’ practical 

attempt to invalidate the same “transaction”—which, in that case, was “the 

adoption of the Class B plan and the issuance of the proxy statement in order to 

 

113 Id. at 1091. 

114 Id. at 1092–93. 

115 Dana v. Trans-Lux Corp., C.A. No. 9755, at 14 (Del. Ch. Aug. 4, 1988) 

(TRANSCRIPT) (settlement hearing).

116 Dana v. Trans-Lux Corp., C.A. No. 9755, at 6 (Del. Ch. Aug. 4, 1988)

(TRANSCRIPT) (ruling of the Court).
34

solicit the proxies.”117 The Delaware Supreme Court affirmed the Court of 

Chancery’s conclusions as “correct as a matter of law.”118

Unlike in TBK Partners and Nottingham, the claims challenged as precluded 

in this case do not all spring from a single factual predicate; here, there are several.

Remaining discussion in this section applies TBK Partners and Nottingham by 

identifying the sets of operative facts underlying Counts I–III and comparing them 

to those underlying the federal claims in search of overlap.

Count I, which seeks invalidation of the ABA and an injunction preventing 

Defendants from claiming Raina is entitled to any bonus under it, derives from the 

factual premise that the Board maintained the ABA as an antitakeover device that 

depressed Ebix’s stock price. Thus, shorn of all legal paraphernalia, Count I’s 

operative facts might be succinctly characterized as “events and conduct calling 

into question the ongoing validity of the ABA.” This line-drawing aims to capture 

the principle from Nottingham that a transaction—here, maintenance of the 

ABA—may serve as the focal point of the inquiry.

Nottingham directly informs the search for operative facts underlying 

Count II, which seeks invalidation of the 2010 Plan due to material misstatements 

and omissions in the 2010 Proxy Statement. Because Nottingham held that settled 

disclosure claims may have preclusive effect on pending disclosure claims that 

 

117 Nottingham, 564 A.2d at 1107 n.37.

118 Id. at 1107.
35

challenge different aspects of a given communication so long as the two claims 

share a common goal—there, challenging stockholders’ approval of a 

recapitalization plan as uninformed and invalid—Count II’s operative facts are any 

allegations of misstatements and omissions in the 2010 Proxy Statement showing 

that shareholders’ approval of the 2010 Plan was uninformed and invalid.

119

Finally, Count III challenges the Board members’ grants of incentive 

compensation to themselves under the 2010 Plan as a breach of fiduciary duty and 

seeks rescission of those grants, as well as disgorgement of grants already 

disbursed. Count III’s operative facts, then, include those tending to show that 

these self-payments were invalid.

Because claims settled in the Federal Securities Class Action Settlement do 

not share the same operative facts with claims asserted in Counts I–III of this 

action, that release does not preclude present claims under applicable law and, 

resultantly, its own express terms. Plaintiffs’ allegations in this action, however, 

traverse a narrow factual pathway to avoid such overlap. 

The gravamen of the Federal Securities Class Action is that Ebix, Raina, and 

Kerris artificially inflated Ebix’s stock price by obscuring Ebix’s “serious internal 

control problems” and participation in a “sham tax strategy,” as well as misstating 

net income, diluted earnings per share, and organic growth rates in public filings, 

 

119 See id. at 1106–07. 
36

press releases, and conference calls.120 In particular, plaintiffs in that action 

challenged disclosures in Forms 10-K for 2009 and 2010, Forms 10-Q for 2009, 

2010, and 2011, press releases issued in 2009, 2010, and 2011, and conference 

calls conducted in 2009, 2010, and 2011. Misstatements and omissions in these 

public filings and pronouncements, according to the Federal Class Action 

plaintiffs, artificially inflated Ebix’s stock price between May 2009 and June 2011. 

Critically, the Federal Securities Class Action does not challenge the 2010 Proxy 

Statement, votes taken at the 2010 Annual Meeting, or the 2010 Plan. 

Accordingly, although it brings similarly-styled claims (i.e., disclosure claims), the 

Federal Securities Class Action lacks an identical factual predicate with Count II of 

this action. And because the Federal Securities Class Action simply has nothing to 

do with the Board’s maintenance of the ABA or usage of the 2010 Plan, the 

Federal Securities Class Action Settlement has no preclusive effect under TBK 

Partners, Nottingham, and the release itself. 

Before describing the factual premises underlying the Federal Derivative 

Action, it is perhaps useful to reiterate that the Federal Derivative Settlement’s 

preclusive capacity is categorically limited. For reasons discussed above, the 

Federal Derivative Action Settlement can only preclude derivative claims in 

Counts I and III, not the direct claim asserted in Count II. Thus, although the 

 

120 See, e.g., Federal Securities Class Action Compl. ¶¶ 153–66.
37

Federal Derivative Action sought, in part, to “invalidate the shareholder vote on 

the 2010 [Plan],” the settlement reached in connection with that action cannot 

preclude Count II.121

The Federal Derivative Action brought six counts, two of which were 

expressly designated as direct class claims.122 Those two direct claims, each 

challenging the Board’s actions surrounding the Abandoned Merger as amounting 

to a breach of fiduciary duties, seem absent from extant claims settled in the 

resulting order, which did not purport to certify a class or otherwise comport with 

Federal Rule 23.123 Further, the “Actions” the release purports to settle are defined 

as “the derivative actions”124 and the stipulation recites that plaintiffs and their 

counsel concluded that settlement was warranted after investigating facts 

surrounding “the derivative claims.”125 Thus, the facts underlying those claims 

 

121 Federal Derivative Action Compl. at 72.

122 Id. ¶¶ 140–49. 

123 See Federal Derivative Action Order ¶¶ 3, 7.

124 The Federal Derivative Action Order settles “Released Claims” and “any and all 

claims (including Unknown Claims) . . . arising out of, relating to, or in connection 

with, the defense, Settlement, and resolution of the Actions.” The former is 

defined above. See supra note 33 and accompanying text. The “Actions” are 

defined as “the Federal Action and the State Action.” Federal Derivative Action 

Settlement ¶ 1.1. The “Federal Action” is defined as “the derivative actions that 

were consolidated and styled as In re Ebix, Inc. Derivative Litigation, File 

No. 1:13-CV-62-RWS (N.D. Ga.).” Id. ¶ 1.7. The “State Action” is defined as 

“the derivative action that is styled as In re Ebix. Inc. Shareholder Derivative 

Action, Case No. 2011VW205276 (Superior Court of Fulton County, Georgia).” 

