IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JOSEPH LAWRENCE LIGOS,

Plaintiff,

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v.

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C.A. No. 2020-0435-SG

ISRAMCO, INC., NAPHTHA ISRAEL 

PETROLEUM CORPORATION LTD., 

NAPHTHA HOLDING LTD., I.O.C. -

ISRAEL OIL COMPANY, LTD., 

NAPHTHA US OIL, INC., HAIM 

TSUFF, ISRAMCO NEGEV 2 

LIMITED PARTNERSHIP, JOSEPH 

FROM, MAX PRIDGEON, ASAF 

YARKONI, FRANS SLUITER, and NIR 

HASSON,

Defendants.

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MEMORANDUM OPINION

Date Submitted: May 21, 2021

Date Decided: August 31, 2021

Corinne Elise Amato, Kevin H. Davenport, Samuel L. Closic, Stephen D. Dargitz, 

and Jason W. Rigby, of PRICKETT, JONES & ELLIOTT, P.A., Wilmington, 

Delaware; OF COUNSEL: Eric L. Zagar, J. Daniel Albert, Justin O. Reliford, and 

Christopher M. Windover, of KESSLER TOPAZ MELTZER & CHECK, LLP,

Radnor, Pennsylvania, Attorneys for Joseph Lawrence Ligos.

William B. Chandler III, Bradley D. Sorrels, Daniyal M. Iqbal, and Nora M. 

Crawford, of WILSON SONSINI GOODRICH & ROSATI, P.C., Wilmington, 

Delaware; OF COUNSEL: Steven Guggenheim, of WILSON SONSINI 

GOODRICH & ROSATI, P.C., Palo Alto, California, Attorneys for Defendants Max 

Pridgeon, Asaf Yarkoni, and Nir Hasson.
S. Mark Hurd and Daniel T. Menken, of MORRIS NICHOLS ARSHT & TUNNEL, 

LLP, Wilmington, Delaware; OF COUNSEL: Danny David and Amy Pharr Hefley, 

of BAKER BOTTS L.L.P., Houston, Texas, Attorneys for Defendants Haim Tsuff, 

Naphtha Israel Petroleum Corporation Ltd., Naphtha Holding Ltd., I.O.C. - Israel 

Oil Company, Ltd., Naphtha US Oil, Inc., and Isramco Negev 2 LP.

Bradley R. Aronstam, Adam D. Gold, and Anthony M. Calvano, of ROSS 

ARONSTAM & MORITZ, Wilmington, Attorneys for Defendants Joseph From, 

Frans Sluiter, and Isramco, Inc.

GLASSCOCK, Vice Chancellor
Before me is a complaint by Joseph Ligos, a former stockholder of a Delaware 

corporation, Isramco, Inc. (“Isramco” or the “Company”), who was cashed out in a 

merger in 2019. According to Ligos, the merger was unfair. Because the Company 

was controlled, indirectly, through Defendant Haim Tsuff, and because Tsuff also 

indirectly controlled the acquiror, Defendant Naphtha Israel Petroleum Corp. 

(“Naphtha”) and its affiliates, entire fairness review of the transaction is the default 

standard. Obviously, this is because of the agency problem created where a 

controller stands on both sides of the transaction.

Nonetheless, the common law of corporations recognizes that conflicted 

controller transactions may enhance firm value, and that the risk of litigation under 

the high bar of entire fairness may discourage such value-enhancing deals. 

Accordingly, the law has encouraged mechanisms to reduce the risk to the 

principals—the stockholders—in such transactions, culminating in MFW and its 

progeny.1

 Compliance with the MFW rubric allows conflicted transactions to 

receive business judgment review, but given the agency risk, compliance with the 

rubric is strictly construed. To avoid entire fairness review under MFW, the 

company and its controller must demonstrate compliance with two conditions: First, 

the deal must be subject ab initio to negotiation by a committee of independent and 

disinterested directors, fully empowered and in compliance with the duties of loyalty 

1 Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014).
2

and care. Second, the transaction must also be so subject to a “majority of the 

minority” stockholder vote in favor, by a fully informed and uncoerced electorate. 

If either of these conditions is absent, entire fairness review results.

Currently pending are numerous defendants’ motions to dismiss under Rules 

12(b)(6) and 12(b)(2). This opinion addresses only Tsuff’s motion to dismiss under 

Rule 12(b)(6), arguing that business judgment must apply because the transaction 

was fully compliant with the MFW standard. For the following reasons, that motion

must be denied; it will necessarily inform the other motions under 12(b)(6), however. 

