IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE VOLCANO CORPORATION

STOCKHOLDER LITIGATION

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)

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CONSOLIDATED

C.A. NO. 10485-VCMR

OPINION

Date Submitted: March 15, 2016

Date Decided: June 30, 2016

Derrick B. Farrell and James R. Banko, FARUQI & FARUQI LLP, Wilmington, 

Delaware; Seth D. Rigrodsky, Brian D. Long, Gina M. Serra, and Jeremy J. Riley,

RIGRODSKY & LONG, P.A., Wilmington, Delaware; Kent A. Bronson, Roy 

Shimon, and Christopher Schuyler, MILBERG LLP, New York, New York; Julia 

J. Sun, LEVI & KORSINSKY LLP, New York, New York; Juan E. Monteverde, 

FARUQI & FARUQI LLP, New York, New York; Attorneys for Plaintiffs Melvin 

Lax, Melissa Gordon, and Mohammed Munawar.

William M. Lafferty, D. McKinley Measley, and Richard Li, MORRIS, 

NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Koji Fukumura 

and Peter Adams, COOLEY LLP, San Diego, California; Attorneys for Defendants

Kieran T. Gallahue, Lesley H. Howe, R. Scott Huennekens, Siddhartha Kadia, 

Alexis V. Lukianov, Ronald A. Matricaria, Leslie V. Norwalk, and Daniel J. 

Wolterman.

Kevin G. Abrams, J. Peter Shindel, Jr., and Daniel R. Ciarrocki, ABRAMS & 

BAYLISS LLP, Wilmington, Delaware; Mitchell A. Lowenthal and Meredith 

Kotler, CLEARY GOTTLIEB STEEN & HAMILTON LLP, New York, New 

York; Attorneys for Defendant Goldman, Sachs & Co.

Raymond J. DiCamillo, J. Scott Pritchard, and Rachel E. Horn, RICHARDS, 

LAYTON & FINGER, P.A., Wilmington, Delaware; Michael H. Steinberg and 

Edward E. Johnson, SULLIVAN & CROMWELL LLP, Los Angeles, California; 

Attorneys for Nominal Defendant Volcano Corporation.

MONTGOMERY-REEVES, Vice Chancellor.
1

The plaintiffs in this action are former public stockholders of a company that 

was acquired for $18 per share in an all-cash merger. Just five months prior, the 

target company had declined an offer of $24 per share from the same acquiror. 

After the companies announced the merger, the plaintiffs brought this action 

against the target company’s board of directors and its financial advisor. The gist 

of the plaintiffs’ complaint is that the board breached its fiduciary duties in 

approving the merger and the financial advisor, motivated by its own conflicts of 

interest, aided and abetted those breaches. Both the board and the financial advisor 

moved to dismiss the complaint under Court of Chancery Rule 12(b)(6). 

The defendants argue, among other things, that stockholders representing a 

majority of the target company’s outstanding shares expressed their fully informed, 

uncoerced, disinterested approval of the merger. As such, according to the 

defendants, the business judgment rule standard of review irrebuttably applies to 

the plaintiffs’ allegations and insulates the merger from a challenge on any ground

other than waste, which the plaintiffs fail to allege. As further explained in this 

Opinion, I agree with the defendants and, therefore, grant their motions to dismiss 

under Rule 12(b)(6).
2

I. BACKGROUND1

A. Parties

Plaintiffs Melvin Lax, Melissa Gordon, and Mohammed Munawar 

(“Plaintiffs”) were common stockholders of Volcano Corporation (“Volcano” or 

the “Company”) at all relevant times.

Defendants R. Scott Huennekens, Kieran T. Gallahue, Lesley H. Howe, 

Siddhartha Kadia, Alexis V. Lukianov, Ronald A. Matricaria, Leslie V. Norwalk, 

and Daniel J. Wolterman were members of Volcano’s board of directors (the 

“Board”) at the time of the complained-of merger. Huennekens also served as the 

Company’s President and Chief Executive Officer (“CEO”).

Defendant Goldman, Sachs & Co. (“Goldman”) is a New York-based 

investment banking firm. Goldman served as Volcano’s financial advisor in 

 

1

The facts are drawn from the well-pled allegations of the plaintiffs’ Verified 

Consolidated Amended Class Action Complaint (the “Complaint”). Further, on a 

motion to dismiss under Rule 12(b)(6), the Court “draw[s] all reasonable 

inferences in the plaintiff’s favor.” Norton v. K-Sea Transp. P’rs L.P., 67 A.3d 

354, 360 (Del. 2013). Those allegations and inferences, as well as the facts drawn 

from the documents incorporated into the Complaint by reference, are assumed 

true for purposes of the defendants’ motions to dismiss. In re Morton’s Rest. Gp., 

Inc. S’holders Litig., 74 A.3d 656, 659 n.3 (Del. Ch. 2013) (“To be incorporated 

by reference, the complaint must make a clear, definite and substantial reference to 

the documents.” (quoting DeLuca v. AccessIT Gp., Inc., 659 F. Supp. 2d 54, 60 

(S.D.N.Y. 2010))). Notably, the documents incorporated by reference include 

Volcano’s Schedule 14D-9 Solicitation/Recommendation Statement filed with the 

U.S. Securities and Exchange Commission (the “SEC”) on December 30, 2014 

(the “Recommendation Statement”). See Trans. Aff. of Richard Li (“Li Aff.”), Ex. 

A (“Recommendation Statement”).
3

connection with the merger. The Board and Goldman, together, are referred to as 

“Defendants.”

Nominal Defendant Volcano was a San Diego-based Delaware corporation 

and “the global leader in intravascular imaging for coronary and peripheral 

applications[] and physiology.”2 Volcano’s shares were listed on the NASDAQ 

under the symbol “VOLC.”3

Non-party Philips Holding USA Inc. is a Delaware corporation and a 

wholly-owned subsidiary of Koninklijke Philips, N.V. (together with Philips 

Holding USA Inc., “Philips”).4 Philips is an Amsterdam-based Dutch technology 

company that focuses on healthcare, consumer lifestyle, and lighting products. 

Philips’s stock is listed on the New York Stock Exchange under the symbol PHG.

 

2 Compl. ¶ 34.

3

I note that, in one paragraph of the Complaint, Plaintiffs also allege that Volcano’s 

stock was traded on the New York Stock Exchange rather than on the NASDAQ. 

Compl. ¶ 34. Because the press release announcing the merger, which is 

excerpted in the Complaint, only describes Volcano as being listed on NASDAQ, I 

assume that the reference to the New York Stock Exchange is an error. See 

Compl. ¶ 99.

4

The Complaint originally named Philips and Clearwater Merger Sub, Inc. 

(“Merger Sub”), a wholly-owned subsidiary of Philips’s that was created to 

effectuate the merger, as defendants. Philips and Merger Sub moved to dismiss 

the Complaint, and, in response to that motion, Plaintiffs voluntarily dismissed 

them from this action pursuant to Court of Chancery Rules 41(a)(1)(i) and 23. See 

Notice and Order of Voluntary Dismissal, Docket Item No. 49.
4

B. Facts

1. Volcano issues convertible notes and enters into hedge 

transactions with Goldman

In 2012, Volcano sought to raise funds through a convertible note offering. 

To that end, the Company entered into an underwriting agreement (the 

“Underwriting Agreement”) with Goldman and J.P. Morgan Securities LLC (“J.P. 

Morgan” and, together with Goldman, the “Underwriters”) on December 4, 2012. 

Pursuant to the Underwriting Agreement, Volcano agreed to sell $400 million of 

1.75% Convertible Senior Notes due in 2017 (the “Convertible Notes”) and, at the 

option of the Underwriters, up to an additional $60 million of those Convertible 

Notes. The Underwriters exercised that option on December 5, 2012 and issued 

the full $460 million of Convertible Notes (the “Convertible Note Issuance”). The 

Convertible Note Issuance closed on December 10, 2012.

The $460 million of Convertible Notes was convertible into approximately 

14.01 million shares of Volcano common stock at $32.83 per share under the 

circumstances described in the Convertible Notes’ indenture. Because the Board 

was concerned about the potentially dilutive effect on Volcano’s common 

stockholders if the Convertible Notes’ holders sought to exercise their conversion 

rights, the Company also entered into a series of hedging transactions with the 
5

Underwriters5(the “Call Spread Transactions”). To mitigate that equity dilution 

risk, the Call Spread Transactions were intended to (1) increase the effective 

conversion premium and (2) reduce the effective dilution of the Convertible Note 

Issuance.

The Call Spread Transactions addressed these dual objectives through the 

two separate transactions between Volcano and the Underwriters that comprised 

the Call Spread Transactions. In the first transaction, Volcano paid $78,085,344 to 

purchase from the Underwriters call options (the “Options”) for 14.01 million 

shares of Volcano common stock at an initial strike price of $32.83 (the “Option 

Transaction”). Because the Option Transaction gave Volcano the ability to 

repurchase the same number of shares that the Convertible Notes could be 

converted into at a strike price equal to the conversion price of the Convertible 

Notes, Volcano could ensure that the total number of its shares outstanding would 

remain static.