Id. ¶ 1.26. 

125 Federal Derivative Action Settlement at 7.
38

could not have been “settled questions at the core” of the Federal Derivative 

Action and the operative facts animating those claims are irrelevant for present 

purposes.

126

 Allowing those facts to inform this analysis would violate the 

rationale underlying TBK Partners; since, for whatever reason,127 the direct claims 

based on the Abandoned Merger were not extant claims being settled, it was not 

“foreseeably obvious” that claims based on their operative facts would be 

extinguished.128

The remaining four counts challenge an Ebix stock repurchase, disclosures 

in public filings and statements—including proxy statements issued in 2010, 2011, 

and 2012—and seek contribution and indemnification against the Board, as well as 

the creation of a constructive trust. Parsing through these claims in search of one 

or several discernible factual predicates that overlap with Count I is unnecessary; 

Defendants fail to provide, and the Court does not discern, any reason to conclude 

that any of these claims share an identical factual thread with Count I’s challenge 

to the Board’s maintenance of the ABA. Accordingly, the Federal Derivative 

Action Settlement lacks the capacity to preclude Count I.

 

126 Cf. TBK P’rs, 675 F.2d at 462 (“If a judgment after trial cannot extinguish 

claims not asserted in the class action complaint, a judgment approving a 

settlement in such an action ordinarily should not be able to do so either.” (quoting 

Nat’l Super Spuds, Inc. v. N.Y. Mercantile Exch., 660 F.2d 9, 18 (2d Cir. 1981))). 

127 Plaintiffs assert that these claims were mooted once the merger was abandoned 

in 2013, but offers no facts or law in support of that contention. 

128 TBK P’rs, 675 F.2d at 461.
39

Because the Federal Derivative Action does, however, indirectly challenge 

the validity of payments made under the 2010 Plan, the release’s effect on 

Count III is a closer call. The Federal Derivative Action does not directly 

challenge the payments in the same way as the Second Amended Complaint, which 

asserts that each disbursement was “inherently self-interested” and a breach of 

fiduciary duty; rather, the Federal Derivative Action Complaint knocks the 

payments’ legs out by attacking the foundational document authorizing their 

disbursement—the 2010 Plan—as the invalid product of an uninformed 

shareholder vote. Further, federal plaintiffs did not identify specific disbursements 

made under the 2010 Plan or explicitly seek disgorgement, but did allege that the 

2010 Plan enabled the Board to “receive lucrative stock option awards.”

129

Accordingly, the two cases’ legal and factual pathways that would (hypothetically) 

result in the disbursements’ invalidity differ: the Federal Derivative Action would 

invalidate the disbursements based on a disclosure theory attacking the 2010 Proxy

Statement, while Count III of this action would invalidate them based on a 

fiduciary duty theory attacking particular Board decisions as inappropriately selfinterested. Thus, neither TBK Partners nor Nottingham is directly on point: TBK 

 

129 Federal Derivative Action Compl. ¶ 72. 
40

Partners dealt with different legal theories but similar factual particulars and 

Nottingham dealt with similar legal theories but different factual particulars.130

Despite sharing a factual predicate—validity of the 2010 Plan—Count III of 

this action and claims asserted in the Federal Derivative Action do not share an 

identical factual predicate. This follows because answering the core question 

central to the federal action’s disclosure claim—do misstatements and omissions in 

the 2010 Proxy Statement render the shareholder vote on the 2010 Plan invalid?—

will not necessarily resolve Count III. In other words, the success or failure of 

Count III, which hinges on details underlying the self-payments, does not depend 

on the answer to that core question in the Federal Derivative Action because Count 

III might successfully invalidate the disbursements even if the federal disclosure 

claim were to fail. This was not the case in either TBK Partners or Nottingham, 

where the released claims would have either succeeded or failed based on the same 

set of facts that informed or could have informed the core question in the settled 

action.131 The practical effect of this factual misalignment is twofold. First, it 

 

130 Cf. TBK P’rs, 675 F.2d at 462 (noting that, in a prior case, the court had 

“refused to affirm the District Court’s approval of a settlement that would release 

distinct claims that not only ‘depend(ed) . . . upon a different legal theory but upon 

proof of further facts’” (alterations in original) (quoting Nat’l Super Spuds, Inc. v. 

N.Y. Mercantile Exch., 660 F.2d 9, 18 n.7 (2d Cir. 1981))).

131 Id. (“Whether the payment results from a breach of fiduciary duty, a breach of 

the lease, or from an appraisal proceeding, the same facts support (or limit) the 

amount of recovery for the value of the reversionary interest.” (emphasis added)); 

Nottingham, 564 A.2d at 1106–07 (holding that two actions were based on the 
41

means that enforcing the Federal Derivative Action Settlement will not “prevent 

relitigation of settled questions”132 because the propriety of particular Board 

decisions to issue compensation was not settled. And second, it makes the 

relationship between the Federal Derivative Action and this action not “foreseeably 

obvious.”133 Simply put, it is not obvious that settling the disclosure question 

would immunize future Board actions not based on disclosures.

134

 Accordingly, 

the Federal Derivative Action could not have released Count III. 

In sum, neither federal settlement had the capacity to preclude Counts I–III 

of this action. The Court need not address Plaintiffs’ remaining arguments. 

B. Whether Entrenchment Claims in Counts IV and V Fail

Under Court of Chancery Rule 12(b)(6)

1. Procedural Standard of Review

In considering a motion to dismiss for failure to state a claim upon which 

relief can be granted under Court of Chancery Rule 12(b)(6), the Court will accept 

all well-pleaded facts as true, accept even vague allegations in the complaint if 

they provide the defendant notice of the claim, draw all reasonable inferences in 

favor of the plaintiff, and deny the motion unless the plaintiff could not recover 

 

same set of operative facts where both hinged on whether disclosures in the same 

proxy rendered the same shareholder vote invalid).