The parties should inform me, in light of that finding, whether further briefing is 

appropriate, and I will then address the remainder of the motions to dismiss.

The Plaintiff raises a number of ways in which he finds that the procedure 

here fell short of that called for in MFW. I need address only one to resolve the 

motions to dismiss.2

 The MFW standard requires that the deal be conditioned on a 

majority of the minority vote by stockholders who are uncoerced and fully informed. 

Because I find that the record at this pleading stage, together with the Plaintifffriendly inferences therefrom, makes it plausible that the vote was materially 

uninformed, entire fairness review is applicable, and dismissal under MFW is thus 

inappropriate.

2 Left for another stage in the litigation is the question as to whether the burden of proof on entire 

fairness must shift to the Plaintiffs given the use of a special committee to negotiate the transaction.
3

The Complaint alleges that a material factor in arriving at a fair value of 

Isramco was the value of certain overriding royalties in an offshore Israeli oil field, 

the Tamar Field, in which another entity, Isramco Negev 2 Limited Partnership

(“Negev 2”) owns a working interest. The value of the royalties, in turn, was 

dependent on when the right to receive royalties ripened, a matter on which Isramco 

and Negev 2 disagree. The royalty issue was, at the time of the merger, in 

arbitration. Negev 2 is yet another entity controlled by Tsuff. The value of the 

royalties, and the value of the arbitration, were material to the deal price.

According to the merger proxy (the “Proxy”), some facts about the arbitration, 

and the value of the arbitration assigned by the Special Committee’s financial

advisor, were disclosed to the minority stockholders. Stockholders were told that 

Naphtha, the merger counterparty, held a controlling interest in Negev 2, which was 

involved in the arbitration. What they were not told is the following. About the time 

that Tsuff formed a desire for Naphtha to acquire Isramco, he approached the 

Isramco board of directors (the “Board”) for permission to allow Tsuff himself to 

participate in the arbitration. The Board agreed. Under the motion to dismiss 

standard, I must assume that, having received permission of the Board to participate, 

Tsuff did so, and that he pursued his own, conflicted, self-interest in that arbitration. 

It is the Plaintiff’s theory that Tsuff’s self-interest included prolonging the 

arbitration throughout the merger negotiations to keep Isramco’s value artificially 
4

reduced. While that matter remains for decision on a record, what I can find at the 

pleading stage is that both the Board’s agreement to allow Tsuff to participate, and 

the participation itself, would have been material to a stockholder attempting to 

evaluate the proposed merger. At this pleading stage, this makes business judgment 

review under MFW unavailable.

A statement of the relevant facts alleged, and my reasoning, follow.

I. BACKGROUND3

A. The Parties and Relevant Non-Parties4

Plaintiff Joseph Lawrence Ligos is a former stockholder of Isramco.5

 He 

continuously owned shares of Isramco stock from the announcement to the 

consummation of the Buyout.6

3 Unless otherwise noted, the facts referenced in this Memorandum Opinion are drawn from the 

Verified Shareholder Class Action Complaint (referred to herein as the “Complaint”) and the 

documents incorporated therein. See generally Compl., Dkt. No. 1. I may also consider documents 

produced by the Defendants in response to the Plaintiff’s 8 Del. C. § 220 books and records 

demand “to ensure that the plaintiff has not misrepresented their contents and that any inference 

the plaintiff seeks to have drawn is a reasonable one.” Voigt v. Metcalf, 2020 WL 614999, at *9 

(Del. Ch. Feb. 10, 2020).

4 The Plaintiff voluntarily dismissed J.O.E.L Jerusalem Oil Exploration Ltd. (“JOEL”), Equital, 

Ltd. (“Equital”), YHK Investment L.P. (“YHK”), YHK General Manager Ltd. (“YHK Manager”), 

and United Kingsway Ltd. (“Kingsway”) without prejudice on August 5, 2020. Notice of 

Voluntary Dismissal as to Certain Defs., Dkt. No. 10. Joseph From, Frans Sluiter, and Isramco, 

Inc. were also voluntarily dismissed from this action with prejudice on May 26, 2021. Order of 

Dismissal with Prejudice as to Certain Defs., Dkt. No. 62.