In the second transaction, the Underwriters paid $46,683,206 to purchase 

from Volcano warrants (the “Warrants”) for 14.01 million shares of Volcano 

common stock at an initial strike price of $37.59 (the “Warrant Transaction”). The 

 

5 Volcano actually entered into the Call Spread Transactions with an affiliate of J.P. 

Morgan’s—JP Morgan Chase Bank, National Association, London Branch. That 

distinction, however, is immaterial for purposes of this decision.
6

Warrant Transaction partially offset the cost to Volcano of the Option Transaction 

and effectively raised the conversion price of the Convertible Notes from $32.83 to 

$37.59. As a result of the Call Spread Transactions, therefore, the Convertible 

Notes likely would not have had any dilutive effect until Volcano’s common stock 

reached a price of $37.59 per share.

Goldman sold 65% of the Options under the Option Transaction and 

purchased 65% of the Warrants under the Warrant Transaction. J.P. Morgan sold 

and purchased the other 35%. The Options were set to expire on December 1, 

2017, the same day that the Convertible Notes matured. The Warrants were set to 

expire over a 120-business day period beginning in March 2018. Alternatively, 

both the Options and the Warrants would terminate immediately upon the 

consummation of certain change in control transactions that required redemption of 

the Convertible Notes, including a cash-out merger. In the event of such a 

transaction, the Underwriters would pay Volcano the Options’ fair value, and 

Volcano would pay the Underwriters the Warrants’ fair value.

2. The Board explores merger options

In January 2014, as part of the Company’s general business development 

outreach, Huennekens had meetings with two companies (“Company A” and 

“Company B”) regarding their respective interests in a strategic transaction with 

Volcano. Afterwards, Volcano and the companies entered into confidentiality 
7

agreements, and Volcano’s senior management gave presentations to each of the 

companies.

In April 2014, as discussions with Company A and Company B progressed, 

Volcano retained Goldman to help perform a market check to gauge other 

companies’ interest in a transaction. The Board and Goldman considered a total of 

thirteen potential buyers for Volcano, separated into six “tier 1 buyers”—including 

Philips—and seven “tier two buyers.” The Board decided to narrow the scope of 

their market check by excluding (1) counterparties that would face significant 

regulatory approval issues and (2) financial buyers, based on Goldman’s advice 

that Volcano’s negative cash flow likely would not support a leveraged acquisition.

Ultimately, Volcano contacted five strategic buyers. In addition to 

Company A and Company B, the Board directed Goldman to contact two 

companies (“Company C” and “Company D”) with whom Volcano’s senior 

management had prior confidential discussions and authorized Huennekens to 

contact another company (“Company E”). In April 2014, Huennekens led a 

management presentation to Company E regarding a strategic transaction with 

Volcano. For various reasons, each of Companies A through E declined to pursue 

a strategic transaction with Volcano, and the Board ended its market check 

process.
8

3. Volcano and Philips enter into merger discussions, which 

end after Philips proposes an insufficient offer price

In June 2014, Philips, with which Volcano had a commercial relationship 

since 2007, expressed to Goldman that it was interested in exploring a strategic 

acquisition of the Company. Goldman relayed that information to Huennekens, 

who then consulted with Matricaria, the Chairman of the Board.

On June 23, 2014, Volcano and Philips entered into a confidentiality 

agreement, and merger discussions between the companies began in earnest. 

During the remainder of June and July 2014, Goldman and Lazard Ltd. 

(“Lazard”)—Philips’s financial advisor—held a number of meetings and telephone 

calls regarding a potential transaction and Volcano’s financial performance. 

Members of Philips’s and Volcano’s management also communicated with one 

another and attended those financial advisor meetings during that time period.

On July 25, 2014, when Volcano’s common stock closed at a price of $16.18 

per share, Philips delivered a non-binding indication of interest to acquire Volcano 

for $24 per share, subject to an eight week period of exclusivity during which it 

would perform due diligence. On July 29, 2014, Goldman discussed with 

Volcano’s senior management the potential effects that a change in control 

transaction would have on the Call Spread Transactions and proposed that Volcano 

consider the matter further. On July 30, 2014, the Board, members of Volcano’s 

senior management, Goldman, and Volcano’s legal counsel met to discuss 
9

Philips’s $24 per share indication of interest. At that meeting, the Board decided 

to allow Philips to proceed with due diligence, but without any commitment as to 

the $24 per share price or eight week exclusivity period. After Goldman’s 

representatives left the meeting, the Board authorized the retention of Goldman as 

its financial advisor for the potential merger with Philips. As the Board’s financial 

advisor, Goldman stood to earn a $17 million advisor fee, contingent on the 

consummation of Volcano’s sale. The Board also authorized the creation of a 

transaction committee comprised of independent Board members to oversee the 

merger process and appointed Gallahue, Howe, Lukianov, and Matricaria to that 

committee (the “Transaction Committee”). Matricaria served as the Chairman of 

the Transaction Committee.

After the Board’s July 30, 2014 meeting, Goldman conveyed to Lazard the 

Board’s position that Philips could proceed with due diligence, but that the price 

would have to be increased above $24 per share for Volcano to consider 

exclusivity. On August 2, 2014, the Transaction Committee held a meeting with 

Volcano’s senior management, Goldman, and the Board’s legal advisor. Goldman 

informed the attendees that Philips had declined to increase its price above $24 per 

share and that it simply would proceed through due diligence without exclusivity. 

To accommodate Philips’s due diligence requests, Volcano gave Philips access to a 

data room that contained the relevant documents. The Transaction Committee then 
10

directed Goldman to reach out to Company A and Company D to gauge their 

respective interests in renewing talks regarding a potential transaction. Once 

again, the Transaction Committee declined to contact direct competitors with 

significant regulatory approval risks. Goldman followed up with both Company A 

and Company D, but neither was interested in renewing discussions regarding a 

potential acquisition of Volcano. At no point did either Volcano or Goldman 

receive any unsolicited expressions of interest from other potential suitors.

On August 7, 2014, while Philips was proceeding with due diligence, 

Volcano issued its earnings press release for the second quarter and shared with 

Philips that it was lowering its revenue guidance for the remainder of 2014 and 

reducing its projected long term growth rate. On August 8, 2014, Volcano’s 

common stock closed at $12.56 per share. Philips continued its due diligence 

process, and the parties and their advisors began drafting a merger agreement. In 

connection with their ongoing discussions, Goldman told Lazard that the Board 

was meeting on September 12, 2014 and stated that if Volcano and Philips had not 

reached a firm agreement by that point, then the Board would halt negotiations and 

focus on running Volcano as a standalone company.

On September 12, 2014, Philips indicated to Huennekens that it had not 

completed its due diligence, but if Philips had to make a firm offer then it would be 

in the range of $17 to $18 per share. Huennekens relayed that message to the 
11

Board, and Matricaria, on behalf of the Transaction Committee, instructed 

Goldman to inform Philips that the proposed price was insufficient. Volcano then 

closed the data room and directed its advisors to stop working on the transaction.

4. Volcano and Philips rekindle their merger discussions, but 

cannot agree on a price

On September 15, 2014, Huennekens met with Bert van Meurs, Senior Vice 

President of Philips Healthcare, at van Meurs’s request. At their meeting, van 

Meurs indicated that Philips still was interested in a transaction with Volcano and 

wanted to complete due diligence. Huennekens reiterated that Philips’s proposed 

price range was inadequate, but indicated that he and Matricaria would be willing 

to meet with members of Philips’s senior management.

On September 29, 2014, Engaged Capital, an investment management firm 

and large stockholder of Volcano’s, released a public letter to the Board calling for 

it to replace both Huennekens and Volcano’s Chief Financial Officer and pressing 

for a sale of the Company. On October 1, 2014, Philips requested an October 10 

meeting with Huennekens and Matricaria, to which they agreed. Before that 

meeting, Volcano agreed to reopen the data room to allow Philips to continue with 

its due diligence. Ten days later, on October 20, 2014, Philips presented another 

non-binding indication of interest to acquire Volcano for $17.25 per share and 

requested a response by October 22.
12

After receiving Philips’s updated offer, the Transaction Committee met with 

its advisors. Goldman updated the Transaction Committee on its discussions with 

Lazard, and Matricaria described his discussions with Volcano’s stockholders. 

The Transaction Committee reviewed the financial aspects of the revised 

indication of interest and discussed strategic alternatives. Ultimately, the

Transaction Committee decided to recommend that the Board schedule another 

meeting to review strategic alternatives before responding to the offer. 

Subsequently, Goldman called Lazard and indicated that Volcano would not enter 

into any transaction at a price of less than $18 per share. On October 23, 2014, 

Philips withdrew its $17.25 per share indication of interest. Volcano once again 

closed access to the data room, and Goldman told Lazard that the Board had 

decided to cease merger discussions and instead focus on running Volcano as a 

standalone company.

5. Volcano and Philips enter into merger discussions for a 

third and final time

On October 28, 2014, Philips sent Volcano another non-binding indication 

of interest at $16 per share. The Transaction Committee met to discuss that offer, 

and Goldman, at Matricaria’s direction, reiterated to Lazard that Volcano would 

not consider any offer below $18 per share. On November 6, 2014, Volcano 

announced better-than-expected financial results for the third quarter of 2014 and 

the Company’s turnaround plan. On November 17, Philips’s CEO, Frans van 
13

Houten, called Matricaria to express Philips’s continuing interest in acquiring 

Volcano at $16 per share. Matricaria responded that he expected Volcano’s stock 

price to increase from its current price of $11.59 per share to $13 or $14 per share 

in the near future. As such, the Board would not consider a price less than $18 per 

share.

