IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THE WILLIAMS COMPANIES 

STOCKHOLDER LITIGATION

Consolidated

C.A. No. 2020-0707-KSJM

MEMORANDUM OPINION

Date Submitted: February 5, 2021

Date Decided: February 26, 2021

Gregory V. Varallo, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, 

Wilmington, DE; Michael J. Barry, Christine M. Mackintosh, Kelly L. Tucker, GRANT & 

EISENHOFER P.A., Wilmington, DE; Mark Lebovitch, Thomas G. James, BERNSTEIN 

LITOWITZ BERGER & GROSSMANN LLP, New York, NY; Jeremy S. Friedman, 

David F.E. Tejtel, FRIEDMAN OSTER & TEJTEL PLLC, Bedford Hills, NY; Counsel 

for Plaintiffs.

William M. Lafferty, Kevin M. Coen, Lauren K. Neal, Sabrina M. Hendershot, MORRIS, 

NICHOLS, ARSHT & TUNNELL LLP, Wilmington, DE; Andrew Ditchfield, Brian M. 

Burnovski, Mari Byrne, DAVIS POLK & WARDWELL LLP, New York, NY; Counsel 

for Defendants The Williams Companies, Inc., Alan S. Armstrong, Stephen W. Bergstrom, 

Nancy K. Buese, Stephen I. Chazen, Charles I. Cogut, Michael A. Creel, Vicki L. Fuller, 

Peter A. Ragauss, Scott D. Sheffield, Murray D. Smith, and William H. Spence.

Patricia R. Urban, Michael A. Weidinger, Megan Ix Brison, PINCKNEY, WEIDINGER, 

URBAN & JOYCE LLC, Wilmington, DE; Counsel for Defendant Computershare Trust 

Company, N.A.

McCORMICK, V.C.
This litigation concerns the validity of a stockholder rights plan, orso-called “poison 

pill,” a device that came to popularity in the 1980s as a response to front-end loaded, twotiered tender offers. Coercive tender offers of the 1980s were “to takeovers what the 

forward pass was to Notre Dame football in the days of Knute Rockne,”1 and a powerful 

offense required a powerful defense. Of all the defenses developed to fend off hostile 

takeovers, the poison pill was among the most muscular.2 These bulwarks gained judicial 

imprimatur in 1985 when the Delaware Supreme Court upheld a poison pill as an antitakeover device in Moran v. Household International, Inc.3

 Moran also established 

intermediate scrutiny under Unocal as the legal framework for reviewing stockholder 

challenges to poison pills.4 

Poison pills metamorphosed post-Moran. The flip-over feature of the Moran pill 

was augmented by a flip-in feature.5 After the adoption of state anti-takeover statutes,6

trigger thresholds crept down from the 20% threshold of Moran to 15% and then to 10% 

1 Robert A. Prentice, Front-End Loaded, Two-Tiered Tender Offers: An Examination of 

the Counterproductive Effects of a Mighty Offensive Weapon, 39 Case W. Res. L. Rev. 

389, 392 (1989). 

2 See generally Martin Lipton & Erica H. Steinberger, 1 Takeovers & Freezeouts § 6.03[4], 

at 6-58 (L. J. Press 2009); Prentice, supra note 1 at 412–13.

3 Moran v. Household Int’l., Inc. (Moran II), 500 A.2d 1346 (Del. 1985).

4 Id. at 1357; see Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985).

5 See generally Stahl v. Apple Bancorp, Inc., 1990 WL 114222 (Del. Ch. Aug. 9, 1990) 

(validating flip-in poison pill).

6 See, e.g., 8 Del. C. § 203 (preventing stockholders from engaging in a tender or exchange 

offer for a period of three years after buying more than 15% of a corporation’s stock unless 

certain criteria are met). See generally E. Norman Veasey, Jesse A. Finkelstein & Robert 

J. Shaughnessy, The Delaware Takeover Law: Some Issues, Strategies and Comparisons, 

43 Bus. Law. 865, 868 (1988).
2

in some instances.7 The pill’s initial success engendered mission creep. Originally 

conceived as anti-takeover armaments, poison pills were redirected to address other 

corporate purposes such as protecting net operating loss assets.8 Recently, pills have been 

deployed to defend against stockholder activism.

The plaintiffs in this litigation challenge an anti-activist pill adopted by the board of 

directors of The Williams Companies, Inc. (“Williams” or the “Company”) at the outset of 

the COVID-19 pandemic and amid a global oil price war. The Williams pill is 

unprecedented in that it contains a more extreme combination of features than any pill 

previously evaluated by this court—a 5% trigger threshold, an expansive definition of 

“acting in concert,” and a narrow definition of “passive investor.” 

Unocal calls for a two-part inquiry, asking first whether the board had reasonable 

grounds for identifying a threat to the corporate enterprise and second whether the response 

was reasonable in relation to the threat posed.9 The defendants identify three supposed 

threats: first, the desire to prevent stockholder activism during a time of market uncertainty 

and a low stock price, although the Williams board was not aware of any specific activist 

7 See generally Marcel Kahan & Edward Rock, Anti-Activist Poison Pills, 99 B.U. L. Rev. 

915, 922 (2019) [hereinafter Anti-Activist Poison Pills].

8 See, e.g., Versata Enters., Inc. v. Selectica, Inc., 5 A.3d 586, 607 (Del. 2010)

(“Selectica II”) (validating an NOL pill).

9 The second prong of Unocal looks first to whether the defensive measure is draconian, in 

the sense of being preclusive or coercive, before addressing whether the measure is in the 

range of reasonableness. Unitrin, Inc. v. Am. Gen. Corp., 651 A.2d 1361, 1387–88 

(Del. 1995) (quoting Paramount Commc’ns, Inc. v. QVC Network, Inc., 637 A.2d 34, 45–

46 (Del. 1994)). In this case, the plaintiffs do not argue that the rights plan is draconian, 

and thus this decision goes right to the proportionality analysis.
3

plays afoot; second, the apprehension that hypothetical activists might pursue “short-term” 

agendas or distract management from guiding Williams through uncertain times; and third, 

the concern that activists might stealthily and rapidly accumulate over 5% of Williams

stock.