5 Compl. ¶ 13.

6 Id.
5

Non-party Isramco is a Delaware corporation headquartered in Houston, 

Texas.7

 In October 2019, Isramco’s controller—Defendant Naphtha—and its 

affiliates consummated a going-private transaction by purchasing all of Isramco’s 

unaffiliated stock for cash consideration (the “Buyout”).8

 Prior to the consummation 

of the Buyout, Isramco was publicly traded on the NASDAQ Capital Market.9

Defendant Naphtha Holding LTD. (“NHL”) is an Israeli company wholly 

owned by Naphtha.10 Prior to the Buyout, NHL directly owned approximately 

58.6% of Isramco’s outstanding shares.11

Defendant I.O.C. – Israel Oil Company, LTD. (“I.O.C.”) is an Israeli private 

company.12 Prior to the Buyout, I.O.C. directly owned approximately 12.1% of 

Isramco’s outstanding shares.13

Defendant Naphtha is an Israeli public company whose securities trade on the 

Tel Aviv Stock Exchange.14 Its principal businesses are exploration and production 

of oil and natural gas.15 Naphtha owns 99.9% of I.O.C. and 100% of NHL.16 

7 Id. ¶ 14.

8 Id. at 1–2, ¶ 142.

9 Id. ¶ 14.

10 Id. ¶ 22.

11 Id. 12 Id. ¶ 23.

13 Id. 14 Id. ¶ 21.

15 Id. 16 Id. ¶¶ 22–23.
6

Accordingly, prior to the Buyout, Naphtha beneficially owned 70.7% of Isramco’s 

outstanding common stock.17

Defendant Naphtha US Oil, Inc. (“Merger Sub”) is a Delaware corporation 

formed by I.O.C. to effectuate the Buyout.18 I.O.C. owns 100% of the outstanding 

shares of common stock of Merger Sub.19

Defendant Haim Tsuff (“Tsuff”) served as Isramco’s President and the 

Chairman of its Board from May 1996 until consummation of the Buyout on October 

25, 2019.20 He served as the Company’s Chief Executive Officer (“CEO”) from 

May 1996 until November 2017, and as Co-CEO from November 2017 until 

consummation of the Buyout in October 2019.

21 Tsuff is also a director of NHL, 

I.O.C., Merger Sub, and Naphtha, and the Chairman of Naphtha’s board of 

directors.22 Prior to the Buyout, Tsuff directly owned 61,679 shares of Isramco 

common stock and, through interests in Naphtha, indirectly owned an additional 

1,922,517 shares, which collectively totaled approximately 73% of the Company’s 

outstanding shares.23 The relationship of the parties is graphically represented in 

Figure 1.

17 Id. ¶ 21.

18 Id. ¶ 24.

19 Id. 20 Id. ¶ 25.

21 Id. 22 Id. ¶¶ 21–24.

23 Id. ¶ 15.
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Tsuff, Naphtha, NHL, I.O.C., and Merger Sub are referred to collectively 

herein as the “Purchaser Group Defendants.” According to the Proxy, Tsuff was “in 

a position to indirectly determine the investment and voting decisions made by each 

of the” Purchaser Group Defendants by virtue of his beneficial ownership of Isramco 

stock and “the ownership and management structures” of the Purchaser 

Defendants.

24

Defendant Negev 2 is an Israeli public limited partnership formed by Isramco 

in 1989.

25 Tsuff is the Chairman of its board of directors.26 Naphtha holds

controlling interests in Negev 2, and I.O.C. fully owns and controls Negev 2’s 

general partner, a non-party.27 Negev 2 owns a working interest in the Tamar oil 

and gas field located in the Levantine basin in the Mediterranean Sea (the “Tamar 

Field”) from which Isramco receives a royalty stream (the “Tamar Royalty”).28 The 

Tamar Royalty was the Company’s single largest source of revenue.29 A dispute 

between Negev 2 and Isramco as to the Tamar Royalty was in arbitration at the time 

of the Buyout (the “Tamar Arbitration”).30

Non-Party Eran Saar is the CEO of Naphtha and a director of Negev 2.31

24 Id. (quoting Proxy at 65).

25 Id. ¶¶ 27, 36.

26 Id. ¶ 26.

27 Id. ¶ 27.

28 Id. 29 Id. ¶ 3.

30 Id. ¶¶ 58–63.

31 Id. ¶¶ 72, 76
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(Figure 1.)
9

B. Factual Background

1. The Tamar Royalty

In May 2001, Isramco joined a partnership that held two offshore exploratory 

licenses in the Tamar Field, known as the Matan and Michal licenses, which 

generated the Tamar Royalty revenue stream.