On November 21, 2014, van Houten again called Matricaria and expressed 

Philips’s willingness to increase its offer to $18 per share, subject to the 

negotiation of a merger agreement and completion of its due diligence. Matricaria 

said that he would take the $18 per share price to the Board for approval if the 

parties could complete the merger agreement and announce the transaction by the 

week of December 1, 2014. Due diligence and negotiations over the merger 

agreement continued beyond December 1.

Philips also desired to retain Huennekens for a short period post-merger to 

assist with the transition. As such, on December 11, 2014, Philips sent a draft 

consulting agreement to be signed by Huennekens before the companies’ boards 

signed the merger agreement. Huennekens, with the assistance of separate 

counsel, negotiated that consulting agreement (the “Consulting Agreement”) with 

Philips from December 11 until December 15. Under the Consulting Agreement, 

Philips would pay Huennekens up to $500,000 for five months of consulting 

services for the surviving company in the merger between Philips and Volcano. 
14

Further, upon consummation of such a merger, the Consulting Agreement provided 

that Huennekens would be terminated without cause from Volcano and, therefore, 

receive benefits totaling $7.8 million, including $3.1 million in cash.

On December 12, 2014, the Transaction Committee held a meeting to 

discuss the progress of the transaction. At that meeting, Goldman made a 

presentation regarding its financial interest in the Call Spread Transactions. 

Goldman then left the meeting, and the Transaction Committee consulted with its 

legal counsel and senior management about Goldman’s interest in the Call Spread 

Transactions. Volcano’s legal counsel and Goldman’s legal counsel had discussed 

the Call Spread Transactions in both August and September 2014. Ultimately, the 

Transaction Committee decided that Goldman was not conflicted from serving as 

Volcano’s financial advisor for the proposed transaction with Philips as a result of 

the Call Spread Transactions.

6. Volcano and Philips enter into a two-step merger under 

Section 251(h) of the Delaware General Corporation Law

On December 15, 2014, Philips informed Volcano that its board of directors 

had approved a cash-out merger with the Company at a price of $18 per share (the 

“Merger”). The Board met the next day along with its legal counsel, Goldman, and 

Volcano’s senior management to consider the Merger. During that meeting, the 

Board’s legal counsel reviewed the key provisions of the merger agreement (the 

“Merger Agreement”), including each of the agreed-to deal protection devices; 
15

Huennekens reviewed the terms of the Consulting Agreement with the rest of the 

Board; and Goldman reviewed its financial analysis of the offer price and rendered 

an oral fairness opinion—which Goldman subsequently confirmed in a written 

opinion—in favor of Philips’s $18 per share all-cash offer.

After Goldman left the meeting, the Board further discussed the Merger and 

unanimously approved the Merger and the Merger Agreement. The Merger 

Agreement provided that the Merger was to be consummated as a two-step 

transaction under Section 251(h) (“Section 251(h)”) of the Delaware General 

Corporation Law (the “DGCL”).

6

 As such, the Board also resolved to recommend 

that Volcano’s stockholders tender their shares into the first-step tender offer (the 

“Tender Offer”) of that two-step transaction. Volcano and Philips then signed the 

Merger Agreement, and, on December 17, 2014, they issued a joint press release 

announcing the Merger.

Philips, through Merger Sub, commenced the Tender Offer to purchase all of 

Volcano’s outstanding common stock for $18 per share in cash on December 30, 

2014. That same day, Volcano filed the Recommendation Statement with the SEC

recommending that Volcano’s stockholders accept the Tender Offer. On February 

 

6

8 Del. C. § 251(h) (allowing an acquiring company to consummate a merger 

without a target company stockholder vote after acquiring a majority of the 

target’s shares pursuant to a tender or exchange offer for all of the target 

company’s outstanding shares, subject to certain conditions).
16

17, 2015, the Tender Offer closed, with 89.1% of Volcano’s outstanding shares 

having tendered. In addition, notices of guaranteed delivery were provided with 

respect to 5.7% of Volcano’s outstanding shares. On February 17, 2015, following 

the Tender Offer’s expiration, Volcano and Philips consummated the Merger 

without a stockholder vote under Section 251(h). Merger Sub merged into 

Volcano, and Volcano survived as a wholly-owned subsidiary of Philips’s. As 

required by Section 251(h), non-tendering Volcano stockholders who were cashed 

out in the second-step merger received the same consideration—$18 per share in 

cash—as the stockholders that had accepted the Tender Offer. The Merger was 

valued at $1.2 billion, and Philips financed it with a combination of cash-on-hand 

and a debt issuance.

As a result of the Merger, the Convertible Notes and, correspondingly, the 

Call Spread Transactions were terminated. Because neither the Options nor the 

Warrants had expired as of the date of the Merger, the Underwriters had to pay 

Volcano the Options’ fair value, and Volcano had to pay the Underwriters the 

Warrants’ fair value. The net result of the termination of the Call Spread 

Transactions, as between Volcano and Goldman, was a $24.6 million payment 

from Volcano to Goldman. Further, the Board and Volcano’s senior management,

collectively, received approximately $8.9 million in Volcano stock options and 

restricted stock units that were accelerated as a result of the Merger. Finally, 
17

Huennekens received the $7.8 million in severance benefits that he had negotiated 

as part of the Consulting Agreement.

C. Procedural History

On December 22, 2014 and January 9, 2015, before the Merger closed, each 

of the three Plaintiffs filed their individual class action complaints seeking to 

enjoin the Merger. On January 12, 2015, Plaintiffs each filed separate motions for 

expedited proceedings. On January 16, the Court consolidated the three actions 

into this single action. A hearing on Plaintiffs’ motion for a preliminary injunction 

was scheduled for January 27, but, after Volcano made supplemental disclosures 

on January 22,7Plaintiffs withdrew that motion and the hearing was cancelled.

On March 2, 2015, after the Merger closed, Plaintiffs filed the amended 

Complaint. Defendants filed motions to dismiss the Complaint under Rule 

12(b)(6) on May 8, 2015 (the “Motions”). By August 2015, the parties had 

completed their initial round of briefing on the Motions. In December 2015, 

however, the parties stipulated to a supplemental round of briefing on the Motions 

to account for relevant Delaware Supreme Court decisions that had been published 

in the interim. The parties completed that supplemental round of briefing in 

 

7

See Li Aff., Ex. K (“Recommendation Statement Supplement”).
18

February 2016, and I held an oral argument on the Motions on March 15, 2016. 

This Opinion contains my rulings on Defendants’ Motions.

D. Parties’ Contentions

Plaintiffs’ Complaint alleges three causes of action against Defendants. 

Count I claims that the Board breached its duties of care and loyalty in connection 

with the Merger. Count II—which Plaintiffs withdrew when they dismissed 

Philips and Merger Sub from this action8—claims that Philips and Merger Sub 

aided and abetted the Board’s alleged fiduciary duty breaches. Count III claims

that Goldman aided and abetted the Board’s alleged fiduciary duty breaches.

As to Counts I and III, Plaintiffs contend that the Board (1) acted in an 

uninformed manner in approving the Merger and (2) was motivated by certain 

benefits—including Huennekens’s Consulting Agreement and the other Board 

members’ accelerated vesting of stock options and restricted stock units—that its 

members stood to receive as a result of the Merger. Further, Plaintiffs posit that 

the Board relied on “flawed advice” rendered by its “highly conflicted financial 

advisor,” Goldman.9 Goldman’s alleged conflicts resulted from the fact that it, 

along with J.P. Morgan, served as Volcano’s counterparty in the Call Spread 

Transactions and profited at Volcano’s expense when the Options and Warrants 

 

8

See supra note 4.

9

Pl.’s Answering Br. 1.
19

were terminated upon consummation of the Merger. Plaintiffs also allege that 

Goldman hid its conflicts from the Board and Volcano’s stockholders.

Defendants deny that the Board was uninformed as to the Merger and 

maintain that any benefits the Board stood to receive from the Merger were routine 

and aligned the Board’s interests with Volcano’s stockholders’ interests. 

Defendants also dispute whether Goldman’s position in the Call Spread 

Transactions rendered Goldman conflicted and contend that, to the extent any such 

conflicts existed, the Board and Volcano’s stockholders were fully informed 

regarding the impact of the Merger on the Options and Warrants. Finally, 

Defendants argue that the Complaint should be dismissed because Volcano’s 

stockholders approved the Merger by overwhelmingly tendering into the Tender 

Offer.