Of these three threats, the first two run contrary the tenet of Delaware law that 

directors cannot justify their actions by arguing that, without board intervention, the 

stockholders would vote erroneously out of ignorance or mistaken belief. This decision 

assumes for the sake of analysis that the third threat presents a legitimate corporate 

objective but concludes that the Company’s response was not proportional and enjoins the 

Williams pill.

I. FACTUAL BACKGROUND

Trial took place over three days. The record comprises 206 trial exhibits, live 

testimony from four fact and three expert witnesses, deposition testimony from eight fact 

and three expert witnesses, and one-hundred stipulations of fact. These are the facts as the 

court finds them after trial.10

10 The Factual Background cites to: C.A. No. 2020-0707-KSJM docket entries (by docket 

“Dkt.” number); trial exhibits (by “JX” number); the trial transcript (Dkts. 111–13) (“Trial 

Tr.”); and stipulated facts set forth in the Parties’ Joint Pre-Trial Order (Dkt. 101) (“PTO”). 

The following witnesses testified at trial: Plaintiff Steven Wolosky; Defendants Charles 

I. Cogut, Murray D. Smith, Nancy K. Buese; Plaintiffs’ expert Joseph Mills; and 

Defendants’ experts Guhan Subramanian and Bruce Goldfarb. The parties relied on the 

deposition transcripts of the following witnesses: Williams’ Chief Financial Officer John 

Chandler and Defendants Stephen W. Bergstrom, Vicki L. Fuller, and Murray D. Smith. 

See Dkt. 88, Notice of Lodging of Dep. Trs. Exs. C–G. The deposition transcripts using 

the witnesses’ last names and “Dep. Tr.”
4

A. Williams and Its Board

Williams is a publicly traded Delaware corporation with its headquarters in Tulsa, 

Oklahoma.11 It owns and operates natural gas infrastructure assets, including over 30,000 

miles of pipelines and 28 processing facilities, and handles approximately 30% of the 

nation’s natural gas volumes.12 

At all times relevant to this decision, there were approximately 1.2 billion shares of 

Williams common stock outstanding. Based on the stock’s trading price from March 2020 

through the time of trial, Williams’ market capitalization ranged from approximately 

$11.22 to $27.54 billion. About 50% of Williams’ outstanding shares are owned by

approximately twenty institutional investors.13 Williams’ largest three stockholders—

Blackrock, Vanguard, and State Street—collectively hold almost a quarter of the 

Company’s common stock.

14

Williams’ certificate of incorporation establishes a straight Board of Directors (the 

“Board”) and provides “that directors shall be elected annually for terms of one year.”15 

Williams stockholders have the right to remove directors without cause and to act by 

written consent.

16 

11 PTO ¶ 14.

12 JX-32 at 5; PTO ¶ 14.

13 JX-156 (“Goldfarb Report”) ¶¶ 22–24.

14 Goldfarb Report ¶ 24. Each of BlackRock, Vanguard, and State Street filed a Schedule 

13G with the SEC in connection with its stake in Williams. Id.

15 JX-8 Art. FIFTH ¶ B, at 28 (May 20, 2010 Form 8-K).

16 See id. ¶ C, at 28 (stating that the “stockholders shall not have the right to remove any 

one or all of the Directors except for cause and by . . . affirmative vote,” but then stating 
5

As of March 2020, the Board comprised twelve members—CEO Alan Armstrong 

and eleven outside directors. The complaint names as defendants Armstrong and ten of 

the outside directors—Stephen W. Bergstrom, Nancy K. Buese, Stephen I. Chazen, Charles 

I. Cogut, Michael A. Creel, Vicki L. Fuller, Peter A. Ragauss, Scott D. Sheffield, Murray 

D. Smith, and William H. Spence (collectively, the “Director Defendants”).17 

B. Williams’ Prior Experience with Stockholder Activism

In late 2011, Soroban Capital Partners LLC (led by Eric Mandelblatt) (“Soroban”) 

and Corvex Management LP (led by Keith Meister) (“Corvex”) each acquired slightly less 

than 5% of Williams stock.

18 Through a February 2014 agreement with Williams, 

Mandelblatt and Meister joined the Board.19 

During their tenure, Mandelblatt and Meister were instrumental in pressing for a 

merger with Energy Transfer Equity LP.

20 After the merger was terminated, six of the 

Board’s thirteen members—including Mandelblatt and Meister—attempted to remove and 

that “[t]he first sentence of this Paragraph C, shall be of no force and effect after the annual 

meeting of stockholder [sic] in 2013”); see also PTO ¶ 109 (“Williams’ By-laws permit 

stockholders to remove members of the Board of Directors by written consent.”).

17 Dkt. 1, Unsworn Verified Compl. for Decl. and Inj. Relief (“Wolosky Compl.”); JX-60 

at 10–11, 16; PTO ¶¶ 15–25. The eleventh outside director, non-party Kathleen Cooper, 

retired from the board and is not a defendant. JX-60 at 16; Trial Tr. at 308:8–11 (Smith).

18 PTO ¶ 27; JX-104; Trial Tr. 309:17–310:8 (Smith); Bergstrom Dep. Tr. 37:6–38:6.

19 PTO ¶ 29.

20 Smith Dep. Tr. 9:13–18, 87:7–88:14; Chandler Dep. Tr. at 104:23–105:11; Fuller Dep. 

Tr. at 83:7–9.
6

replace Armstrong as CEO.21 When this effort failed, those six directors resigned.22 

Meister then threatened a proxy fight to replace the entire Board,23 but he agreed to stand

down when Williams named three new independent directors—Bergstrom, Sheffield, and 

Spence.24 Bergstrom became Chair. 

Management also underwent significant change. Armstrong remained as CEO, but 

the Company hired several new executives, including CFO John D. Chandler and General 

Counsel T. Lane Wilson.