32 By March 2007, when the Company 

filed its 2006 Form 10-K, Isramco, through its interests in Negev 2, held a 27.5% 

working interest and overriding royalties in the Matan and Michal licenses.

33

In late 2007, however, the Company decided to close its Israel branch office 

and focus instead on development and exploration in the United States.

34 The 

Complaint alleges that Isramco’s shift towards operations in the United States was 

part of a campaign by Tsuff to strip Isramco of its valuable interests in the Tamar 

Field for the benefit of other Tsuff-controlled entities such as Naphtha and 

Negev 2.35

In connection with this shift, Isramco and I.O.C. entered into an Israel Branch 

Sale Agreement, pursuant to which Isramco sold to I.O.C. its Israel-based activities

and assets conducted and managed by the Company’s Israel branch office.36 These 

32 Id. ¶ 40.

33 Id. ¶ 41.

34 Id. ¶ 42.

35 Id. ¶¶ 42, 55, 57.

36 Id. ¶ 44.
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assets included Isramco’s general and limited partnership interests in Negev 2, which 

continued to own a working interest in the Tamar Field.

37

As a result, by the end of 2008, Isramco’s working interest in the Matan 

license was reduced to zero, and its overriding royalties in the Matan license—i.e., 

the Tamar Royalty—were reduced to 1.4375% of the revenues received by Negev 2 

from the Tamar Field.38 The Tamar Royalty was set to increase to 2.7375%, 

however, after the triggering of a payout date (the “Payout Date”).

39 This 

represented a 78% increase, which translated to an additional $8.84 per share in 

royalty income.40 The Payout Date was calculated based on the amount of certain 

expenses incurred by Negev 2 relative to the revenue that Negev 2 received from the 

Tamar Field.

41 In other words, higher costs meant that more revenue was required 

to reach the Payout Date.42

The Tamar Royalty was the Company’s single largest source of revenue, and 

the Company disclosed in each of its Annual Reports dating back to 2014 that the 

Tamar Royalty was “expected to be very significant to the Company for the 

foreseeable future.”43

37 Id. ¶¶ 27, 44.

38 Id. ¶ 45.

39 Id. ¶¶ 3, 45.

40 Id. ¶ 3.

41 Id. ¶ 57.

42 Id. 43 Id. ¶¶ 3, 57.
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2. Tamar Arbitration

According to the Complaint, beginning in late 2016, Tsuff, through his 

beneficial ownership of Negev 2, attempted to delay the Payout Date by continually 

adding expenses to the Payout Date calculation.44 Specifically, in 2016, Negev 2 

added $39 million in “solo expenses,” such as legal and insurance expenses, to the 

Payout Date equation, which pushed the Payout Date back from 2016 to the first 

quarter of 2017.45 Then, in February 2017, Negev 2 asserted that the calculation 

should also include “financing expenses.”46

In light of Negev 2’s shifting cost calculations, on February 26, 2017, the 

Tamar Arbitration commenced between Isramco and Negev 2 concerning “what 

costs should be included in the payout calculation” for the purposes of calculating 

the timing of the Payout Date.47 At a preliminary hearing on August 13, 2017, 

Negev 2 again added “hundreds of millions of . . . dollars” in expenses to its 

purported Payout Date calculation.48

In November 2017, as disclosed in the Proxy, Tsuff and Saar met with Baker 

Botts L.L.P. (“Baker Botts”) to discuss a potential purchase by Naphtha of the 

remaining Isramco shares.49 The Proxy does not disclose, however, that, also in 

44 Id. ¶¶ 3–4, 69–71.

45 Id. ¶ 71.

46 Id. ¶ 74.

47 Id. ¶¶ 59, 63 (quoting the Company’s 2016 Form 10-K).

48 Id. ¶ 75.

49 Id. ¶ 76 (citing Proxy at 12).
12

November 2017, the Company’s Board met and the Board’s Conflict Committee 

“‘(i) reauthorized the limited involvement of Haim Tsuff in the Tamar [A]rbitration 

and (ii) approved the assistance of Eran Saar . . . in the Tamar [A]rbitration.’”50

On November 27, 2017, a few weeks after the Conflict Committee authorized 

Tsuff’s and Saar’s involvement in the Tamar Arbitration, Negev 2 submitted a 

revised position in the Tamar Arbitration asserting $950 million in additional 

expenses to the Payout Date calculation, which it contended would delay the Payout 