II. ANALYSIS

A. Legal Standard for a Motion to Dismiss Under Rule 12(b)(6)

This Court may grant a motion to dismiss under Rule 12(b)(6) for failure to 

state a claim if a complaint does not allege facts that, if proven, would entitle the 

plaintiff to relief. “[T]he governing pleading standard in Delaware to survive a 

motion to dismiss is reasonable ‘conceivability.’”10 When considering such a 

 

10 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 537 

(Del. 2011) (footnote omitted).
20

motion, the Court must “accept all well-pleaded factual allegations in the 

Complaint as true . . . , draw all reasonable inferences in favor of the plaintiff, and 

deny the motion unless the plaintiff could not recover under any reasonably 

conceivable set of circumstances susceptible of proof.”11 This reasonable 

“conceivability” standard asks whether there is a “possibility” of recovery.12 The 

Court, however, need not “accept conclusory allegations unsupported by specific 

facts or . . . draw unreasonable inferences in favor of the non-moving party.”13 

Failure to plead an element of a claim precludes entitlement to relief, and, 

therefore, is grounds to dismiss that claim.14

B. The Business Judgment Rule Irrebuttably Applies to the Merger

As an initial matter, I must determine what standard of review to apply in 

evaluating Defendants’ alleged fiduciary duty breaches. Because Volcano’s 

stockholders received cash for their shares, the Revlon standard of review 

presumptively applies.15 Defendants contend, however, that because Volcano’s

fully informed, uncoerced, disinterested stockholders approved the Merger by 

 

11 Id. at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).

12 Id. at 537 & n.13.

13 Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing 

Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).

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

15 See TW Servs., Inc. v. SWT Acq. Corp., 1989 WL 20290, at *7 (Del. Ch. 1989).
21

tendering a majority of the Company’s outstanding shares into the Tender Offer, 

the business judgment rule standard of review irrebuttably applies.16 According to 

Defendants, the stockholders’ approval of the Merger had that cleansing effect 

despite the fact that (1) the Merger otherwise would have been subject to the 

Revlon standard of review and (2) the Tender Offer was statutorily required to 

consummate the Merger. Defendants, therefore, assert that Plaintiffs can challenge 

the Merger solely on the basis that it constituted waste. 

Plaintiffs disagree. Plaintiffs counter that because a tender offer does not 

have the same cleansing effect as a stockholder vote, the Court should not shift its 

standard of review from Revlon to the business judgment rule. Alternatively, 

Plaintiffs maintain that even if a tender offer has the same cleansing effect as a 

 

16 In this context, if the business judgment rule is “irrebuttable,” then a plaintiff only 

can challenge a transaction on the basis of waste—i.e., that it “cannot be 

‘attributed to any rational business purpose.’” See Cede & Co. v. Technicolor, 

Inc., 634 A.2d 345, 361 (Del. 1993) (“The business judgment rule posits a 

powerful presumption in favor of actions taken by the directors in that a decision 

made by a loyal and informed board will not be overturned by the courts unless it 

cannot be ‘attributed to any rational business purpose.’” (quoting Sinclair Oil 

Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971))). If, by contrast, the business 

judgment rule is “rebuttable,” then a board’s violation of either the duty of care or 

duty of loyalty—even based on facts that were disclosed to stockholders before 

they approved a transaction—would render the business judgment rule 

inapplicable. See id. (“To rebut the [business judgment] rule, a shareholder 

plaintiff assumes the burden of providing evidence that directors, in reaching their 

challenged decision, breached [the duties of] loyalty or due care. If a shareholder 

plaintiff fails to meet this evidentiary burden, the business judgment rule attaches 

to protect corporate officers and directors and the decisions they make, and our 

courts will not second-guess these business judgments.” (citations omitted)).
22

stockholder vote and the business judgment rule presumption applies, that 

presumption is rebuttable. Finally, Plaintiffs argue that regardless of the 

theoretical cleansing effect of Volcano’s stockholders’ approval of the Merger by

tendering their shares, no such cleansing effect should be accorded here because 

those stockholders were not, in fact, fully informed.

I resolve the parties’ disputes in the following manner. First, recent 

Supreme Court decisions confirm that the approval of a merger by a majority of a 

corporation’s outstanding shares pursuant to a statutorily required vote of the 

corporation’s fully informed, uncoerced, disinterested stockholders renders the 

business judgment rule irrebuttable. Second, I conclude that stockholder approval 

of a merger under Section 251(h) by accepting a tender offer has the same 

cleansing effect as a vote in favor of that merger. Third, I find that the business 

judgment rule irrebuttably applies to the Merger because Volcano’s disinterested, 

uncoerced, fully informed stockholders tendered a majority of the Company’s 

outstanding shares into the Tender Offer.

1. The fully informed, uncoerced, disinterested approval of a 

merger by a majority of a corporation’s outstanding shares

pursuant to a statutorily required vote renders the business 

judgment rule irrebuttable

The parties’ disagreement regarding the applicable standard of review stems 

from a recent line of decisions issued by this Court and the Supreme Court, 

including (1) this Court’s October 14, 2014 In re KKR Financial Holdings LLC 
23

Shareholder Litigation (“KKR”) decision,17 (2) this Court’s October 1, 2015 In re 

Zale Corp. Stockholders Litigation (“Zale I”) decision,

18 (3) the Supreme Court’s 

October 2, 2015 Corwin v. KKR Financial Holdings LLC (“Corwin”) decision,

19

(4) this Court’s October 20, 2015 In re TIBCO Software, Inc. Stockholders 

Litigation decision,20 and (5) this Court’s October 29, 2015 In re Zale Corp. 

Stockholders Litigation (“Zale II”) decision.21

In KKR, Chancellor Bouchard cited a number of cases that support the 

proposition that after “a fully-informed stockholder vote of a transaction with a 

non-controlling stockholder . . . the business judgment rule applies and insulates 

the transaction from all attacks other than on the grounds of waste, even if a 

majority of the board approving the transaction was not disinterested or 

independent.”22 The Chancellor then noted that “[i]n light of the Delaware 

Supreme Court’s 2009 decision in Gantler v. Stephens, there has been some debate 

 

17 101 A.3d 980 (Del. Ch. 2014).

18 2015 WL 5853693 (Del. Ch. Oct. 1, 2015) (“Zale I”).

19 125 A.3d 304 (Del. 2015).

20 2015 WL 6155894 (Del. Ch. Oct. 20, 2015).

21 2015 WL 6551418 (Del. Ch. Oct. 29, 2015) (“Zale II”).

22 101 A.3d at 1001 (citing Harbor Fin. P’rs v. Huizenga, 751 A.2d 879, 890 (Del.

Ch. 1999); In re Wheelabrator Techs., Inc. S’holders Litig., 663 A.2d 1194, 1200 

(Del. Ch. 1995)).
24

as to whether [that rule applies] when the stockholder vote is statutorily required as 

opposed to a purely voluntary stockholder vote.”23 Chancellor Bouchard disagreed 

with that interpretation of Gantler, however, and found that it simply clarified that 

the term “ratification” applies only to non-statutorily required stockholder votes 

rather than “alter[ing] the legal effect of a stockholder vote when it is statutorily 

required.”24 He then granted the defendants’ motion to dismiss.

In Zale I, Vice Chancellor Parsons declined to follow Chancellor Bouchard’s 

holding in KKR. Despite the presence of a fully informed, uncoerced vote in favor 

of the merger at issue by a majority of the target corporation’s disinterested 

stockholders, Vice Chancellor Parsons applied the Revlon standard of review and 

stated that “[u]ntil the Supreme Court signals otherwise, I interpret Gantler as 

holding that an enhanced standard of review cannot be pared down to the business 

judgment rule as a result of” a statutorily required vote.25 Vice Chancellor Parsons 

cited In re Santa Fe Pacific Corp. Shareholder Litigation for the proposition that 

“[p]ermitting the vote of a majority of stockholders on a merger to remove from 

judicial scrutiny unilateral Board action in a contest for corporate control would 

 

23 Id.

24 Id.

25 2015 WL 5853693, at *10 (citing In re Santa Fe Pacific Corp. S’holder Litig., 669 

A.2d 59, 68 (Del. 1995)).
25

frustrate the purposes underlying Revlon,” but also indicated that he “would follow 

the reasoning articulated in KKR if it permitted a review of the Merger under” the 

rebuttable, as opposed to an irrebuttable, business judgment rule presumption.26

On October 2, 2015, the day after Zale I was published, the Supreme Court 

issued Corwin.

27

 In Corwin, the Supreme Court affirmed KKR and held, in 

relevant part, that “when a transaction not subject to the entire fairness standard is 

approved by a fully informed, uncoerced vote of the disinterested stockholders, the 

business judgment rule applies,” even in a statutorily required vote on a transaction 

otherwise subject to the Revlon standard of review.28

After the Supreme Court issued Corwin, the Zale I defendants moved for 

reargument. In Zale II, Vice Chancellor Parsons granted the defendants’ motion 

for reargument, finding that, under Corwin, he should have applied the business 

judgment rule standard of review rather than the Revlon standard of review.29 Vice 

Chancellor Parsons interpreted Corwin, however, as diverging from KKR in that it 

allowed for application of the rebuttable business judgment rule presumption, on 

the following bases:

 

26 Id.

27 125 A.3d 304.