132 TBK P’rs, 675 F.2d at 460.

133 Id. 

134 The Second Amended Complaint challenges options disbursed to directors 

following Ebix’s 2010, 2011, 2012, and 2013 annual meetings whose value totaled 

approximately $800,000. Compl. ¶ 57.
42

under any reasonably conceivable set of circumstances.135 Allegations that are 

merely conclusory will not be accepted as true.136

2. Analysis

Count IV purports to bring both class and derivative claims against the 

Board on the grounds that approving the Proxy Put, the Director Nomination 

Agreement, and the Bylaw Amendments amounted to a breach of fiduciary duties. 

Plaintiffs further argue that the 2014 Corporate Actions are defensive measures 

whose adoption warrants strict scrutiny under Unocal Corp. v. Mesa Petroleum 

Co.137 and its progeny. Count V purports to bring a class and derivative claim that 

the Bylaw Amendments “are invalid because they are inconsistent with provisions 

of the Delaware General Corporation Law and Ebix’s bylaws and/or inconsistent 

with Delaware law.”138 Defendants’ motion challenges Count IV’s Proxy Put 

claim as moot and remaining claims under Counts IV and V as failing to state a 

claim upon which relief can be granted under Court of Chancery Rule 12(b)(6).

Because Plaintiffs concede that Defendants mooted the Proxy Put claim by 

removing it, that aspect of Count IV is dismissed. Another concession further 

 

135 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 

536 (Del. 2011).

136 Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 972 (Del. Ch. 2000).

137 493 A.2d 946 (Del. 1985).

138 Compl. ¶ 136.
43

narrows analysis: Plaintiffs acknowledge that they “are not challenging the facial 

validity of the bylaws like in Boilermakers.”139

Defendants argue that the business judgment rule applies to the 2014 

Corporate Actions because none is a defensive measure that would trigger 

heightened scrutiny under Unocal. In particular, they argue that adopting the 

Director Nomination Agreement was not defensive for two reasons. First, adding 

two insurgents to the board “is the antithesis of an entrenching action”140 and

characterizing that concession as defensive would otherwise be inconsistent with 

cases in which Delaware courts have failed to locate a defensive action in the 

absence of a looming threat. Second, Defendants argue that such a holding would 

allow for the “perverse result” of encouraging directors to oppose activists in proxy 

fights instead of appointing dissidents to the board since either decision would, in 

Defendants’ view, give rise to an entrenchment claim.141 Further, Defendants 

argue that adopting the Bylaw Amendments was not defensive because it occurred 

on a “clear day”; that is, the Barrington threat had ended roughly one month prior

to the bylaws’ adoption and the Second Amended Complaint supplies no other 

plausible threat. Finally, Defendants argue that the complained-of conduct was 

 

139 Answering Br. 45. See also Boilermakers Local 154 Ret. Fund v. Chevron 

Corp., 73 A.2d 934 (Del. Ch. 2013). 

140 Reply Br. 20.

141 Opening Br. 28. 
44

“neutral and proportionate as a matter of law” because Plaintiffs “must—but 

cannot—show that the measures were not reasonable.”142

Plaintiffs respond by arguing that because the Second Amended Complaint 

adequately pleads facts showing that the Board adopted each 2014 Corporate 

Action in response to the threat posed by Barrington, Unocal is triggered. In 

addition, Plaintiffs argue that because heightened scrutiny, once triggered, requires 

Defendants to prove that their actions were reasonable and facts before this Court 

do not establish reasonableness as a matter of law, dismissal is inappropriate.

Section 141 of the Delaware General Corporation Law empowers the board 

of directors of a Delaware corporation to conduct the corporation’s business and 

affairs.

143 Directors carrying out that function owe fiduciary duties of loyalty and 

care to the corporation and its shareholders.144 In assessing whether the directors’ 

conduct amounts to a breach of their fiduciary duties in a given scenario, Delaware 

courts use three standards of review: the business judgment rule, enhanced 

scrutiny, and entire fairness.145 The business judgment rule is applicable by default 

and presumes that “in making a business decision the directors of a corporation

 

142 Id. 29–30. 

143 8 Del. C. § 141(a). 

144 See Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 

2006); Mills Acq. Co. v. Macmillan, Inc., 559 A.2d 1261, 1280 (Del. 1989).

145 Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 457 (Del. Ch. 2011).
45

acted on an informed basis, in good faith and in the honest belief that the action 

taken was in the best interests of the company.”146

The Delaware Supreme Court has identified certain scenarios, however, that 

by their nature generate concerns requiring the Court to conduct a more searching 

inquiry.147 Enhanced scrutiny under Unocal applies “whenever the record reflects 

that a board of directors took defensive measures in response to a perceived threat 

to corporate policy and effectiveness which touches on issues of control.”148

As this court noted in Stroud v. Grace, Unocal may also apply in contexts aside 

from a board’s adoption of a defensive measure in response to a hostile takeover 

attempt; Unocal has also “applied to a preemptive measure where the corporation 

was not under immediate ‘attack’”149 but nonetheless enacted a measure “in 

contemplation of an ephemeral threat that could somehow materialize in the 

future.”150

 

146 Aronson v. Lewis, 473 A.3d 805, 812 (Del. 1984).

147 See, e.g., Revlon, Inc. v. MacAndrews & Forbes Hldgs., Inc., 506 A.2d 173 

(Del. 1986); Unocal, 493 A.2d at 954–55; Weinberger v. UOP, Inc., 457 A.2d 701, 

710–11 (Del. 1983). 

148 Gantler v. Stephens, 965 A.2d 695, 705 (Del. 2009) (quoting Santa Fe, 669 

A.2d at 71).

149 Stroud v. Grace, 606 A.2d 75, 82 (Del. 1992) (quoting Moran v. Household 

Int’l, Inc., 500 A.2d 1346, 1350–53 (Del. 1985)).