Date “until the end of 2019.”51 Isramco, in contrast, believed that the Payout Date 

was “around the middle of 2015.”52

Isramco and Negev 2 also disagreed as to the amount at stake in the Tamar 

Arbitration. Specifically, Isramco disclosed in its 2016 Form 10-K that it believed 

the scope of the disagreement was approximately $15 million, and it later disclosed 

in its 2017 Form 10-K that it believed this figure to be $45 million, not including the 

value of Isramco’s counterclaims against Negev 2.53 In contrast, Negev 2 estimated 

the scope of disagreement to be approximately $73 million, before taxes.54

Isramco submitted a Statement of Claim in the Tamar Arbitration on February 

25, 2018, and Negev 2 submitted its response on August 8, 2018.55 The Company 

50 Id. ¶ 77; Decl. of Daniel T. Menken in Support of Naphtha OB, Ex. 9 at 2.

51 Compl. ¶ 78.

52 Id. ¶ 61 (quoting the Company’s 2017 Form 10-K).

53 Id. ¶ 62.

54 Id. 55 Id. ¶ 63.
13

disclosed in its Form 10-Q for the quarter ended June 30, 2019 that the Tamar 

Arbitration was “in its early stages with the parties expected to complete the 

discovery process in the coming months,” and “[t]he Company expect[ed] the 

discovery and evidentiary filings . . . to conclude in 2019, with evidentiary hearings 

to occur in February of 2020.”56

3. The Buyout

On March 21, 2018, with the Tamar Arbitration still ongoing, and one month 

after Isramco filed its Statement of Claim, the Purchaser Group Defendants filed an 

amendment to their Schedule 13D disclosing that they were in the preliminary stages 

of evaluating a potential acquisition of unaffiliated shares of Company stock or 

another going-private transaction involving the Company.

57 Naphtha thereafter 

submitted a letter to the Board on May 24, 2018 indicating that it was interested in 

exploring the possibility of a transaction involving Naphtha’s acquisition of all 

unaffiliated shares of Isramco stock in exchange for cash (the “Indication of 

Interest”).

58 The Indication of Interest stated that Naphtha expected “that the 

Company’s board of directors will appoint a special committee of independent 

56 Id. ¶ 63 (quoting the Company’s Q2 2019 10-Q).

57 Id. ¶ 80.

58 Id. ¶ 81.
14

directors to engage in this process and make a recommendation to the Company’s 

board of directors with respect to any Transaction.”59

On June 5, 2018, the Board met and appointed a special committee (the 

“Special Committee”) to review, evaluate, and negotiate a potential transaction with 

Naphtha.

60 On October 5, 2018, the Special Committee selected Duff & Phelps 

Securities, LLC and Duff & Phelps, LLC (together, “Duff & Phelps”) as a financial 

advisor.61 The Board never reversed the November 2017 decision to authorize 

Tsuff’s and Saar’s involvement in the Tamar Arbitration.62

On January 8, 2019, over a year after the Board reauthorized Tsuff and 

authorized Saar to participate in the Tamar Arbitration, Naphtha submitted an initial 

proposal to acquire the unaffiliated shares of Isramco stock for $110.36 per share in 

cash.63 The January 8, 2019 proposal stated that the transaction would be 

conditioned on the Special Committee’s recommendation and a majority vote of the 

Company’s minority stockholders.

64 After three months of negotiations, which 

included numerous discussions related to the Tamar Royalty and Tamar 

Arbitration,65 Naphtha increased its proposal to $121.40 per share on April 4, 2019, 

59 Id. ¶ 82.

60 Id. ¶ 84.

61 Id. ¶ 87.

62 Id. ¶ 90.

63 Id. ¶ 91.

64 Id. ¶ 83.

65 See, e.g., id. ¶¶ 95–96, 98–100, 105–06, 108–16, 119–21, 124–25, 130–32, 134, 136.
15

which the Special Committee approved on the same day.

66 On May 20, 2019, Duff 

& Phelps presented its fairness opinion to the Special Committee, which included 

an assessment of various potential outcomes to the Tamar Arbitration.67 The Special 

Committee then recommended that the Board approve the Buyout, and the Board

met, with Tsuff recused, and approved the Buyout and resolved to recommend to the

Company’s stockholders that they do the same.