28 Id. at 308-09.

29 2015 WL 6551418, at *2.
26

[A]lthough the Supreme Court generally 

affirmed KKR, the Court also suggested that “the gross 

negligence standard for director due care liability 

under Van Gorkom” is the proper standard for evaluating 

“post-closing money damages claims.” While the Court 

in Corwin quotes KKR and a law review article for the 

proposition that a fully informed majority vote of 

disinterested stockholders insulates directors from all 

claims except waste in the explanatory parentheticals of 

two footnotes, the Court itself does not hold that 

anywhere in its opinion. And, in In re TIBCO Software, 

Inc. Stockholders Litigation, which was issued 

after Corwin, Chancellor Bouchard, the author 

of KKR, denied a motion to dismiss after finding it 

reasonably conceivable that the directors had breached 

their duty of care by acting in a grossly negligent manner, 

despite the absence of any indication that the merger was 

not approved by a majority of disinterested stockholders 

in a fully informed vote.30

Thus, although he eventually concluded in Zale II that the plaintiffs’ duty of care 

claims should be dismissed, Vice Chancellor Parsons examined the substance of 

those claims to determine whether they sufficiently pled that the defendant-board 

was grossly negligent during the merger process, as opposed to evaluating simply 

whether the plaintiffs’ had stated a waste claim.31

 

30 Id. at *3 (citing In re TIBCO Software Inc. S’holders Litig., 2015 WL 6155894 

(Del. Ch. Oct. 20, 2015); Corwin, 125 A.3d at 308-09 nn.13 & 19) (quoting 

Corwin, 125 A.3d at 312).

31 Id. at *4-5.
27

On May 6, 2016, after the parties here already had completed their briefing, 

the Supreme Court issued Singh v. Attenborough.

32

 In Attenborough, the Supreme 

Court affirmed Zale I, as modified by Zale II, but clarified the standard of review 

that the Court of Chancery should have applied to the plaintiffs’ duty of care 

claims in Zale II:

[T]he reargument opinion’s decision to consider postclosing whether the plaintiffs stated a claim for the 

breach of the duty of care after invoking the business 

judgment rule was erroneous. Absent a stockholder vote 

and absent an exculpatory charter provision, the damages 

liability standard for an independent director or other 

disinterested fiduciary for breach of the duty of care is 

gross negligence, even if the transaction was a change-ofcontrol transaction. Therefore, employing this same 

standard after an informed, uncoerced vote of the 

disinterested stockholders would give no standard-ofreview-shifting effect to the vote. When the business 

judgment rule standard of review is invoked because of a 

vote, dismissal is typically the result. That is because the 

vestigial waste exception has long had little real-world 

relevance, because it has been understood that 

stockholders would be unlikely to approve a transaction 

that is wasteful.33

In Attenborough, therefore, the Supreme Court held that upon a fully informed

vote by a majority of a company’s disinterested, uncoerced stockholders, the 

business judgment rule irrebuttably applies to a court’s review of the approved 

 

32 2016 WL 2765312 (Del. May 6, 2016) (ORDER).

33 Id. at *1.
28

transaction, even when that vote is statutorily required and the transaction 

otherwise would be subject to the Revlon standard of review. Thus, such an 

approved transaction only can be challenged on the basis that it constituted waste. 

I now examine whether that same reasoning applies to a merger approved through

stockholder acceptance of a tender offer.

2. Stockholder acceptance of a tender offer pursuant to a 

Section 251(h) merger has the same cleansing effect as a

stockholder vote in favor of a transaction

The Delaware General Assembly adopted Section 251(h) in 2013 and 

amended it in 2014 and 2016.

34

 Section 251(h) “permit[s] a merger agreement to 

include a provision eliminating the requirement of a stockholder vote to approve 

certain mergers”35 if, among other requirements, the acquiror consummates a 

tender or exchange offer that results in the acquiror owning “at least such 

percentage of the shares of stock of [the target] corporation . . . that, absent 

 

34 See 79 Del. Laws ch. 72, § 6 (2013), as amended by 79 Del. Laws ch. 327, § 7 

(2014), 80 Del. Laws ch. 265, § 7 (2016). Because the parties entered into the 

Merger Agreement in December of 2014, the General Assembly had not yet 

adopted the 2016 amendments to Section 251(h). Those 2016 amendments, 

therefore, are inapplicable to the Merger. See 80 Del. Laws ch. 265, § 17 (2016) 

(“Section 7 shall be effective only with respect to merger agreements entered into 

on or after August 1, 2016.”). For the sake contemporaneousness, however, I 

quote the most updated version of Section 251(h) in this Opinion. The differences 

between the 2014 version and the 2016 version of Section 251(h) are immaterial to 

this Opinion. 

35 Del. H.B. 127 syn., 147th Gen. Assem. (2013).
29

[Section 251(h)], would be required to adopt the agreement of merger by [the 

DGCL] and by the certificate of incorporation of [the target] corporation.”

36

 

Similar two-step mergers were consummated with some regularity before Section 

251(h)’s enactment, largely through “top-up options,”

37 which gave acquirors—

after completing a first-step tender offer—the ability to purchase up to 90% of the 

target corporation’s stock and consummate a second-step, short-form merger 

without a stockholder vote.38 Through Section 251(h), therefore, “the Delaware 

General Assembly essentially . . . approved [the two-step merger] transactional 

structure . . . [and] facilitate[d] the ability of the acquirer in a two-step acquisition 

. . . to use a short-form back-end merger without resorting to a top-up option.”39

Two concerns have been raised to support the argument that stockholder 

acceptance of a tender offer and a stockholder vote differ in a manner that should 

preclude the cleansing effect articulated by the Supreme Court in Corwin from 

applying to tender offers. Section 251(h) addresses each of those concerns. The 

 

36 8 Del. C. § 251(h)(3).

37 See, e.g., In re Cogent, Inc. S’holder Litig., 7 A.3d 487, 504-08 & n.56 (Del. Ch. 

2010) (describing top-up options and noting that the vast majority of two-step 

mergers included those options).

38 8 Del. C. § 253 (permitting a parent company that owns 90% of a subsidiary 

corporation’s outstanding stock to merge with that subsidiary without the approval 

of the subsidiary’s minority stockholders).

39 In re Comverge, Inc., 2014 WL 6686570, at *14 (Del. Ch. Nov. 25, 2014).
30

first concern suggests that tender offers may differ from statutorily required 

stockholder votes based on “the lack of any explicit role in the [DGCL] for a target 

board of directors responding to a tender offer.”40 A target board’s role in 

negotiating a two-step merger subject to a first-step tender offer under Section 

251(h), however, is substantially similar to its role in a merger subject to a 

stockholder vote under Section 251(c) of the DGCL.

41

 Section 251(h) requires that 

the merging corporations enter into a merger agreement that expressly “[p]ermits 

or requires such merger be effected under [Section 251(h)].”

42

 Because Section 

251(h) requires a merger agreement, Sections 251(a) and (b) of the DGCL subject

that agreement to the same obligations as a merger or consolidation consummated 

under any other section of the DGCL.43 For example, the target corporation’s 

board must “adopt a resolution approving” that agreement “and declaring its 

advisability,” and the merger agreement must provide “[t]he terms and conditions 

of the merger.”44 The first-step tender offer also must be made “on the terms 

 

40 See, e.g., Espinoza v. Zuckerberg, 124 A.3d 47 (Del. Ch. 2015) (quoting In re 

CNX Gas Corp. S’holders Litig., 4 A.3d 397, 407 (Del. Ch. 2010)).

41 Compare 8 Del. C. § 251(h), with id. § 251(c). 

42 Id. § 251(h)(1)(a).

43 Id. § 251(a)-(b).

44 Id. § 251(b), (b)(1).
31

provided” in the negotiated merger agreement.45 And, in recommending that its

stockholders tender their shares in connection with a Section 251(h) merger, the 

target corporation’s board has the same disclosure obligations as it would in any 

other communication with those stockholders.46 Taken together, therefore, 

Sections 251(a), (b), and (h) of the DGCL mandate that a target corporation’s 

board negotiate, agree to, and declare the advisability of the terms of both the firststep tender offer and the second-step merger in a Section 251(h) merger, just as a 

target corporation’s board must negotiate, agree to, and declare the advisability of 

a merger involving a stockholder vote under Section 251(c). The target board also 

 

45 Id. § 251(h)(2).

46 See Matador Capital Mgmt. Corp. v. BRC Hldgs., Inc., 729 A.2d 280, 294-95

(Del. Ch. 1998) (citing Zirn v. VLI Corp., 621 A.2d 773, 778 (Del. 1993)) (“At 

argument, counsel for [one of the defendants] suggested that I should construe the 

[target corporation’s] directors’ state law based fiduciary duty of disclosure more 

narrowly in the case of a Schedule 14D–9 [recommending that stockholders accept 

a first-step tender offer] than would be true in the case of a proxy statement

[recommending that stockholders vote in favor of a one-step merger], because 

Schedules 14D–9 are reactive documents requiring, by federal law, only a limited 

amount of disclosure. The point is well taken, of course, that it is federal law, not 

state law, that prescribes the items of disclosure required by Schedule 14D–9 and 

that mandates the dissemination of that disclosure statement to the stockholders of 

the subject company. The actual recommendation itself, however, is the product of 

state law, in this case the requirement under Section 251 of the DGCL that the 

[target corporation’s] directors approve and recommend the proposed Agreement. 