150 Kahn v. Roberts, 679 A.2d 460, 466 (Del. 1996) (quoting Moran, 500 A.2d at 

1350–53).
46

“Once the plaintiff establishes that defensive measures have been employed 

in the context of a contest for control, the Board has the burden of showing (1) that 

it ‘had reasonable grounds for believing that a danger to corporate policy and 

effectiveness existed,’ and (2) ‘that [its] defensive response was reasonable in 

relation to the threat posed.’”151 A board that successfully carries this burden wins 

reinstatement of the business judgment rule as the applicable standard of review.152

Unocal’s threshold question of whether a defensive action has occurred is a 

matter of some significance in the context of a motion to dismiss.

153 In the event a 

complaint pleads nonconclusory facts sufficient to support the characterization of a 

given board’s action as defensive, the burden shifts to the board to prove the 

reasonableness that action. Yet, as the Court in Santa Fe observed, the activation 

of heightened scrutiny poses a systemic difficulty for defendants seeking dismissal 

under Court of Chancery Rule 12(b)(6), given the limited record from which they 

might draw to demonstrate reasonableness.

154 This is a point worth clarifying 

given Defendants’ backwards suggestion that Plaintiffs’ failure to disprove

reasonableness is dispositive even if this Court finds Defendants’ actions were 

defensive. To the contrary, plaintiffs certainly have no incentive to plead facts 

 

151 Santa Fe, 669 A.2d at 71 (quoting Unitrin, Inc. v. Am. Gen. Corp., 651 A.2d 

1361, 1371 (Del. 1995)). 

152 Id. 

153 See id. at 72. 

154 Id. 
47

showing a board acted reasonably, and when Unocal applies the board does not 

“enjoy a presumption to that effect.”155 That said, “it does not necessarily follow 

that an allegation that a board adopted a defensive device will always state a 

claim.”156

Both the Director Nomination Agreement and the Bylaw Amendments 

contain mechanisms that might help Ebix’s incumbent management maintain 

control of the company in some manner. The Director Nomination Agreement’s 

standstill and voting provisions prevent Barrington—an activist shareholder which 

had voiced dissatisfaction with both particular business decisions and incumbent 

management in general—from soliciting proxies, presenting proposals, or voting 

against Board-recommended matters and nominees. And the Bylaw Amendments 

both impose certain constraints on shareholder action and grant the Board greater 

dominion over meetings, nominations, and proposals—including an ability to 

prevent shareholders from electing directors through the medium of a special 

meeting in ratcheting time intervals. For reasons that follow, however, enhanced 

scrutiny under Unocal only applies to the Board’s approval of the Bylaw 

Amendments. 

 

155 Id. 

156 In re Gaylord Container Corp. S’holders Litig., 1996 WL 752356, at *2 (Del. 

Ch. Dec. 19, 1996). 
48

Entry into the Director Nomination Agreement cannot be viewed as 

defensive for purposes of triggering Unocal. After Barrington threatened to launch 

a proxy contest for majority control of Ebix’s board on November 11, 2014, the 

Individual Defendants made the strategic decision to come to the bargaining table 

instead of mounting outright opposition.157 The Director Nomination Agreement, 

entered into on November 26, 2014, reflects mutual concessions presumably in line 

with each contracting party’s intent: Barrington principally received two board 

seats and thereby a say in managing the affairs of Ebix, and Ebix received a 

guarantee that Barrington would abate dissenting behavior during the standstill 

period.158 Applying Unocal to the Board’s agreement to give up board seats, 

though conceivable as entrenching insofar as that concession was part of a quid pro 

quo earning Ebix the extinction of Barrington’s not-yet-launched proxy contest, is 

counterintuitive. A corporate action with collateral effects including a tendency to 

preserve incumbent control is not per se subject to Unocal scrutiny;

159 and 

 

157 Compl. ¶¶ 78–81.

158 Id.

159 See, e.g., Gantler, 965 A.2d at 705 n.23 (“Rejecting an acquisition offer, 

without more, is not ‘defensive action’ under Unocal.” (citing Kahn v. MSB 

Bancorp, Inc., 1998 WL 409355, at *3–4 (Del. Ch. July 16, 1998), aff’d, 734 A.2d 

158 (Table) (Del. 1999))); Stroud, 606 A.2d at 83 (holding that a private contract 

between shareholders and a private company whose “defensive effects” were 

“collateral at best” would not receive Unocal scrutiny); Doskocil Cos. Inc. v. 

Griggy, 1988 WL 85491, at *6–7 (Del. Ch. Aug. 18, 1988) (holding, in the context 

of a motion for a preliminary injunction, that plaintiffs failed to establish a 

reasonable likelihood of success of showing that Unocal applied to a board’s 
49

applying Unocal under the specific facts of this case would sponsor the enigmatic 

idea that the Board’s decision to dilute its own control of the corporation by 

surrendering board seats to insurgents is best viewed as a defensive action. Simply 

put, because Ebix opened its doors to Barrington, approving the Director 

Nomination Agreement does not qualify as the sort of entrenchment device viewed 

as categorically suspect under Unocal.

Plaintiffs have, however, pled facts sufficient to support an inference that the 

Bylaw Amendments were entrenchment measures related to a potential change in 

control. The Second Amended Complaint establishes a factual chronology that, 

viewed in a light most favorable to Plaintiffs, supports Plaintiffs’ contention that 

the Board adopted the new bylaws to stave off Barrington. Three facts in 

particular support this inference. First, the Bylaw Amendments were prepared on 

November 17, 2014, six days after Barrington conveyed an intent to launch a proxy 

contest.160 The record properly before the Court provides no facts exposing this 

temporal proximity as coincidental—for example, nothing indicates the Board had 

been considering the Bylaw Amendments for some time before Barrington entered 

the picture. And although the Board did not adopt the bylaws until December 19, 

2014, by which time Barrington was contractually barred from running a slate, that 

 

decision to approve the issuance of preferred stock containing a put provision that 

triggered certain penalties in the event of an acquisition).