68

On October 22, 2019, a majority of the unaffiliated Isramco stockholders 

voted to approve the Buyout.69 The Proxy described aspects of the Tamar 

Arbitration, including Duff & Phelps’s assessment regarding the potential proceeds 

from the arbitration, and that Naphtha controlled Negev 2,

70 but it did not disclose 

the Conflict Committee’s decision in November 2017 to reauthorize Tsuff’s 

participation in the Tamar Arbitration.71

C. Procedural History

The Plaintiff initiated this action on June 4, 2020.72 The Complaint brings 

claims for breach of fiduciary duty against the Purchaser Group Defendants (Count 

66 Id. ¶¶ 136–38.

67 Id. ¶ 141.

68 Proxy at 21.

69 Compl. ¶ 142.

70 Proxy at 12, 31.

71 Compl. ¶ 148.

72 See Compl.
16

I) and the Director Defendants73 (Count II), for unjust enrichment against the 

Purchaser Group Defendants (Count III), and for aiding breaches of fiduciary duty 

against Negev 2 (Count IV) and Kingsway, YHK Manager, YHK, Equital, JOEL, 

Naphtha, I.O.C., and Merger Sub (Count V).74 On August 5, 2020, the Plaintiff 

dismissed his claims against JOEL, Equital, YHK, YHK Manager, and Kingsway 

without prejudice.75

On September 21, 2020, three groups of defendants filed separate motions to 

dismiss: (i) Naphtha, NHL, I.O.C., and Tsuff;76 (ii) From, Sluiter, and Isramco (the 

“Isramco Motion”);77 and (iii) Pridgeon, Yarkoni, and Hasson.78 Negev 2 moved to 

dismiss on December 14, 2020.79 The parties fully briefed the four motions by 

February 26, 2021.80

73 The Complaint defines the Director Defendants to include Tsuff, Joseph From, Max Pridgeon, 

Asaf Yarkoni, Frans Sluiter and Nir Hasson. Compl. ¶ 33. The Plaintiff subsequently dismissed 

From and Sluiter with prejudice on May 26, 2021. Order of Dismissal with Prejudice as to Certain 

Defs., Dkt. No. 62.

74 Compl. ¶ 159–87.

75 Notice of Voluntary Dismissal as to Certain Defs., Dkt. No. 10.

76 Mot. to Dismiss of Defs. Naphtha, Holdings, US Oil, and Tsuff, Dkt. No. 23 [hereinafter 

“Naphtha Mot.”]; Opening Br. in Supp. of Naphtha Mot., Dkt. No. 24 [hereinafter “Naphtha OB”].

77 Defs. From, Sluiter, and Isramco’s Mot. to Dismiss, Dkt. No. 26 [hereinafter “Isramco Mot.”]; 

Opening Br. in Supp. of Isramco Mot., Dkt. No. 26.

78 Defs. Pridgeon, Yarkoni, and Hasson’s Motion to Dismiss, Dkt. No. 28 [hereinafter “Special 

Committee Mot.”]; Opening Br. in Supp. of Special Committee Mot., Dkt. No 28.

79 Def. Negev’s Mot. to Dismiss, Dkt. No. 39 [hereinafter “Negev 2 Mot.”]; Opening Br. in Supp. 

of Negev Mot., Dkt. No. 40 [hereinafter “Negev 2 OB”].

80 Pl.’s Answering Br. in Opp’n to Naphtha Mot., Isramco Mot., and Special Committee Mot., Dkt. 

No. 36 [hereinafter “Pl.’s First Br.”]; Reply Br. in Further Supp. of Isramco Mot., Dkt. No. 45; 

Reply Br. in Further Supp. of Special Committee Mot., Dkt. No 46; Reply Br. in Supp. of Naphtha 

Mot., Dkt. No. 47; Pl.’s Answering Br. in Opp’n to Negev 2 Mot., Dkt. No. 52; Reply Br. in Supp. 