State law, not federal law, establishes the norms within which such approval and 

recommendation is given. Thus, it is hardly surprising that state fiduciary duty 

law has a role to play in regulating what directors actually say when 

recommending approval of a proposal or transaction to their stockholders, whether 

that recommendation is communicated in a Schedule 14D–9 or some other 

document.”).
32

is subject to the same common law fiduciary duties, regardless of the subsection 

under which the merger is consummated.

The second concern suggests that a first-step tender offer in a two-step 

merger arguably is more coercive than a stockholder vote in a one-step merger.47 

Section 251(h), however, alleviates the coercion that stockholders might otherwise 

be subject to in a tender offer because (1) the first-step tender offer must be for all

of the target company’s outstanding stock,48 (2) the second-step merger must “be 

effected as soon as practicable following the consummation of the” first-step 

tender offer,49 (3) the consideration paid in the second-step merger must be of “the 

same amount and kind” as that paid in the first-step tender offer,50 and (4) appraisal 

rights are available in all Section 251(h) mergers,

51 subject to the conditions and 

 

47 See, e.g., In re Pure Res., Inc., S’holders Litig., 808 A.2d 421, 441-42 (Del. Ch. 

2002) (“Indeed, many commentators would argue that the tender offer form is 

more coercive than a merger vote. In a merger vote, stockholders can vote no and 

still receive the transactional consideration if the merger prevails. In a

tender offer, however, a non-tendering shareholder individually faces an uncertain 

fate.” (footnote omitted)).

48 8 Del. C. § 251(h)(2).

49 Id. § 251(h)(1)(b).

50 Id. § 251(h)(5).

51 Id. § 262(b)(3) (“In the event all of the stock of a subsidiary Delaware corporation 

party to a merger effected under § 251(h) . . . is not owned by the parent 

immediately prior to the merger, appraisal rights shall be available for the shares 

of the subsidiary Delaware corporation.”).
33

requirements of Section 262 of the DGCL. Thus, Section 251(h) appears to 

eliminate the policy bases on which a first-step tender offer in a two-step merger 

may be distinguished from a statutorily required stockholder vote, at least as it 

relates to the cleansing effect rendered therefrom.52

Further, the policy considerations underlying the holding in Corwin do not 

provide any basis for distinguishing between a stockholder vote and a tender offer. 

In Corwin, the Supreme Court justified its decision to afford a transaction 

approved pursuant to a statutorily required stockholder vote the benefit of the 

irrebuttable business judgment rule presumption as follows:

[W]hen a transaction is not subject to the entire fairness 

standard, the long-standing policy of our law has been to 

avoid the uncertainties and costs of judicial secondguessing when the disinterested stockholders have had 

the free and informed chance to decide on the economic 

merits of a transaction for themselves. . . . The reason for 

that is tied to the core rationale of the business judgment 

rule, which is that judges are poorly positioned to 

evaluate the wisdom of business decisions and there is 

little utility to having them second-guess the 

determination of impartial decision-makers with more 

information (in the case of directors) or an actual 

economic stake in the outcome (in the case of informed, 

 

52 The parallels between Sections 251(c) and 251(h) of the DGCL are evidenced 

further by Section 251(h)(3), which requires that the first-step tender offer result in 

the acquiror holding as many shares of the target corporation’s outstanding stock 

as would otherwise be required to vote in favor of a merger under Section 251(c). 

See id. § 251(h)(3). In other words, the same number of the target corporation’s 

outstanding shares must approve a merger, regardless of whether it is 

consummated under Section 251(c) or Section 251(h).
34

disinterested stockholders). In circumstances, therefore, 

where the stockholders have had the voluntary choice to 

accept or reject a transaction, the business judgment rule 

standard of review is the presumptively correct one and 

best facilitates wealth creation through the corporate 

form.53

Those justifications are equally applicable to a tender offer in a Section 251(h) 

merger. When a merger is consummated under Section 251(h), the first-step 

tender offer essentially replicates a statutorily required stockholder vote in favor of 

a merger in that both require approval—albeit pursuant to different corporate 

mechanisms—by stockholders representing at least a majority of a corporation’s 

outstanding shares to effectuate the merger. A stockholder is no less exercising her 

“free and informed chance to decide on the economic merits of a transaction” 

simply by virtue of accepting a tender offer rather than casting a vote. And, judges 

are just as “poorly positioned to evaluate the wisdom of” stockholder-approved 

mergers under Section 251(h) as they are in the context of corporate transactions

with statutorily required stockholder votes.

Additionally, although much of Corwin refers to a stockholder vote in favor 

of a transaction, the Supreme Court, at times, uses the terms “approve” and “vote” 

interchangeably.54 The Supreme Court also included In re Morton’s Restaurant 

 

53 Corwin, 125 A.3d at 312-13.

54 See, e.g., id at 306, 310 (“[W]e find that the Chancellor was correct in finding that 

the voluntary judgment of the disinterested stockholders to approve the merger 
35

Group, Inc. Shareholders Litigation—a case involving a two-step merger with a 

first-step tender offer—among the cases it cited “for the proposition that the 

approval of the disinterested stockholders in a fully informed, uncoerced vote that 

was required to consummate a transaction has the effect of invoking the business 

judgment rule.”55 In addition, numerous other Delaware decisions have equated 

stockholder acceptance of a tender offer with a stockholder vote in favor of a 

merger,

56 especially where “the first-step tender offer in a two-step transaction is 

 

invoked the business judgment rule standard of review and that the plaintiffs’

complaint should be dismissed. . . . [T]he plaintiffs did not contest the defendants’ 

argument below that if the merger was not subject to the entire fairness standard, 

the business judgment standard of review was invoked because the merger was 

approved by a disinterested stockholder majority. The Chancellor agreed with that 

argument below, and adhered to precedent supporting the proposition that when a 

transaction not subject to the entire fairness standard is approved by a fully 

informed, uncoerced vote of the disinterested stockholders, the business judgment 

rule applies.”).

55 See id. at 310 n.19 (citing Morton’s, 74 A.3d at 663 n.34).

56 See, e.g., Bershad v. Curtiss-Wright Corp., 535 A.2d 840, 842 (Del. 1987) (“An 

informed minority stockholder . . . who either votes in favor of a merger or accepts 

the benefits of the transaction [by accepting a tender offer] cannot thereafter attack 

the fairness of the merger price.”); Morton’s, 74 A.3d at 663 n.34 (characterizing a 

tender offer as “approv[al] by 92% of the stockholders in a non-coerced, fully 

informed manner” and noting that “when disinterested approval of a sale to an 

arm’s-length buyer is given by a majority of stockholders who have had the 

chance to consider whether or not to approve a transaction for themselves, there is 

a long and sensible tradition of giving deference to the stockholders’ voluntary 

decision, invoking the business judgment rule standard of review, and limiting any 

challenges to the difficult argument that the transaction constituted waste”); In re 

Orchid Cellmark Inc. S’holder Litig., 2011 WL 1938253, at *13 (Del. Ch. May 12, 

2011) (“Tendering, of course, is a substitute for shareholder vote, and courts 

should be careful about depriving shareholders of their opportunity to make such a 
36

conditioned on tenders of a majority of the outstanding shares.”57 As such, I am 

convinced that the Supreme Court did not intend that its holding in Corwin be 

limited to stockholder votes only. 

Finally, Plaintiffs cite to Chancellor Bouchard’s Espinoza v. Zuckerberg

decision for the proposition that tender offers should not be given the same 

cleansing effect under Corwin as a statutorily required vote.58 The plaintiffstockholder’s derivative action in Zuckerberg challenged a board’s approval of a 

compensation plan for a majority of the board’s directors.

59

 The parties agreed that 

the board’s approval of that compensation was a self-dealing transaction that 

 

choice, especially with such a significant premium to prior market price.”); 

Matador Capital, 729 A.2d at 294 (noting that, in a two-step transaction where the 

first-step was a cash tender offer for a majority of the corporation’s outstanding 

common stock, the corporation’s “ stockholders are being asked to decide to 

approve the sale of their corporation as a part of their decision whether or not to 

tender shares in the first-step tender offer”); see also J. Travis Laster, The Effect of 

Stockholder Approval on Enhanced Scrutiny, 40 WM. MITCHELL L. REV. 1443, 

1459 n.57 (2014) (“This article discusses the concept of stockholder approval in 

terms of a stockholder vote, which is the typical context in which the issue arises. 

Stockholders also can consent to a transaction by tendering their shares. If the 

first-step tender offer in a two-step transaction is conditioned on tenders of a 

majority of the outstanding shares, and if sufficient stockholders tender to satisfy 

the condition, then it should have the same effect as an affirmative stockholder 

vote.” (citation omitted)).

57 See Laster, supra note 56, at 1459 n.57.

58 Pls.’ Supplemental Answering Br. 2-4 (citing Zuckerberg, 124 A.3d 47).

59 124 A.3d at 51-52.
37

would be subject to the entire fairness standard of review in the first instance.