25 

Armstrong and Smith are the only two Director Defendants who served on the Board

during the Soroban and Corvex era; the others joined the Board in either 2016 or 2018.26 

Smith found Soroban and Corvex’s activism detrimental to the Company.27 Smith further 

felt that Soroban and Corvex pushed for short-term-value-enhancing agendas that were not 

aligned with the Board’s long-term goals.28

C. Williams Stock Price Plummets

Before 2020, Williams stock price traded at a high of $24.04 and had been relatively 

stable over the preceding months. In early 2020, however, the COVID-19 pandemic and 

21 PTO ¶ 30.

22 Id.; Trial Tr. 312:7–23 (Smith).

23 PTO ¶ 31; Trial Tr. 312:24–313:11 (Smith).

24 PTO ¶ 31; Trial Tr. 313:12–19 (Smith); id. at 129:15–20 (Cogut).

25 Trial Tr. 136:14–138:10 (Cogut); see JX-162 at 1–3.

26 PTO ¶¶ 15–25 (listing the Director Defendants and the year in which each joined the 

Board). 

27 See, e.g., Trial Tr. at 311:7–16, 314:1–17, 349:14–350:20 (Smith).

28 Id. at 311:10–16 (Smith).
7

the ensuing oil price war between Saudi Arabia and Russia shocked the oil market and sent 

stock prices plummeting.

The COVID-19 pandemic hit first. On January 31, 2020, the Department of Health 

and Human Services “declared a public health emergency in response to the COVID-19 

pandemic.”29 Williams stock price fell to $18.90 by the end of February 2020.30 During 

this period, trading volume in Williams stock was high and fluctuated dramatically from 

day to day, indicating “a lot of unusual and short-term-type trading.”31

The Board met on March 2, 2020, to discuss solutions for the declining stock price. 

Management and representatives from Morgan Stanley explained that the stock was 

approaching lows similar to those in 2010 and 2016, despite the fact that earnings were 

25% higher and the Company was carrying significantly less debt.32 The Board discussed 

a share repurchase program but opted to preserve liquidity and continue to de-leverage

instead.

33 

Then came the oil price war. On March 8, 2020, Saudi Arabia cut prices in reaction 

to Russia’s conduct at a March 2020 meeting of the Organization of the Petroleum 

29 PTO ¶ 34.

30 Id. ¶ 36.

31 Trial Tr. 538:19–539:1 (Buese).

32 JX-34 at 1–2; JX-35 at 4 (noting that the Company’s stock price was “approaching lows 

realized in 2010 and 2016 despite 25% higher earnings and >1 turn less of leverage during 

other market stresses”).

33 PTO ¶ 37; JX-34 at 1; JX-35 at 3–4; Trial Tr. 140:14–141:20 (Cogut); Chandler Dep. 

Tr. at 203:21–204:4; Fuller Dep. Tr. at 278:16–280:13; Bergstrom Dep. Tr. at 216:11–16.
8

Exporting Countries.

34 The following day energy stocks “fell to their lowest levels in 15 

years, dropping 20% in a single day.”35 Williams stock price closed at $14.99 on 

March 9, 2020.36 By March 19, Williams stock price had fallen to approximately $11, 

which was close to a 55% decline since January 2020.37 

D. Cogut’s Plan

Around early March 2020, outside director Cogut conceived of an alternative to the 

repurchase program—a stockholder rights plan (the “Plan”).

38 Cogut, a retired lawyer who 

had led the M&A and private equity practices of a prominent New York law firm, had 

joined the Board in 2016.39 Cogut had helped clients adopt rights plans roughly a dozen 

times beginning in the 1980s.40

Cogut witnessed the evolution of poison pills throughout his career and described 

them at trial as “the nuclear weapon of corporate governance.”41 He explained his 

understanding that the poison pill was historically designed to protect companies from 

34 PTO ¶¶ 38, 83.

35 Id. ¶ 39 (internal quotation marks omitted).

36 Id. ¶ 40; PTO Ex. A.

37 PTO Ex. A; JX-157 (“Subramanian Report”) ¶ 22 & n.48.

38 A flip-in poison pill generally works as follows: A company issues its stockholders 

rights that have nominal value unless somebody acquires an amount of shares above a 

specified triggering threshold, at which point the rights become exercisable, for everyone 

other than the acquiring persons, into common or equivalent shares worth more than the 

exercise price. JX-155 (“Mills Report”) ¶ 28.

39 PTO ¶ 19; JX-60 at 27.

40 JX-60 at 27; Trial Tr. at 53:5–17 (Cogut).

41 Trial Tr. at 53:18–55:1, 114:10–12 (Cogut).
9

hostile takeovers and that they originated in response to front-end loaded, two-tier tender 

offers.

42 Cogut knew that acceptable trigger thresholds had declined from 20% to 15%, 

with the occasional 10% trigger.43 As trigger levels shrank, the pills’ uses expanded. 

Cogut observed that companies began using pills to protect their net operating losses 

(“NOLs”) and not just as a takeover deterrent.44

Like many Delaware corporations, Williams had an “on-the-shelf” pill (the “Shelf 

Pill”)—a rights plan that the Company could quickly adopt in the event a threat arose. The 

Board considered a “refreshment” of the Shelf Pill every so often; the last such refreshment 

took place in October 2019.45 The Shelf Pill was geared towards a traditional change of 

control situation.46 None of the Company representatives could testify as to details of the 

Shelf Pill other than its existence, though Cogut testified that it likely had a trigger of 15% 

and certainly greater than 5%.47 

Cogut was not concerned with a potential takeover or with NOLs.