of Negev 2 Mot., Dkt. No. 54.
17

I heard oral argument on all motions to dismiss on May 21, 2021.81 On May 

26, 2021, the Plaintiff voluntarily dismissed From, Sluiter, and Isramco from this 

action, mooting the Isramco Motion, and I consider the remaining motions submitted 

for decision as of that date.82

II. ANALYSIS

A. Legal Standards

The Defendants seek dismissal under Rule 12(b)(6).83 At the pleading stage, 

I must take as true all well-pled allegations and draw inferences therefrom in the 

light most favorable to the Plaintiff.84 I may only grant the motions to dismiss if I 

find it not “reasonably conceivable” that the Plaintiff may prevail.85

When a controller exists on both sides of a merger, the default standard of 

review is entire fairness.86 This is because the existence of a controller is likely to 

undermine the dual statutory protections of disinterested board and stockholder 

approval.87 Under the rubric laid out in MFW, however, a controller can deploy 

these dual procedural protections and gain the benefit of business judgment review 

81 Tr. of Oral Arg. on Defs.’ Mots. to Dismiss, Dkt. No. 63.

82 Order of Dismissal with Prejudice as to Certain Defs., Dkt. No. 62.

83 Certain Defendants have also moved to dismiss for lack of personal jurisdiction under Rule 

12(b)(2). See Naphtha OB § II; Negev 2 OB § II. Because this Memorandum Opinion decides 

only the motions to dismiss under Rule 12(b)(6) arguing that the transaction was fully compliant 

with the MFW rubric, I do not discuss the Rule 12(b)(2) standard in this opinion.

84 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531, 536-37 (Del. 

2011).

85 Id. at 537.

86 M & F Worldwide, 88 A.3d at 644.

87 Id.
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of the transaction.88 Specifically, for a controller transaction to be subject to 

business judgment review under MFW, the transaction must be (i) approved by an 

independent and empowered special committee and (ii) by an uncoerced, informed 

majority of the Company’s minority stockholders.

89

The Plaintiff attacks the Defendants’ compliance with the MFW protocol on 

numerous grounds. The second requirement of MFW is dispositive here, I find,

because the minority stockholders were not adequately informed when they voted to 

approve the Buyout.

B. The Minority Stockholder Vote Was Uninformed

The Plaintiff argues that the Proxy was incomplete because it did not disclose, 

among other things, that the Conflict Committee reauthorized Tsuff’s participation 

in the Tamar Arbitration.90 The Plaintiff contends that it was material for 

stockholders to know that Tsuff participated in a proceeding that impacted the 

valuation of Isramco, especially given the temporal proximity between the 

reauthorization, the initial meeting among Tsuff, Saar and Baker Botts to discuss a 

potential Isramco transaction, and Negev 2’s submission of a revised position in the 

arbitration that the Payout Date would not occur until the end of 2019.

91 The 

88 Id. 89 Id. 654.

90 Compl. ¶ 148.

91 Pl.’s First Br. at 55–57.
19

Plaintiff also contends that this omission was material because Tsuff’s participation

created the reasonable impression that Naphtha used Tsuff’s knowledge of the 

Tamar Arbitration to inform its Indication of Interest.

92

The Defendants argue that the Conflict Committee’s decision to reauthorize 

Tsuff’s participation in the Tamar Arbitration adds nothing to the “total mix” of 

information and is merely “cumulative to the information already disclosed”—i.e., 

that Negev 2 was involved in the proceedings, and Naphtha held a controlling 

interest in Negev 2, as well as Isramco.

93 The Defendants contend that because the 

minority stockholders were informed of Naphtha’s controlling interest in Negev 2, 

they already knew that Naphtha had a window into the Tamar Arbitration 

proceedings.94

The Defendants also assert that, for the Plaintiff to establish that this omission 

was material, the Complaint must have pled what Tsuff’s role was in the Tamar 

Arbitration, what information he learned that he otherwise would not have known, 

what information he passed on to Naphtha, and how that information affected 

Naphtha’s Indication of Interest.

95

92 Compl. ¶ 148; Pl.’s First Br. at 56. 93 Naphtha OB at 45. See Dent v. Ramtron Int’l Corp., 2014 WL 2931180, at *12 (Del. Ch. June 

30, 2014). 94 Naphtha OB at 45.

95 Naphtha OB at 44–45.
20

The Defendants seek to impose too high a bar at this stage of the proceedings. 

Making all plaintiff-friendly inferences, it is plausible that after obtaining the 

Conflict Committee’s reauthorization to participate in the proceedings, Tsuff did 

participate. I can also infer at this stage that Tsuff, who, as the ultimate controller 

of Isramco, Negev 2, and Naphtha, stood on both sides of the Buyout and the Tamar 

Arbitration, acted for his own interests in the Tamar Arbitration.