60

 

After the plaintiff-stockholder filed his lawsuit, however, the company’s 61% 

controlling stockholder expressed his approval of that compensation in a 

deposition and an affidavit.61 According to the defendants, the controlling 

stockholder’s post hoc approval constituted ratification, subjecting the board’s 

decision to approve the director compensation to the business judgment rule 

standard of review rather than entire fairness.62 

Chancellor Bouchard rejected the defendants’ argument that the controlling 

stockholder’s informal approval of the compensation constituted ratification and 

held “that stockholder ratification of an interested transaction, so as to shift the 

standard of review from entire fairness to the business judgment presumption, 

cannot be achieved without complying with the statutory formalities in the DGCL 

for taking stockholder action.”63 Zuckerberg, therefore, focuses on corporate 

formalities and emphasizes that stockholders must follow the DGCL’s prescribed 

 

60 Id. at 49.

61 Id. at 52-53.

62 Id. at 54-55.

63 Id. at 66.
38

methods for taking stockholder action to obtain the benefits of ratification.64 

Specifically, stockholders must either “vot[e] at a stockholder meeting or act[] by 

written consent in compliance with Section 228 of the [DGCL].”65 The controlling 

stockholder’s informal approval did not constitute ratification in Zuckerberg

precisely because it diverged from the DGCL’s required corporate formalities. In 

this case, there is no dispute that the Board complied with the DGCL’s prescribed 

procedures for consummating a merger under Section 251(h). Thus, Zuckerberg 

largely is inapposite.

Nonetheless, Plaintiffs contend that Chancellor Bouchard recognized a 

substantive distinction between tender offers and stockholder votes that precludes 

this Court from affording a Corwin-based cleansing effect to mergers 

 

64 See id. at 57-58 (“In sum, the provisions of the DGCL governing the ability of 

stockholders to take action, whether by voting at a meeting or by written 

consent, demonstrate the importance of ensuring precision, both in defining the 

exact nature of the corporate action to be authorized, and in verifying that the 

requirements for taking such an action are met, including that the transaction 

received enough votes to be effective. They also demonstrate the importance of 

providing transparency to stockholders, whose rights are affected by the actions of 

the majority. In particular, stockholders have the right to participate in a meeting 

at which a vote is to be taken after receiving notice and all material information or, 

in the case of action taken by written consent, to receive prompt notice after the 

fact of the action taken.” (footnote omitted)).

65 Id. at 50.
39

accomplished through first-step tender offers.66 To support that contention, 

Plaintiffs rely on the following excerpt from Zuckerberg:

[D]efendants suggest that stockholder acts such as 

tendering shares serve as an example of less formal 

ratification. This suggestion is unpersuasive, because 

expressing approval of the sale of a company by 

tendering shares is not analogous to stockholder 

ratification. “Approving” a two-step transaction by 

tendering a sufficient number of shares in a tender offer 

is a functional requirement for completing such a 

transaction. Directors cannot tender stockholders’ shares 

for them, so stockholders are not ratifying the 

transaction, but effectuating it in the first instance. . . . 

Thus tendering shares bears no meaningful resemblance 

to a post hoc ratification of directors’ actions.67

I disagree with Plaintiffs’ interpretations of both (1) Defendants’ argument 

regarding the Tender Offer’s cleansing effect and (2) Chancellor Bouchard’s 

decision in Zuckerberg. First, Chancellor Bouchard distinguishes a post hoc 

stockholder vote or written consent from a first-step tender offer in the context of 

deciding what form stockholder assent must take to constitute ratification. But, 

Defendants do not argue that the Tender Offer constituted stockholder ratification. 

Instead, Defendants argue that the Tender Offer affords the Merger the same 

 

66 Pls.’ Supplemental Answering Br. 2-4.

67 Id. at 61 (footnotes omitted) (citing Orchid Cellmark Inc., 2011 WL 1938253, at 

*13; Matador Capital, 729 A.2d at 294).
40

cleansing effect that Corwin affords to a statutorily required vote in favor of a 

merger. 

Second, in Gantler, the Supreme Court differentiated between a statutorily 

required vote and stockholder “ratification.”

68

 It is consistent with Gantler, 

therefore, that just as a statutorily required vote does not constitute “ratification,” 

stockholder acceptance of a tender offer also does not constitute “ratification.”69 

Despite that distinction, the Supreme Court in Corwin held that a statutorily 

required vote by a stockholder majority—which, just as a first-step tender offer in 

a two-step merger, “effectuat[es a transaction] in the first instance”70—irrebuttably 

invokes the business judgment rule.

71

 As such, the fact that a first-step tender offer 

in a two-step merger does not constitute “ratification” is not dispositive as to the 

cleansing effect of stockholder approval as expressed through acceptance of such a

 

68 KKR, 101 A.3d at 1002-03 (“I read the Supreme Court’s discussion of the doctrine 

of ratification in Gantler to have been intended simply to clarify that the term 

‘ratification’ applies only to a voluntary stockholder vote. As the Supreme Court 

stated in a footnote at the end of its decision, ‘[t]his Opinion clarifies that 

“ratification” legally describes only corporate action where stockholder approval 

is not statutorily required for its effectuation.’” (footnote omitted) (quoting 

Gantler, 965 A.2d at 714 n.55)).

69 Zuckerberg, 124 A.3d at 61.

70 Id.

71 Corwin, 125 A.3d at 308-09.
41

tender offer. Interpreting Zuckerberg differently would contradict Corwin’s 

holding.

72

I conclude that the acceptance of a first-step tender offer by fully informed, 

disinterested, uncoerced stockholders representing a majority of a corporation’s 

outstanding shares in a two-step merger under Section 251(h) has the same 

cleansing effect under Corwin as a vote in favor of a merger by a fully informed, 

disinterested, uncoerced stockholder majority. As a result, I now examine whether 

the Volcano stockholders that accepted the Tender Offer were fully informed, 

disinterested, and uncoerced.

3. Volcano’s stockholders were fully informed, disinterested, 

and uncoerced

Because stockholders representing a majority of Volcano’s outstanding 

shares approved the Merger, Plaintiffs must plead facts from which it reasonably 

can be inferred that those stockholders were interested, coerced, or not fully 

 

72 In fact, in Zuckerberg, Chancellor Bouchard cited both Gantler and Corwin and 

recognized that although a statutorily required vote does not constitute ratification, 

it can have same cleansing effect. Zuckerberg, 124 A.3d at 62-63 

(“In Gantler, the Supreme Court held that the scope of ‘the shareholder ratification 

doctrine must be limited . . . to circumstances where a fully informed shareholder 

vote approves director action that does not legally require shareholder approval in 

order to become legally effective.’ . . . Corwin v. KKR . . . confirmed that 

stockholder approval from a statutorily required vote can be used to invoke the 

business judgment rule the same way [stockholder ratification] can . . . .” 

(footnotes omitted) (quoting Gantler, 965 A.2d at 713)). That same principle 

applies to a first-step tender offer under Section 251(h).
42

informed in accepting the Tender Offer to avoid application of the business 

judgment rule. The Complaint does not allege—and Plaintiffs do not argue—that 

the Volcano stockholders that tendered 89.1% of the Company’s outstanding 

shares into the Tender Offer were interested or coerced. Instead, Plaintiffs allege 

that “Defendants have failed to disclose all material information regarding the 

[Merger].”73 Aside from that conclusory statement, the Complaint largely is 

devoid of allegations regarding Volcano’s Merger-related disclosures to its

stockholders. Many of those allegations were brought in Plaintiffs’ original, preMerger complaints. Plaintiffs withdrew those claims after Defendants released 

supplemental disclosures, and the operative Complaint reflects those withdrawals. 

As a result, Defendants contend that Plaintiffs have conceded that Volcano’s 

stockholders were fully informed as to the Merger.74 

Plaintiffs point out, however, that the Complaint contains allegations that the 

Board was not fully informed regarding the Merger and Goldman’s interest in the 

Call Spread Transactions. It follows, according to Plaintiffs, that if the Board was 

 

73 Compl. ¶ 153.

74 Oral Arg. Tr. 16 (“The bottom line is after the supplemental disclosures were 

made, the plaintiffs voluntarily withdrew their application for preliminary 

injunction, later filed the amended complaint that has no disclosure claims in it. 

We submit that they’ve waived the opportunity to assert them at this point, and 

they’re just not there. They can’t amend their complaint by making arguments in 

their briefing or otherwise.”).
43

not fully informed as to certain aspects of the Merger, Volcano’s stockholders also 

were not fully informed, as they received their information regarding the Merger 

from the Board’s Recommendation Statement.75 Because I conclude that 

Volcano’s stockholders were fully informed as to all material facts regarding the 

Merger, I need not decide whether Plaintiffs waived their disclosure-based 

arguments.

a. Legal standard for determining whether Volcano’s 

stockholders were fully informed

“For stockholder approval of any corporate action to be valid, the [approval] 

of the stockholders must be fully informed.”76 Evaluating “[w]hether shareholders

are ‘fully-informed’” as to a particular transaction depends on whether those 

stockholders were apprised of “all material information” related to that 

transaction.77 “An omitted fact is material if there is a substantial likelihood that a 

reasonable shareholder would consider it important in deciding [whether to 

 

75 Oral Arg. Tr. 63-64 (“I would submit that it’s . . . fairly obvious that if the board 

wasn’t fully informed, the stockholders weren’t fully informed.”).