160 Compl. ¶ 85.
50

sequence does not end the inquiry given the second fact: the Director Nomination 

Agreement’s standstill provision lasts, at most, roughly two years.161 Third and 

finally, although most of the Bylaw Amendments achieved little more than making 

shareholder action more cumbersome, one reform in particular has clear defensive 

value: the Special Meeting Bylaw’s series of clauses that allow the Board, at the 

very least, to delay stockholder-initiated special meetings for 120 days and, at 

most, prevent elections from occurring at special meetings indefinitely. Bylaw 

amendments enacting shorter special meeting delay periods have received Unocal

scrutiny in past cases.

162

These three facts, considered in concert, permit the inference that the Bylaw

Amendments were, in the aggregate, a forward-looking prophylactic designed with 

Barrington in mind, but holstered until the period of Barrington’s guaranteed 

complacency expired. Delaware law supports the imposition of Unocal scrutiny in 

this sort of scenario—that is, one where a board implements defensive measures in 

 

161 Id. ¶ 83. 

162 See Mentor Graphics Corp. v. Quickturn Design Sys., Inc., 728 A.2d 25, 38–43 

(Del. Ch. 1998) (applying Unocal to a bylaw amendment that gave the board of 

directors authority to set a time and place for special meetings called by 

stockholders and required that such meetings take place “not less than ninety (90) 

nor more than one hundred (100) days after the receipt and determination of the 

validity” of the shareholder request); Kidsco v. Dinsmore, 674 A.2d 483, 487–89, 

494–97 (Del. Ch. 1995) (applying Unocal to a bylaw amendment that extended the 

minimum allowable time for calling a stockholder-initiated special meeting from 

35 days to 60 days).
51

response to a threat to corporate control that is not immediate, but rather perceived 

as a future possibility.163 Accordingly, heightened scrutiny applies. 

Defendants strenuously dispute the appropriateness of this result because, in 

their view, the Director Nomination Agreement eliminated the Barrington threat 

and the Second Amended Complaint supplies no alternative ephemeral threat 

sufficient to trigger Unocal under Moran.

164

 This argument lacks precedential 

support and is fatally shortsighted. None of the cases Defendants cite in support of 

this contention controls because none involves a purposive response to a known 

threat: in Goggin v. Vermillion, Inc., the board accused of entrenchment did not 

know of the threat at the time it made the challenged decision;165 in Kahn v. 

Roberts, there was no hostile bidder and “no real probability of any hostile acquirer 

emerging or that the corporation was ‘in play’”;166 and the defendant board 

members in Doskocil Cos. v. Griggy had been considering the challenged action 

for more than a year before the threat emerged and “neither asked for nor wanted” 

the allegedly defensive feature of the provision at issue.167 Although Barrington 

could not run a slate at the time Ebix adopted the Bylaw Amendments, that is only 

 

163 See supra notes 149–50 and accompanying text.

164 See Kahn, 679 A.2d at 466 (citing Moran, 500 A.2d at 1350–53, for the 

proposition that board actions “in contemplation of an ephemeral threat that could 

somehow materialize at some point in the future” trigger enhanced scrutiny under 

Unocal).

165 2011 WL 2347704, at *4 (Del. Ch. June 3, 2011).

166 679 A.2d at 466.

167 1988 WL 85491, at *6.
52

half of the story. The rest—which includes Barrington’s known future capacity to 

re-initiate dissenting behavior and the bylaws’ conception closely after 

Barrington’s emergence—creates, at least, a reasonable inference that improper 

motives were at work.168

These conclusions, however, do not necessarily require the dismissal of 

claims related to the Director Nomination Agreement and the survival of claims 

related to the Bylaw Amendments. Count IV’s claim that the Board members 

breached their fiduciary duties by approving the Director Nomination Agreement 

may yet state a claim for breach of fiduciary duty if well-pled facts overcome the 

presumptions of the business judgment rule.169 Further, Counts IV and V’s 

challenge to the Bylaw Amendments do not automatically state a claim because 

heightened scrutiny applies. Following discussion ties up these loose ends.

Count IV’s claim that the Board breached their fiduciary duties by approving 

the Director Nomination Agreement fails to state a claim because well-pled facts 

do not give rise to a reasonable inference that the Board did not act “on an 

informed basis, in good faith and in the honest belief that the action was taken in 

 

168 See Gantler, 965 A.2d at 705 (affirming the Court of Chancery’s determination 

that Unocal did not apply because it could not be “reasonably . . . inferred that the 

defendants acted ‘defensively’”).

169 See id. at 705–06. 
53

the best interests of the company.”170 The Complaint, which instead focuses on 

proving an entrenchment motive, does not allege that the Board was uninformed or 

otherwise failed to adequately contemplate the merits of executing the Director 

Nomination Agreement. Further, the pleadings supply no facts calling into 

question a majority of Board members’ disinterestedness.171 Accordingly, because 

entry into the Director Nomination Agreement is clearly attributable to a rational 

business purpose, this Court will not substitute its own business judgment for that 

of Ebix’s Board. Count IV’s claim that the Board members breached their 

fiduciary duties by entering into the Director Nomination Agreement is therefore 

dismissed.

 

170 Id. (quoting Aronson, 473 A.2d at 812); see also Kahn, 679 A.2d at 466 

(affirming the Court of Chancery’s dismissal of breach of fiduciary duty claims to 

which the business judgment standard of review, not heightened scrutiny, applied 

because the plaintiff failed assert facts rebutting the business judgment rule’s 

presumptions).