96 The Plaintiff 

theorizes that Tsuff advanced his own interests by delaying the outcome of the 

Tamar Arbitration—which concerned the Company’s largest revenue stream, the 

Tamar Royalty—in order to artificially deflate the value that the Special Committee 

ascribed to Isramco.97 Whether that is true is a matter to be developed by the record; 

for now, it is enough to say that Tsuff’s participation in the Tamar Arbitration would 

have been material to the minority stockholders attempting to evaluate the Buyout.98

Moreover, the Conflict Committee’s decision itself to reauthorize Tsuff’s 

participation was also material to the minority stockholders. Absent a disclosure to 

the contrary, the Isramco stockholders were entitled to presume that the Board would 

act in the stockholders’ best interests, rather than the controller’s, especially in a 

96 See Chester Cty. Emps.’ Ret. Fund v. KCG Holdings, Inc., 2019 WL 2564093, at *13 n.64 (Del. 

Ch. June 21, 2019) (“reasonable to infer that [potentially conflicted director] was acting in his own 

interests”).

97 Compl. ¶ 5.

98 See In re Tesla Motors, Inc. S’holder Litig., 2020 WL 553902, at *9 (Del. Ch. Feb. 4, 2020) 

(controller’s “involvement in the process beyond what was disclosed in the proxy would likely 

have been something a reasonable stockholder would have considered important when deciding 

whether to vote for the [m]erger”).
21

buyout that purportedly employed the dual protections against controller conflicts 

laid out in MFW.

99 This included the Board’s acting to pursue Isramco’s interest in 

the Tamar Arbitration. In other words, the independent stockholders would not 

assume, absent disclosure, that the Board would permit the controller to participate 

in the arbitration. The progress and likely outcome of the Tamar Arbitration, and its 

effect on the timing and value of the Tamar Royalties, was material to the valuation 

of the Company, which obviously is the overriding concern of a stockholder 

contemplating a merger. That the Conflict Committee decided to allow Tsuff to 

participate in the Tamar Arbitration, which plausibly impacted Isramco’s valuation, 

was therefore material for stockholders to know.100

I note that a finding, as here, that the Plaintiff has adequately pled an 

uninformed stockholder vote is sufficient to negate the application of the business 

judgement rule to the transaction under the MFW line of cases. A finding that the 

Board did not adequately inform the stockholder vote is not enough, standing alone, 

99 See In re GGP, Inc. S’holder Litig., 2021 WL 2102326, at *13 (Del. Ch. May 25, 2021) 

(“Delaware law presumes ‘that a director’s decision is based on the corporate merits of the subject 

matter before the board rather than extraneous considerations or influence,’” including in the 

controller context) (citing In re W. Nat. Corp. S’holders Litig., 2000 WL 710192, at *11 (Del. Ch. 

May 22, 2000)).

100 Cf. Chester Cty., 2019 WL 2564093, at *13 n.64 (accepting “reasonable . . . infer[ence] that 

[director’s] . . . own interests . . . or those of his management team or employees . . . overtook his 

duties to the stockholders when he was charged with obtaining the highest deal price,” “that 

information is material”).
22

to plead a breach of duty action against individual directors, however.101 Here, 

Isramco has an exculpation clause for director liability.102 Accordingly, a pleading 

that any director breached a duty for failure to disclose or lack of candor, to 

withstand a motion to dismiss, must allege facts making it “reasonably conceivable”

that such a failure to disclose was in bad faith or otherwise disloyal. This 

determination awaits the parties’ review of this decision and any supplemental 

briefing.

* * *

Defendant Tsuff’s motion to dismiss the Plaintiff’s breach of fiduciary duty 

claim against him (Count I) rests solely on the argument that the Buyout met the 

conditions laid out in MFW and should therefore be evaluated under the business 

judgment rule. Because I have determined that application of business judgement 

review under MFW is not available, Tsuff’s motion to dismiss is denied as to Count I. 

The remaining motions to dismiss raise other distinct issues and therefore remain 

outstanding.

III. CONCLUSION

For the foregoing reasons, Defendant Tsuff’s motion to dismiss is denied as 

to Count I. The other Defendants’ motions to dismiss remain outstanding. The 

101 Nor does the Conflict Committee’s decision to allow Tsuff’s participation in the Tamar 

Arbitration necessarily imply a breach of duty.

102 Isramco, Inc. Certificate of Incorporation at 16.
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parties should confer, provide a form of order consistent with the decision above, 

and inform me in light of this decision whether further briefing is appropriate.