48 He felt that the 

“circumstances that existed because of the pandemic” warranted “a different type of pill.”49 

42 Id. at 53:10–54:4 (Cogut). 

43 Id. at 54:15–18 (Cogut).

44 Id. at 55:2–10 (Cogut).

45 JX-27 at 1; JX-29 at 2.

46 Trial Tr. at 563:17–564:6 (Buese).

47 Id. at 58:15–59:5 (Cogut).

48 Id. at 64:19–23, 69:12–70:16, 93:16–19 (Cogut).

49 Trial Tr. at 65:5–8 (Cogut).
10

The “uncertainty” in the market required a solution that could “insulat[e]” management 

from activists “who were trying to influence the control of the company.”50

Cogut suggested a rights plan to Wilson around March 2 when management was 

considering its share repurchase proposal.51 Cogut’s proposal “was not meant to deal with 

the same issues as the stock buyback” and was not fully developed—he simply 

recommended that “the concept [of a pill] should be considered” by management.52 The 

goal was to prevent “[a]ny activism that would influence control over the company at an 

aggregate level above 5 percent.”53

Cogut made no distinctions among types of activism.54 He hoped to impose a “oneyear moratorium” on activism of any type.55 To accomplish this goal, he proposed “a 

shareholder rights agreement with a 5% triggering threshold, a one-year duration, and an 

exclusion for passive investors.”56

50 Id. at 69:8–70:16 (Cogut).

51 Id. at 66:4–10 (Cogut).

52 Id. at 65:19–24, 66:11–67:1 (Cogut).

53 Id. at 70:20–71:5 (Cogut).

54 Id. at 72:21–75:2 (Cogut).

55 Id. at 118:11–18 (Cogut); see also id. at 154:22–155:23 (Cogut) (“I thought that the 

company would be best off if there was a limitation on the ability of opportunistic investors 

. . . who were interested in influencing control of the company, if there was a limitation on 

what they could do, limit their voice over this period of uncertainty.”).

56 PTO ¶ 44.
11

E. Williams Management Proposes the Plan to the Board

After Cogut proposed the Plan, Wilson consulted with Davis Polk & Wardwell LLP 

(“Davis Polk”), the Company’s outside counsel.57 Davis Polk then revised the Shelf Pill

and sent a draft to Wilson on March 11, 2020.

58

After receiving the draft from Davis Polk, Wilson socialized the Plan among senior 

management including Armstrong. Cogut expected Armstrong to support the idea because 

he had “barely survived” Soroban and Corvex’s “attempt to get him fired.”59

Management liked the pill. At the time, Williams Director of Investor Relations & 

Treasury Brett Krieg had been looking for a way to “monitor the potential emergence of 

activists in this low price environment.”60 

On March 17, Wilson forwarded a draft pill to Cogut, along with Davis Polk’s 

“explanation of changes.”61 Wilson noted that he, Armstrong, and Chandler were “all 

supportive of moving forward proactively.”62

Wilson also asked Cogut to discuss the Plan with Bergstrom, who lacked any 

experience with poison pills.63 Cogut emailed Bergstrom to express his “view that 

[Williams] should adopt a shareholders’ rights plan with a 1 year term, a 5% threshold, and 

57 See JX-42 at 1–2.

58 Id. at 1; JX-42; see also JX-176 at 1.

59 Trial Tr. at 137:8–15 (Cogut); JX-40; JX-174.

60 JX-172 at 3; see also JX-171 at 2.

61 JX-42 at 1.

62 Id.; see also JX-175.

63 Trial Tr. at 75:3–77:17 (Cogut); Bergstrom Dep. Tr. at 29:16–30:7; JX-176 at 1.
12

an exception for 13g holders.”64 Bergstrom agreed to discuss the Plan with Cogut the 

following morning.65 

In the meantime, Armstrong, Bergstrom, and Wilson scheduled an emergency 

Board meeting to further evaluate Cogut’s Plan.

66 Wilson had also advised that holding 

two meetings would look better; he recommended scheduling a “second board meeting to 

approve, at least a day later, to show appropriate consideration by the Board.”67 

Cogut and Bergstrom spoke by phone on the morning of March 18.68 Bergstrom 

expressed concern about the Plan’s novelty. He was wary of the 5% trigger69 and “had not 

joined the enthusiasm of management to proceed.”70 During a call later that morning, 

Bergstrom expressed similar concerns to Wilson.71 

F. The Board Calls an Urgent Meeting

The Board scheduled its first meeting for the evening of March 18.72 An agenda 

distributed to the Board prior to the meeting identified two discussion topics: (i) the Plan,

which the agenda gave forty minutes, and (ii) whether to hold the annual stockholder 

64 JX-41.

65 Id.

66 JX-176 at 1.

67 JX-43 at 1; see also JX-47 at 1.

68 See JX-41.

69 Trial Tr. at 79:19–82:20 (Cogut).

70 Id. at 76:14–21 (Cogut).

71 JX-50; JX-52.

72 PTO ¶ 46. In the lead up to the meeting, stockholder activism was a topic of discussion 

in emails between Wilson, Davis Polk, and Morgan Stanley. JX-50; JX-52.
13

meeting virtually, which the agenda gave twenty minutes.

73 The agenda attached a 

presentation titled “Rights Plan Overview.”74 The Board did not receive a draft of the Plan

before or during the March 18 meeting.75

The meeting lasted approximately seventy-five minutes, with most of that time 

spent on the Plan.76 Representatives from Davis Polk and Morgan Stanley attended the 

meeting.77 

During the meeting, Armstrong and Wilson delivered the presentation.78 The 

presentation identified the purposes of stockholder rights plans generally, the mechanics of

rights plans, and their dilutive effects.79 

Management’s presentation explained that, generally, rights plans seek to:

• “Discourage unsolicited takeover attempts that do not offer an adequate price 

to all stockholders or are otherwise not in the best interests of the company 

and its stockholders;”

• “Discourage or prevent coercive or unfair takeover tactics” such as 

“acquisitions of control through open market purchases[,] ‘street sweeps,’”

or “coercive tender offers, including partial and two-tiered tender offers;”

• “Encourage bidders to negotiate with the Board;” and

73 JX-54 at 1.

74 Id. at 1–2.

75 See PTO ¶ 55.

76 JX-55 at 1, 4; PTO ¶ 51; see also Trial Tr. at 152:4–7 (Cogut); id. at 326:18–327:11 

(Smith); id. at 551:11–17 (Buese). 