171 Even if the Second Amended Complaint successfully alleged that Ebix’s 

individual directors approved the Director Nomination Agreement for the selfinterested purpose of entrenchment, that fact, without more, might nonetheless fail 

to state a claim for breach of the duty of loyalty. See Gantler, 965 A.2d at 707 

(“By its very nature, a board decision to reject a merger proposal could always 

enable a plaintiff to assert that a majority of the directors had an entrenchment 

motive. For that reason, the plaintiffs must plead, in addition to a motive to retain 

their corporate control, other facts sufficient to state a cognizable claim that the 

Director Defendants acted disloyally.”).
54

Aspects of Counts IV and V premised on the Board’s approval of the Bylaw 

Amendments, however, survive. In this case, heightened scrutiny requires Ebix’s 

board members to show, on the face of the Second Amended Complaint, that their 

adoption of the Bylaw Amendments was “within the range of reasonableness.”172 

Defendants have provided no argument explaining why the Bylaw Amendments, 

considered collectively,

173 fall within that range as a matter of law. Instead, 

Defendants attempt to vindicate each bylaw individually by citing cases upholding 

similar token bylaws using diverse standards of review and under different 

procedural postures.174 None considers the reasonableness of a salvo of new 

provisions accomplishing the number and nature of reforms at work here—which 

include (1) giving the Board authority to set the time and place of special meetings, 

adjourn special meetings for certain reasons, prevent elections from occurring

through special meetings for lengthy periods of time, and delay action by consent 

for twenty days; (2) imposing information and notice requirements on shareholders 

 

172 Santa Fe, 669 A.2d at 72.

173 “Where all of the target board’s defensive actions are inextricably related, the 

principles of Unocal require that such actions be scrutinized collectively as a 

unitary response to the perceived threat.” Unitrin, 651 A.2d at 1387 (citing Gilbert 

v. El Paso, 757 A.2d 1131, 1145 (Del. 1990)).

174 See, e.g., Stroud, 606 A.2d at 75 (reversing the Court of Chancery’s invalidation 

of an advance notice bylaw variant); Mentor Graphics Corp. v. Quickturn Design 

Sys. Inc., 728 A.2d 25, 38–43 (Del. Ch. 1998) (upholding a special meeting bylaw 

variant challenged on Unocal and Blasius grounds after a trial on the merits); 

Kidsco Inc. v. Dinsmore, 674 A.2d 482, 496–97 (Del. Ch. 1995) (upholding a 

special meeting bylaw variant challenged on Unocal grounds in the context of a 

motion for a preliminary injunction and for summary judgment).
55

who request special meetings or submit nominations or proposals; and (3) vesting 

discretionary authority in a meeting chairman. Although many of the complainedof features, as noted earlier, only give rise to inconvenience, the reasonableness of 

a defensive response whose munitions include the ability to foreclose the use of 

special meetings to hold elections requires an explanation not evident on the face 

of these pleadings. Accordingly, those aspects of Counts IV and V challenging 

adoption of the Bylaw Amendments as entrenchment devices withstand 

Defendants’ motion.175

C. Whether the Disclosure Claims in Count VI Fail Under

Court of Chancery Rule 12(b)(6)

Count VI of the Second Amended Complaint purports to bring a class claim 

against the Board members for breaching their fiduciary duties of care and loyalty 

by “issuing the materially misleading and incomplete 2014 Proxy Statement.”176

Defendants have moved to dismiss this claim under Court of Chancery 

Rule 12(b)(6) on the basis of three principal arguments: (1) failure to plead 

materiality adequately; (2) failure to prove reliance and causation, or some other 

“connection” between the disclosures and the election of directors; and (3) failure 

to plead a “cognizable measure of relief.”

177

 

175 See Santa Fe, 669 A.2d at 72; Gaylord Container, 1996 WL 752356, at *2. 

176 Compl. ¶ 139. 

177 Reply Br. 45.
56

Directors’ fiduciary duties of care and loyalty give rise to a related duty “to 

observe proper disclosure requirements.”178 This so-termed duty of disclosure

aims, in part, to ensure that stockholders asked to approve a given action have all 

material information needed to vote on an informed basis.179 In an action alleging 

breach of the duty of disclosure, “[t]he essential inquiry” is materiality, a standard 

that “is determined with respect to the shareholder action being sought.”180

Although the materiality standard does not require a given omission to “have 

caused the reasonable investor to change his vote,” information is material and 

must be disclosed if there exists “a substantial likelihood that [it] would have been 

viewed . . . as having significantly altered the ‘total mix’ of information made 

available.”181 The Court’s determination of a given misstatement or omission’s 

 

178 Malone v. Brincat, 722 A.2d 5, 12 (Del. 1998); RBC Capital Mkts., LLC v. 

Jervis, 2015 WL 7721882, at *29 (Del. 2015) (“The Board’s ‘fiduciary duty of 

disclosure, like the board’s duties under Revlon and its progeny, is not an 

independent dut[y] but the application in a specific context of the board’s duties of 

care, good faith, and loyalty.’” (quoting Malpiede v. Townson, 780 A.2d 1075, 

1086 (Del. 2001))).

179 See Crescent, 846 A.2d at 987.

180 Malone, 772 A.2d at 12.

181 Rosenblatt v. Getty Oil Co., 493 A.2d 929, 945 (Del. 1985) (quoting TSC 

Indus., Inc. v. Northway, Inc., 426 U.S. 426, 449 (1976)); see also Crescent, 846 

A.2d at 987–88 (framing the rule as applicable to misrepresentations and 

omissions).
57

materiality is a mixed question of fact and law decided from the standpoint of a 

reasonable stockholder.182

Disclosure suits challenging alleged misstatements or omissions made in 

connection with a request for shareholder action that seek injunctive relief do not 

require the plaintiff to address reliance, causation, or quantifiable money 

damages.183 Instead, the presence of a connection between the challenged 

disclosure and the shareholder action is sufficient.184 More fundamentally, 

plaintiffs seeking injunctive relief on the basis of disclosure claims must have 

standing.185 The elements of standing are as follows:

First, the plaintiff must have suffered an injury in fact—an invasion of 

a legally protected interest which is (a) concrete and particularized, 

and (b) actual or imminent, not conjectural or hypothetical. Second, 

there must be a causal connection between the injury and the conduct 

complained of—the injury has to be fairly . . . trace[able] to the 

challenged action of the defendant, and not . . . th[e] result [of] the 

 

182 RBC, 2015 WL 7721882, at *29 (“Whether disclosures are adequate ‘is a mixed 

[question] of law and fact, requiring an assessment of the inferences a reasonable 

shareholder would draw and the significance of those inferences to the individual 

shareholder.’” (quoting Shell Petroleum, Inc. v. Smith, 606 A.2d 112, 114 (Del. 