76 KKR, 101 A.3d at 999.

77 Solomon v. Armstrong, 747 A.2d 1098, 1127-28 (Del. Ch. 1999) (quoting Santa 

Fe, 669 A.2d at 66).
44

approve the challenged transaction].”78 “Stated another way, there must be ‘a 

substantial likelihood that the disclosure of the omitted fact would have been 

viewed by the reasonable stockholder as having significantly altered the “‘total 

mix’ of information made available.”

79

 Although a plaintiff generally bears the 

burden of proving a material deficiency when asserting a duty of disclosure 

claim,80a defendant bears the burden of demonstrating that the stockholders were 

fully informed when relying on stockholder approval to cleanse a challenged 

transaction.

81

 

78 Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., 

Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976) and adopting TSC’s materiality 

standard as Delaware law).

79 Skeen v. Jo-Ann Stores, Inc., 750 A.2d 1170, 1172 (Del. 2000) (quoting Louden v. 

Archer–Daniels–Midland Co., 700 A.2d 135, 142 (Del. 1997)).

80 In re Siliconix Inc. S’holders Litig., 2001 WL 716787, at *9 (Del. Ch. June 21, 

2001).

81 KKR, 101 A.3d at 999 (citing Bershad, 535 A.2d at 846); see also Solomon, 747 

A.2d at 1128 (“In their analyses of Delaware’s disclosure jurisprudence, there 

appears to be some dispute among the litigants over who bears the burden of proof 

on disclosure issues. The answer is that it depends on which type of disclosure 

claim is made by whom. As far as claims of material misstatements, omissions 

and coercion go, the law is clear that plaintiff bears the burden of proof that 

disclosure was inadequate, misleading, or coercive. On the other hand, when it 

comes to claiming the sufficiency of disclosure and the concomitant legal effect of 

shareholder ratification after full disclosure (e.g., claim extinguishment, the 

retention of the business judgment rule presumptions, or the shift of the burden of 

proof of entire fairness from the defendant to the plaintiff) it is the defendant who 

bears the burden.”).
45

b. Defendants have carried their burden of 

demonstrating that Volcano’s stockholders were fully 

informed in approving the Merger

At oral argument, Plaintiffs agreed that the allegation in their Complaint 

regarding Volcano’s deficient disclosure is based solely on their contention “that 

neither Volcano’s board nor its stockholders were fully informed because Goldman 

failed to disclose sufficiently detailed information regarding the extent of the 

deterioration of the value of the [W]arrants over time.”82 More specifically, 

Plaintiffs claim that although the Board and Volcano’s stockholders were apprised 

of the fact that the Warrants’ value decreased over time, Goldman never disclosed 

that the Warrants’ value decreased “exponentially.”83 According to Plaintiffs, this 

information is material because it indicates a possible conflict of interest between 

Volcano’s stockholders and Goldman, as “it was in Goldman Sachs’ direct 

financial interest that a change in control transaction, involving all or nearly all 

cash, be consummated as soon as possible, regardless of whether the transaction 

maximizes Volcano stockholder value.”84 In other words, Plaintiffs allege that 

Volcano’s stockholders were not fully informed that the exponential decrease in 

the Warrants’ value over time may have given Goldman an incentive to seek a sale 

 

82 Oral Arg. Tr. 63, 67.

83 See Compl. ¶¶ 15, 63, 65, 76.

84 Id. ¶ 15.
46

as soon as possible when waiting for a better offer or deciding not to sell the 

Company at all may have been in Volcano’s stockholders’ interests.

The Board, however, disclosed that “[i]f the [Merger was] announced at a 

later date, assuming other inputs remain the same, the value of the [Warrants] 

would decrease over time as the result of option time decay until the [W]arrants’ 

expiration.”85 Based on that disclosure, Volcano’s stockholders were aware that 

Goldman’s payout under the Warrants would have decreased if the Merger was 

consummated at a later date. Volcano’s stockholders also were aware that the 

Warrants eventually would expire. Plaintiffs’ argument that the Merger-related 

disclosures were materially deficient, therefore, boils down to the fact that the 

Board did not describe the decline in the Warrants’ value as “exponential.”

Assessing materiality is a difficult practice that requires balancing the 

benefits of additional disclosures against the risk that insignificant information 

may dilute potentially valuable information.86 Here, Volcano announced that 

Goldman had an interest in the Warrants and that their value would decline until 

 

85 Recommendation Statement Supplement.

86 See Solomon, 747 A.2d at 1128 (“The determination of the materiality of an 

alleged omission or misstatement ‘requires a careful balancing of the potential 

benefits of disclosure against the resultant harm.’ The theory goes that there is a 

risk of information overload such that shareholders’ interests are best served by an 

economy of words rather than an overflow of adjectives and adverbs in solicitation 

statements.” (footnote omitted) (quoting Arnold v. Soc’y for Sav. Bancorp, Inc., 

650 A.2d 1270, 1279 (Del. 1994))).
47

they expired “over a series of expiration dates in 2018.”

87

 A reasonable 

stockholder could infer from this information that, all else held equal, Goldman 

would have preferred to consummate a deal sooner rather than later. Assuming the 

Warrants truly did decay at an exponential—rather than “linear” or “gradual”—

rate, the Board’s disclosure of this information only would change the degree of 

Goldman’s interest. Thus, although a more exhaustive disclosure of the Warrants’ 

value decay over time may have been “somewhat more informative,”88a 

reasonable stockholder would not have viewed that fact as significantly altering the 

total mix of available information regarding the relationship between Goldman’s 

interests in the Call Spread Transactions and the Merger.89

C. The Complaint Fails to State a Claim for Waste

Because Volcano’s fully informed, uncoerced, disinterested stockholders 

approved the Merger by tendering a majority of the Company’s outstanding shares

into the Tender Offer, the business judgment rule irrebuttably applies. The 

Merger, therefore, only can be challenged on the basis that it constituted waste. In 

other words, the Complaint must plead that the Merger “cannot be attributed to any 

 

87 Recommendation Statement at 31.

88 Kahn v. Lynch Commc’n Sys., Inc., 669 A.2d 79, 89 (Del. 1995).

89 Siliconix, 2001 WL 716787, at *9.
48

rational business purpose.”90 The Complaint fails to plead that the Merger 

constituted waste. And, even if it did, I note that “it [is] logically difficult to 

conceptualize how a plaintiff can ultimately prove a waste or gift claim in the face 

of a decision by fully informed, uncoerced, independent stockholders to ratify the 

transaction,” given that “[t]he test for waste is whether any person of ordinary 

sound business judgment could view the transaction as fair.”

91

 Because the Merger 

did not constitute waste, the Complaint fails to state a valid breach of fiduciary 

duty claim against the Board.

D. The Complaint Fails to State a Claim for Aiding and Abetting

Finally, Plaintiffs assert that Goldman aided and abetted the Board’s 

fiduciary duty breaches. To state a valid aiding and abetting claim, Plaintiffs must 

allege “(1) the existence of a fiduciary relationship, (2) a breach of the fiduciary’s 

duty, . . . (3) knowing participation in that breach by the defendants,’ and (4) 

damages proximately caused by the breach.”92 “An aiding and abetting claim[, 

however,] ‘may be summarily dismissed based upon the failure of the breach of 

 

90 Cede & Co., 634 A.2d at 361 (internal quotation marks omitted).

91 Harbor Fin., 751 A.2d at 901 (citing Michelson, 407 A.2d at 224); see also 

Attenborough, 2016 WL 2765312, at *1.

92 Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001) (quoting 

Penn Mart Realty Co. v. Becker, 298 A.2d 349, 351 (Del. Ch. 1972)).
49

fiduciary duty claims against the director defendants.’”93 Further, in Attenborough, 

the Supreme Court reiterated the high burden that a plaintiff faces in attempting to 

plead facts from which a court could reasonably infer that a financial advisor acted 

with the requisite scienter for an aiding and abetting claim.

94 Just as in that case, 

“[n]othing in this record comes close to approaching the sort of [financial advisor 

misconduct] at issue in RBC Capital Markets.”95 The Complaint, therefore, fails to 

state a valid aiding and abetting claim against Goldman.

III. CONCLUSION

For the foregoing reasons, Defendants’ Motions are granted, and the 

Complaint is dismissed. 

IT IS SO ORDERED.

 

93 KKR, 101 A.3d at 1003 (quoting Meyer v. Alco Health Servs. Corp., 1991 WL 

5000, at *4 (Del. Ch. Jan. 17, 1991)); see also Attenborough, 2016 WL 2765312, 

at *2 (“Having correctly decided, however, that the stockholder vote was fully 

informed and voluntary, the Court of Chancery properly dismissed the plaintiffs’

claims against all parties.”).

94 Attenborough, 2016 WL 2765312, at *2.

95 Id. (citing RBC Capital Mkts. v. Jervis, 129 A.3d 816, 865 (Del. 2015) (finding, in 

the context of a change-of-control transaction, that “[t]he claim for aiding and 

abetting was premised on [the financial advisor]’s ‘fraud on the Board,’ and that 

RBC aided and abetted the Board’s breach of duty where, for [the financial 

advisor]’s own motives, it ‘intentionally duped’ the directors into breaching their 

duty of care. The record evidence amply supports the trial court’s conclusion that 

[the financial advisor] purposely misled the Board so as to proximately cause the 

Board to breach its duty of care.”)).