77 JX-56 at 1–2.

78 Trial Tr. 554:4–9 (Buese); JX-54 at 1.

79 Id. at 3–10.
14

• “Provide the Board with [the] opportunity to preserve existing, more 

advantageous strategies or to develop and implement superior 

alternatives.”80

The next slide of the presentation explained that, generally, rights plans are not 

intended to:

• “Prevent all acquisitions;”

• “Deter fully priced and fairly structured offers;”

• “Prevent proxy contests for representation on Board;” or

• “[P]revent a group of unaffiliated hedge funds from acquiring meaningful 

positions . . . so long as they remain below the threshold.”81

The presentation went on to identify “the board’s duties.”82 It also noted certain 

“corporate governance matters,” including the possibility of negative reactions from 

Institutional Shareholder Services Inc. (“ISS”) and the press.83 

The presentation did not discuss any proposed features specific to the Plan, although 

the minutes of the March 18 meeting reflect that the Board discussed a 5% trigger.

84 

In addition, the minutes of the March 18 meeting state that:

• Morgan Stanley “advised that, given the extremely unusual market volatility 

primarily arising from the uncertainty relating to the coronavirus outbreak 

and the disproportionate impact on the Company’s common stock price . . . 

a Rights Plan is a valid consideration.” 

• Morgan Stanley advised that “in light of existing disclosure regimes, and 

high, volatile trading volumes, before the Company would have any insight 

80 Id. at 3.

81 Id. at 4.

82 Id. at 11–15. 

83 Id. at 16.

84 JX-56 at 2.
15

or knowledge, an opportunistic investor could acquire a sizable position in 

the Company’s common stock.” 

• Armstrong stated “that the adoption of a Rights Plan would protect and 

preserve the interests of long-term shareholders.”

• The Board discussed “protecting long-term shareholders (especially by 

exempting all passive investors from the contemplated plan).”85

The Board also discussed the “market perception” and the anticipated reaction of its 

stockholders, the press, and proxy advisory firms to the proposed Plan.

86 The directors

concluded that “further explanation to shareholders” could overcome bad publicity given 

“the one year term and other . . . mitigating factors in respect of any potential negative 

investor reaction.”87

Although the Board had not yet seen a draft of the Plan, by the end of the March 18 

meeting, the Board had decided to adopt it. Buese stated that the Board had “unanimously” 

decided that its “fiduciary duty required [it] to take action in light of the significant 

dislocation of the stock” despite the “risk that shareholders could vote out a director” in 

response.88 The only open issues were logistical questions and a formal vote.

89 

As recommended by Wilson, the Board scheduled a second meeting for the 

following day, the evening of March 19.90 The Board briefly discussed transitioning its 

85 Id.

86 Id.; JX-53 at 16; Trial Tr. at 550:20–551:10 (Buese); Fuller Dep. Tr. at 49:11–24, 59:13–

60:24. 

87 JX-56 at 2; Trial Tr. at 546:11–16 (Buese).

88 Trial Tr. at 551:4–10 (Buese).

89 See id. at 550:20–551:10 (Buese).

90 Trial Tr. at 153:4–11 (Cogut).
16

2020 Annual Meeting of Stockholders to a virtual setting before adjourning for the 

evening.

91

G. The Board Adopts the Plan.

Immediately after the March 18 Board meeting, Williams corporate secretary Bob 

Riley emailed Computershare Trust Company, N.A. (“Computershare Trust”) noting that 

“our Board will tomorrow adopt a shareholder rights plan” and asking to “chat tomorrow 

about Computershare’s role as the rights agent.”92 Later that evening, Riley emailed the 

agenda and materials for the meeting to the Board, including the Plan.

93

On the morning of March 19, Williams filed its 2020 Proxy Statement in 

anticipation of its April 28, 2020 annual stockholder meeting.

94 The Proxy Statement did 

not disclose that the Board was considering the Plan.

95

An agenda was sent to the Board a few hours before the meeting.

96 The agenda

allocated sixty minutes to “[a]pproval” of a “Shareholder Rights Plan,” including: Morgan 

Stanley’s presentation, discussion of the Plan, review of a draft Form 8-K and a Form 8A 

91 JX-56 at 2–4; Trial Tr. at 83:23–84:3, 152:4–7 (Cogut); id. at 551:11–17 (Buese).

92 JX-58 at 1.

93 JX-59; PTO ¶ 55.

94 JX-60 at 4–5.

95 See JX-60 at 7 (listing agenda items but not including information about the Plan).

96 JX-65 at 1–2.
17

registration statement, adoption of resolutions approving the Plan, and review of a draft 

press release.97 

The email also included a presentation prepared by Morgan Stanley.98 Buese 

testified that she reviewed these materials and “touch[ed] base” with Bergstrom and Wilson 

prior to the March 19 Board meeting.

99 She did not review every detail but focused instead 

on key terms and provisions.

The March 19 Board meeting began at 6 p.m. with the full Board and representatives 

from Morgan Stanley and Davis Polk in attendance.100 The Morgan Stanley team opened 

the meeting, beginning its presentation with an executive summary of the Plan before 

turning to “Considerations Regarding a 5% Trigger.”101 The executive summary stated:

The key benefit of a rights plan is to prevent an opportunistic 

party from achieving a position of substantial influence or 

control without paying a control premium to other 

shareholders.

A shareholder rights plan does not deter friendly or hostile 

M&A; however, an acquiror would be forced to negotiate with 

the Board.

An activist would be limited in its ability to accumulate a large 

stake.102

97 Id. at 2. The agenda is dated March 18, 2020. Id. Given its distribution on March 19, 

and the numerous differences from the March 18 agenda, this was likely a typo. See Buese 

Dep. Tr. at 205:10–206:13.