1992))); Millenco L.P. v. meVC Draper Fisher Jurvetson Fund I, Inc., 824 A.2d 

11, 18 (Del. Ch. 2002); Crescent, 846 A.2d at 988; see Cede & Co. v. Technicolor, 

Inc., 636 A.2d 956, 957 (Del. 1994).

183 In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 53 (Del. Ch. 2014).

184 Malone, 722 A.2d at 12; Dubroff v. Wren Hldgs., LLC, 2010 WL 3294219, at 

*5 (Del. Ch. Aug. 20, 2010); cf. Alessi v. Beracha, 849 A.2d 939, 944 (Del. Ch. 

2004) (“Malone teaches that ‘[a]n action for breach of fiduciary duty arising out of 

disclosure violations in connection with a request for stockholder action does not 

include the element[] of reliance.’” (alternations in original)).

185 Thornton v. Bernard Techs., Inc., 2009 WL 426179, at *4 (Del. Ch. Feb. 20, 

2009).
58

independent action of some third party not before the court. Third, it 

must be likely, as opposed to merely speculative, that the injury will 

be redressed by a favorable decision.”186

Accordingly, this Court has found past occasion to dismiss a disclosure claim at 

the motion to dismiss stage for lack of a redressable injury.187

Here, Plaintiffs challenge the 2014 Proxy Statement for things it says and 

does not say about the Director Nomination Agreement, the Barrington threat, 

Raina’s compensation, the Bylaw Amendments, and the (now mooted) Proxy Put. 

Plaintiffs take issue with the 2014 Proxy Statement’s failure to describe the factual 

context from which the Director Nomination Agreement sprung, an omission 

which, in Plaintiffs’ view, inappropriately clouds the Board’s motivations. 

Further, Plaintiffs argue that the 2014 Proxy Statement contains misleading 

information about Raina’s salary because it both omits his 2014 compensation 

information and fails to adequately describe the arrangement Raina negotiated for 

himself in the Abandoned Merger despite disclosing his $1.2 million retention 

bonus in connection with the same deal. Finally, the Second Amended Complaint 

avers that the 2014 Proxy Statement both fails to mention the Bylaw Amendments 

and misstates certain procedural requirements those bylaws would impose.

 

186 Id. (alterations in original) (italics omitted) (quoting Lujan v. Defenders of 

Wildlife, 504 U.S. 555, 560 (1992)).

187 Id. at *4–5 (finding a lack of standing where plaintiff asserting disclosure 

claims sought relief in the form of new disclosures and new elections because 

neither would redress any alleged harm in light of defendant corporation’s entry 

into Chapter 7 liquidation).
59

Because Plaintiffs suppose that these misstatements and omissions befouled

stockholder approvals at the 2014 Annual Meeting, including a Board election and 

an advisory say-on-pay vote, Plaintiffs ask this Court to declare them invalid and 

order a new annual meeting at which stockholders may submit nominations and 

proposals.

Count VI fails to state a claim because Plaintiffs have failed to identify 

misstatements or omissions in the 2014 Proxy Statement that are “material with 

respect to the shareholder action being sought.”188 Plaintiffs challenge two forms 

of shareholder action sought in the 2014 Proxy Statement: (1) a vote on director 

elections and (2) an advisory say-on-pay vote.189 Accordingly, the challenged 

disclosures must be material and “connect[ed] to the request” for those actions.190 

For reasons that follow, a reasonable shareholder would not think the complainedof disclosures altered the “total mix” of information made available with respect to 

the election and say-on-pay vote.191 This discussion organizes the disclosures into 

 

188 Malone, 722 A.2d at 12. 

189 See Compl. ¶¶ 99-106. Through the course of litigating this Motion to Dismiss, 

Plaintiffs have failed to argue that the alleged misstatements and omissions they 

identify are material with respect to any other shareholder action sought in the 

2014 Proxy Statement. Arguments to that effect are therefore waived. See King v. 

VeriFone Hldgs., Inc., 994 A.2d 354, 360 n.21 (Del. Ch. 2010), rev’d on other

grounds, 12 A.3d 1140 (Del. 2011) (“A party’s failure to raise an argument in its 

answering brief on a motion to dismiss constitutes waiver of that argument.”).

190 Malone, 722 A.2d at 12.

191 See Rosenblatt, 493 A.2d at 945. 
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the following three categories: (1) disclosures about the Proxy Put, Bylaw 

Amendments, and Director Nomination Agreement; (2) disclosures about Raina’s 

compensation; and (3) disclosures providing procedural guidance for the 2015 

annual meeting.

Challenges to the disclosures concerning the Proxy Put, Bylaw 

Amendments, and factual background to the Director Nomination Agreement fall 

short of the applicable standard. Omissions about the Proxy Put have been 

mooted,

192 and the stockholders were not asked to vote on the Director Nomination 

Agreement or the Bylaw Amendments—an unsurprising circumstance given that 

the Board had not adopted the Bylaw Amendments at the time the 2014 Proxy 

Statement was issued. Nonetheless, Plaintiffs claim that a reasonable stockholder 

might have viewed incumbent directors and Barrington’s designees with a 

“jaundiced eye” had they known of the Bylaw Amendments and the fact that the 

Director Nomination Agreement arose after Barrington announced its plan to 

propose four new directors.

193 This limited conceptual nexus does not salvage 

either alleged omission. Ebix’s directors were under no obligation to unveil the 

Bylaw Amendments preemptively in a proxy soliciting votes on two unrelated 

items. And in any event, the Board disclosed the Bylaw Amendments in a public 

filing issued on December 24, 2014—over two weeks before the annual meeting 

 

192 See supra note 40 and accompanying text; supra Part III.B.2.

193 Compl. ¶¶ 102–03. 
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scheduled for January 9, 2015. Further, the informational value of a disclosure 

conveying the particulars of Barrington’s letter is dubious given the breadth of 

information already disclosed in the 2014 Proxy Statement, which included 

descriptions of the Director Nomination Agreement, Barrington’s standstill 

obligations, and the addition of two Barrington designees who would receive 

Board support.194 Accordingly, a reasonable stockholder would not think these

omissions significantly altered the “total mix” of information relating to the actions 

sought. 

Although the alleged omissions concerning Raina’s compensation are 

“connected” to both the election and the advisory say-on-pay votes,195 they are not

material. Both omissions identified by Plaintiffs criticize the 2014 Proxy Statement

for failing to disclose compensation that Raina had not actually received. Plaintiffs 

complain that 2014 compensation figures should have accompanied 2011–2013 

figures, but do not allege that Raina had in fact received 100% of his 2014 

compensation as of mid-December when the 2014 Proxy Statement was issued. 

 

194 Cf. Dias v. Purches, 2012 WL 4503174, at *9 (Del. Ch. Oct. 1, 2012) (“The 

drafters of an S4 or proxy statement face the difficult task of providing 

stockholders enough information to make an informed decision while 

simultaneously not miring the reader in insignificant details.”); Zirn v. VLI Corp., 

1995 WL 362616, at *4 (Del. Ch. June 12, 1995) (“[T]he law ought guard against 

the fallacy that increasingly detailed disclosure is always material and beneficial 

disclosure. In some cases the opposite will be true.”).

195 The Second Amended Complaint alleges that all directors—including Raina and 

the Compensation Committee—were up for re-election at the 2014 Annual 

Meeting. Compl. ¶¶ 99, 104.
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Thus, the pleadings do not support an inference, and this Court will not assume, 

that a complete 2014 figure was actually available.196 Further, disclosure of an 

incomplete figure might have been possible, but nonetheless difficult to interpret, 

misleading, or subject to subsequent modification. Similarly, Plaintiffs’ suggestion 

that the 2013 figure is materially incomplete because the 2014 Proxy Statement

does not disclose the compensation arrangement Raina bargained for but did not 

receive in connection with the Abandoned Merger goes too far. What the 2014 

Proxy Statement does disclose—the $1.2 million retention bonus Raina in fact 

received—is far more relevant to an election and say-on-pay vote. In short, the 

Board was under no duty to disclose one unrealized aspect of an eighteen month 

old terminated deal.

The final batch of challenged disclosures, which itself contains three pieces 

of procedural guidance on submitting shareholder nominations and proposals for 

the 2015 annual meeting,197 does not provide a basis for liability for two reasons. 

First, each disclosure was true at the time the 2014 Proxy Statement was issued.198

 

196 See Gen. Motors, 897 A.2d at 168 (“A trial court is required to accept only 

those ‘reasonable inferences that logically flow from the face of the 

complaint’ . . . .).

197 Those three items are: (1) the date by which nominations for the 2015 annual 

meeting must be received; (2) the standards the Board applies in considering 

candidates submitted by stockholders; and (3) the date(s) by which stockholders 

must submit proposals for the 2015 annual meeting. Compl. ¶ 106. 

198 “Directors are required . . . to provide a balanced, truthful account of all matters 

disclosed in the communications with shareholders.” Malone, 722 A.2d at 12.
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Plaintiffs do not argue that the 2014 Proxy Statement’s guidance on either the 2015 

annual meeting’s shareholder proposal submission deadline or the standards the 

Board would use to consider stockholder nominees conflicted with Ebix’s thenexisting bylaw regime.199 And Plaintiffs’ argument that the 2014 Proxy Statement

provided a contemporaneously incorrect deadline for 2015 shareholder 

nominations submissions fails. At the time, Ebix had no advance notice bylaw200

and this Court has, in the past, recognized directors’ ability to set an advance 

notice deadline for future meetings in a proxy statement in the absence of such a 

bylaw.201 Accordingly, the pleadings fail to sustain an inference that the 2014 

Proxy Statement contained false information. 

Second, these disclosures are not material in relation to the 2014 Proxy

Statement’s solicitations for shareholders’ approval of incumbent directors and 

advisory say-on-pay at the 2014 Annual Meeting. Once again, the conceptual 

nexus Plaintiffs provide—that directors who provide misleading procedural 

disclosures are less attractive candidates—is attenuated. None of the complainedof procedural guidance affected shareholders’ understanding of how to, say, submit 

 

199 See Compl. ¶ 106.

200 Id.

201 See Goggin v. Vermillion, 2011 WL 2347704, at *4 (Del. Ch. June 3, 2011) 

(holding, in the context of a motion for a preliminary injunction, that a party had 

failed to establish a reasonable probability of success on the merits of its claim that 

an advance notice requirement created in a proxy statement was an “unwarranted 

defensive and entrenching behavior by the Board”).
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nominations or proposals for the 2014 Annual Meeting. And the fact that 

procedural guidance relating to the 2015 annual meeting later became obsolete is 

unremarkable given its correction (upon Ebix’s December 24, 2014 public filing 

disclosing the Bylaw Amendments) far in advance of that meeting.202 Relatedly, as 

was noted in discussion of Defendants’ alleged omission of Raina’s 2014 

compensation figure, a disclosure designed to conform preemptively to the not-yetadopted Bylaw Amendments might have required revision should the Board have 

ultimately decided to adopt those amendments in modified form or not at all. 

Thus, Plaintiffs overstate these disclosures’ materiality with respect to the 

challenged election. 

For all of these reasons, the alleged misstatements and omissions, whether

considered individually or collectively, are not material with respect to the

challenged shareholder actions. Count VI is dismissed. 

IV. CONCLUSION

For the foregoing reasons, Count IV is dismissed in part; its challenge to the 

Board’s approval of the Proxy Put is dismissed as moot and its challenge to the 

Board’s approval of the Director Nomination Agreement as a breach of fiduciary 

 

202 The 2014 Proxy Statement provides an August 15, 2015 deadline for receipt of 

nominations for the 2015 annual meeting. Plaintiffs argue the correct deadline is 

between September 11 and October 11, 2015. Compl. ¶ 106. Either way, 

stockholders had ample time to appreciate the correction that Plaintiffs allege was 

necessary. 
65

duties is dismissed for failure to state a claim under Rule 12(b)(6). Count VI is 

dismissed. Otherwise, Defendants’ Motion to Dismiss is denied.

IT IS SO ORDERED. 

 /s/ John W. Noble 

 Vice Chancellor