98 JX-65 at 3; see Trial Tr. at 153:12–16 (Cogut); id. at 596:18–597:4 (Buese).

99 Trial Tr. at 552:7–553:6 (Buese).

100 JX-67 at 1.

101 JX-65 at 4–5.

102 Id. at 4 (emphasis added) (formatting altered).
18

The executive summary stated that “campaigns from well-known activists are 

expected to continue at a reasonable pace in the current market.”103 In connection with this 

prediction, the presentation stated that:

The rights plan would deter an activist from taking advantage 

of the current market dislocation and challenges in monitoring 

unusual trading patterns that results in a rapid accumulation of 

a >5% stake.104

The presentation displayed a chart signaling an upward trend in stockholder 

activism and predicting that such activism would not decline as significantly as it did in 

response to the market downturn of 2008.105

As to the trigger, the presentation informed the Board that: (a) only 2% of rights 

plans had triggers below 10%; (b) 76% of rights plans “set the trigger” between 15% and 

20%; and (c) “[n]o precedents exist below 5%.”106 The presentation did not cover any 

other provisions of the Plan.107

Morgan Stanley walked the Board through its generation of an exercise price for the 

warrants included in the Plan and the impact that triggering the Plan at that price would 

have on Company stock.108 

103 Id.

104 Id.

105 Id. at 8.

106 Id. at 5.

107 PTO ¶ 57; Chandler Dep. Tr. 146:15–148:3; see also Trial Tr. at 553:12–563:1 (Buese).

108 Id. at 6–7. 
19

The Morgan Stanley team concluded its presentation with some general market data 

regarding exercise price multiples.109 It further identified a substantial decline in active 

rights plans among public companies—only 55 at the end of 2019, down from a high of 

946 at the end of 2009.110 

After delivering the presentation, the Morgan Stanley and Davis Polk 

representatives left the room to allow the Board to deliberate.111 The minutes indicate that 

the Board discussed “recent market events and the impact on the Company’s stock 

price.”112

Cogut confirmed at trial that Morgan Stanley relayed the above information at the 

March 19 Board meeting. He regarded the information about other rights plan triggers 

“irrelevant” because “this was not a traditional shareholder rights plan.”113 

Buese recalled that the Board discussed the potential impact the Plan would have 

on the trading volume of Williams stock.114 She further noted that the Board revisited 

“several levels of thresholds” and “the acting in concert concept.”115 Buese also recalled 

that the Board discussed the “the fact that ISS has a reasonably dim view of rights plans.”116 

109 Id. at 11–14.

110 Id. at 10.

111 JX-67 at 1.

112 Id. at 2.

113 Trial Tr. at 87:22–90:1 (Cogut).

114 Id. at 555:20–556:6 (Buese).

115 Id. at 556:16–557:11 (Buese).

116 Id. at 560:2–11 (Buese).
20

According to Buese, the Board collectively felt that “outreach and engagement and 

education” would temper any investor dissatisfaction.117

Following discussion, the Board unanimously resolved to adopt a stockholder rights 

plan “in substantially the form presented at the meeting.”118 The March 19 meeting, 

initially scheduled to last for one hour, adjourned after forty minutes.119

On March 20, 2020, the Company issued a press release that publicly disclosed the 

Board’s adoption of the Plan (the “March 20 Press Release”).120 On March 30, 2020, the 

Company supplemented the 2020 Proxy Statement to disclose the Plan’s adoption (the 

“March 30 Proxy Supplement”).121 

The Board elected not to subject the Plan to a stockholder vote. Cogut testified that 

the idea of allowing stockholders to vote on the Plan “was not raised” by Morgan Stanley, 

Davis Polk, or any of the Board members.122 At trial, the Director Defendants cited time

constraints as an additional consideration,

123 contending that the 2020 Proxy Statement 

“was at the printer” by the time the Board began discussing the Plan.

124 

117 Id. at 561:21–562:6 (Buese).

118 JX-67 at 2; Trial Tr. at 154:14–19 (Cogut); id. at 337:5–9 (Smith).

119 JX-67 at 5.

120 JX-69.

121 JX-82.

122 Trial Tr. at 118:8–119:8 (Cogut).

123 Id. at 563:10–16 (Buese). 

124 Id. at 117:24–118:4 (Cogut).
21

H. The Plan’s Features

The Plan will expire at the end of one year and has four key features: (i) a 5% 

trigger; (ii) a definition of “acquiring person” that captures beneficial ownership as well as 

ownership of certain derivative interests, such as warrants and options; (iii) an “acting in 

concert” provision that extends to parallel conduct and includes a “daisy chain” concept 

(the “AIC Provision”); and (iv) a limited “passive investor” exemption. 

While the Plan’s features were a focal point of trial, they received little attention 

during the March 18 and March 19 Board meetings. The Director Defendants confirmed 

that Board discussions focused almost exclusively on the 5% trigger.125 Although Buese 

recalls having discussed the concept of the AIC Provision,126 other directors testified that 

the Board was informed only that the Plan would apply to groups of investors but did not 

review or discuss the actual terms of the AIC Provision.127 Most directors admitted that 

they had not even read the key features of the Plan before this litigation began.128 

The Plan operates in conjunction with regulatory requirements established by 

federal and state law. Understanding the Plan’s features requires a quick refresher of

certain of those requirements.

125 See id. at 329:21–331:5 (Smith).

126 Id. at 548:8–22 (Buese); see also id. at 568:8–569:8 (Buese) (testifying that she 

reviewed the AIC Provision prior to voting on the Plan). But see Buese Dep. Tr. at 225:1–

228:21 (testifying that she has no recollection of having reviewed the AIC Provision but 

assumes that she did because it was her “common practice” to review Board materials).

127 Trial Tr. at 95:17–96:13 (Cogut); id. at 345:5–21 (Smith); Bergstrom Dep. Tr. at 254:5–

22, 293:6–294:10; Fuller Dep. Tr. at 74:5–77:7, 80:3–21.

128 Trial Tr. at 87:1–15, (Cogut); id. at 345:2–7 (Smith); Bergstrom Dep. Tr. at 253:9–24, 

272:6–273:13; Fuller Dep. Tr. at 74:5–77:7, 80:3–21.
22

• Section 13(d) of the Securities Exchange Act (the “Exchange Act”) requires 

that non-passive investors report “beneficial ownership” of more than 5% of 

a class of stock but gives investors a ten-day window to report ownership 

levels using a Schedule 13D form. During that window, the investor is 

permitted to continue accumulating stock. 

• Section 13(d) does not include derivative securities in the definition of 

“beneficial ownership.” 

• Section 13(d) aggregates the beneficial ownership of investors who are 

acting in concert, which under the Exchange Act occurs where “two or more 

persons agree to act together for the purpose of acquiring, holding, voting or 

disposing of equity securities of an issuer.”129 Section 13(d)’s definition of 

“acting in concert” does not capture “parallel conduct” (discussed below) nor 

a “daisy chain” concept (discussed below).

• Section 13(d) excludes “passive investors,” defined as persons who acquired 

“securities in the ordinary course of [their] business and not with the purpose 

nor with the effect of changing or influence the control of the issuer.”130 

1. The 5% Trigger

The Plan established a trigger threshold of “5% or more.”131 The Plan is triggered, 

and the rights distributed, on “the close of business on the tenth Business Day after” a 

“Person” (defined as an individual, firm, or entity)132 acquires “beneficial ownership” of

5% or more of Williams stock or commences “a tender or exchange offer” that would result 

in their ownership reaching that threshold.

133 Given Williams’ market capitalization in 

March 2020, triggering the 5% threshold at the time the Plan was adopted would have 

129 17 C.F.R. § 240.13d–5(b)(1); see also Subramanian Report ¶ 41.

130 See generally 17 C.F.R. § 240.13d-1.

131 JX-69 at 22.

132 Id.

133 Id. at 21.
23

required an economic investment (sometimes referred to as a “toehold”) of approximately 

$650 million.134

2. Beneficial Ownership Definition

The Plan’s definition of “beneficial ownership” starts with the definition found in 

Rule 13d–3 of the Exchange Act, then extends more broadly to include “[c]ertain synthetic 

interests in securities created by derivative positions,” such as warrants and options.135

3. The AIC Provision

The AIC Provision deems a Person to be “Acting in Concert” with another Person if:

such Person knowingly acts (whether or not pursuant to an 

express agreement, arrangement or understanding) at any time 

after the first public announcement of the adoption of this 

Right Agreement, in concert or in parallel with such other 

Person, or towards a common goal with such other Person, 

relating to changing or influencing the control of the Company 

or in connection with or as a participant in any transaction 

having that purpose or effect, where (i) each Person is 

conscious of the other Person’s conduct and this awareness is 

an element in their respective decision-making processes and 

(ii) at least one additional factor supports a determination by 

the Board that such Persons intended to act in concert or in 

parallel, which additional factors may include exchanging 

information, attending meetings, conducting discussions, or 

making or soliciting invitations to act in concert or in 

parallel.

136

Breaking it down, the AIC Provision deems a Person to be “Acting in Concert” with 

another where the Person: (1) “knowingly acts . . . in concert or in parallel . . . or towards 

134 Subramanian Report ¶ 94.

135 JX-69 at 3, 19.

136 PTO ¶ 70; JX-69 at 18.
24

a common goal” with another; (2) if the goal “relat[es] to changing or influencing the 

control of the Company or [is] in connection with or as a participant in any transaction 

having that purpose or effect;” (3) where each Person is “conscious of the other Person’s 

conduct” and “this awareness is an element in their respective decision-making processes;” 

and (4) there is the presence of at least one additional factor to be determined by the Board, 

“which additional factors may include exchanging information, attending meetings, 

conducting discussions, or making or soliciting invitations to act in concert or in 

parallel.”137 The fourth factor of this definition gives the Board “a great amount of latitude”

for making the “Acting in Concert” determination.138

The “parallel-conduct” dimension of the “acting in concert” provision (sometimes 

referred to as a “wolfpack” provision)139 is a feature of modern pills,140 as Defendants’ 

expert witness Professor Guhan Subramanian of Harvard Law School and Harvard 

Business School explained.

141 According to Subramanian, poison pills have always 

137 PTO ¶ 70; JX-69 at 18.

138 Smith Dep. Tr. at 231:3–21, 248:15–24; Trial Tr. at 96:14–22 (Cogut); Mills Report 

¶¶ 67–68.

139 The phrase “wolfpacks” in this context refers to “a loose association of hedge funds that 

employs parallel activist strategies toward a target corporation while intentionally avoiding 

group status under [S]ection 13(d).” Subramanian Report ¶ 45 n.90 (quoting William R. 

Tevlin, The Conscious Parallelism of Wolf Packs: Applying the Antitrust Conspiracy 

Framework to Section 13(D) Activist Group Formation, 84 Fordham L. Rev. 2335, 2337 

(2016)).

140 Subramanian Report ¶¶ 48–49.

141 Professor Subramanian is a recognized expert in corporate affairs and has been helpful 

to this court on many occasions. In re Starz Appraisal, 2018 WL 4922095, at *1 (Del. Ch. 

Oct. 10, 2018). His published work concerning policy questions of corporate law fills the 

footnotes of many decisions of Delaware courts. See, e.g., In re CNX Gas Corp. S’holder 
25

included an acting-in-concert concept. Early poison pills required express agreements,

using language that tracked the definitions of a “group,” “affiliate,” and “associate” under 

Section 13(d) and Rule 12b-2 of the Exchange Act.142 Express agreement provisions do

not capture so-called wolfpack activism achieved through “‘conscious parallelism’ that 

deliberately stop[s] short of an explicit agreement.”143

The AIC Provision includes a “daisy chain” concept, providing that “[a] Person who 

is Acting in Concert with another Person shall be deemed to be Acting in Concert with any 

third party who is also Acting in Concert with such other Person.”144 Put differently, 

stockholders act in concert with one another by separately and independently “Acting in 

Concert” with the same third party. 

Litig., 2010 WL 2291842, at *7 n.4, *10 n.5 (Del. Ch. May 25, 2010); In re CNX Gas Corp. 

S’holder Litig., 2010 WL 2705147, at *11 (Del. Ch. July 5, 2010); In re MFW S’holders 

Litig., 67 A.3d 496, 501 n.3, 530 n.162 (Del. 2013); In re Compellent Techs., Inc. S’holder 

Litig., 2011 WL 6382523, at *22 n.11 (Del. Ch. Dec. 9, 2011); In re Del Monte Foods Co. 

S’holders Litig., 25 A.3d 813, 840 n.5, 844 n.6 (Del. Ch. 2011); In re Cornerstone 

Therapeutics Inc. S’holder Litig., 115 A.3d 1173, 1184 nn.44–45 (Del. 2015).

142 Subramanian Report ¶ 41. Professor Subramanian notes that “under the Hart-ScottRodino (HSR) Act, any person wishing to buy more than $94 million of Williams common 

stock would have to disclose its position,” thus imposing a constraint on “activist 

shareholders’ trading of Williams stock well before the Williams Pill became relevant.” 

Id. ¶ 96; see 15 U.S.C. § 18a. But HSR does not include a group concept and does not 

apply to the acquisition of nonvoting, derivative securities, such as stock options; the Plan 

thus casts a wider net than federal antitrust law.

143 Subramanian Report ¶ 45.

144 JX-69 at 18.
26

The AIC Provision does not apply to a public proxy solicitation or tender offer.145 

Persons are not deemed to be “Acting in Concert” solely as a result of soliciting proxies in 

connection with a “public proxy or consent solicitation made to more than 10 holders of 

shares of a class of stock” or when soliciting tenders pursuant to a “public tender or 

exchange offer.”146 While this provision allows stockholders to initiate a proxy contest 

and solicit proxies without triggering the Plan, it does not exempt routine communications 

among stockholder before the launch of a proxy contest or tender offer.

The AIC Provision is also asymmetrical. It excludes “actions by an officer or 

director of the Company acting in such capacities,” such that incumbents can act in concert 

without suffering the consequences of the Plan.147 

4. The Passive Investor Definition

The Plan carves out “Passive Investors” from the definition of “Acquiring Persons.” 

The Plan defines “Passive Investor” to mean:

[A] Person who (i) is the Beneficial Owner of Common Shares 

of the Company and either (a) has a Schedule 13G on file with 

the Securities and Exchange Commission pursuant to the 

requirements of Rule 13d-1(b) or (c) under the Exchange Act 

with respect to such holdings (and does not subsequently 

convert such filing to a Schedule 13D) or (b) has a Schedule 

13D on file with the Securities and Exchange Commission and 

either has stated in its filing that it has no plan or proposal that 

145 Id. (excluding from the AIC Provision Persons “(a) making or receiving a solicitation 

of, or granting or receiving, revocable proxies or consents given in response to a public 

proxy or consent solicitation made to more than 10 [stockholders] . . . , or (b) soliciting or 

being solicited for tenders of, or tendering or receiving tenders of, securities in a public 

tender or exchange offer”).

146 Id.

147 JX-69 at 18.
27

relates to or would result in any of the actions or events set 

forth in Item 4 of Schedule 13D or otherwise has no intent to 

seek control of the Company or has certified to the Company 

that it has no such plan, proposal or intent (other than by voting 

the shares of the Common Shares of the Company over which 

such Person has voting power), (ii) acquires Beneficial 

Ownership of Common Shares of the Company pursuant to 

trading activities undertaken in the ordinary course of such 

Person’s business and not with the purpose nor the effect, 

either alone or in concert with any Person, of exercising the 

power to direct or cause the direction of the management and 

policies of the Company or of otherwise changing or 

influencing the control of the Company, nor in connection with 

or as a participant in any transaction having such purpose or 

effect, including any transaction subject to Rule 13d-3(b) of the 

Exchange Act, and (iii) in the case of clause (i)(b) only, does 

not amend either its Schedule 13D on file or its certification to 

the Company in a manner inconsistent with its representation 

that it has no plan or proposal that relates to or would result in 

any of the actions or events set forth in Item 4 of Schedule 13D 

or otherwise has no intent to seek control of the Company 

(other than by voting the Common Shares of the Company over 

which such Person has voting power).148 

This carve-out was intended to ensure that truly passive investors would be exempt 

from the definition of Acquiring Person under the Plan.149 Director Defendants testified 

as to their belief that the definition excludes Schedule 13G filers, defined under the 

Exchange Act as an investor that “acquired such securities in the ordinary course of his 

148 PTO ¶ 69; JX-69 at 22.

149 Trial Tr. at 106:11–16 (Cogut); id. at 546:20–547:5, 567:11–19 (Buese); Fuller Dep. Tr. 

at 151:10–153:12; Chandler Dep. Tr. at 270:24–271:2, 286:24–288:23, 302:6–305:7; 

Bergstrom Dep. Tr. at 272:23–273:2; PTO ¶ 44.
28

business and not with the purpose nor with the effect of changing or influencing the control 

of the issuer.”150 

As drafted, however, the carve-out is far more exclusive. The definition uses “and” 

before romanette (iii), which makes the three requirements of the provision conjunctive. 

Thus, a stockholder must meet all three conditions to qualify as an exempt “Passive 

Investor.”151 Consequently, the definition excludes any investor that seeks to “direct or 

cause the direction of the management and policies of the Company” as provided in 

romanette (ii) of the definition. The “management and policies” qualifier of the AIC 

Provision captures a broader range of activity other than the “changing or influencing . . . 

control” language applicable to Schedule 13G filers.152

As most of the defense witnesses testified, this conjunctive language appears to have 

been a mistake.153 The intent was for the provisions to present two options: “(i) or (ii) and 

(iii).”154 Yet, the Board never discussed nor corrected this error.155 

150 17 C.F.R. § 240.13d-1(b)(1)(i) (emphasis added); see Trial Tr. at 106:11–16 (Cogut); 

id. at 566:23–567:19 (Buese); Smith Dep. Tr. at 215:21–216:3, 218:18–219:18; see also 

JX-161 ¶ 46 (Goldfarb Rebuttal Report). 

151 JX-159 (“Mills Rebuttal Report”) ¶ 29.

152 See Mills Report ¶¶ 28–33 (describing various forms of stockholder activism).

153 See Trial Tr. at 107:3–109:15 (Cogut); id. at 606:9–607:13 (Buese); see also id. at 

698:21–700:15 (Goldfarb). Subramanian stood out as the sole witness to read the Passive 

Investor Definition disjunctively, contending that the provision should be read as “(i) or 

(ii) and (iii).” Id. at 505:6–506:1 (Subramanian) (emphasis added). When confronted with 

its language he stood his ground, referring to a conjunctive reading of the provision as “just 

a red herring.” Id. at 421:16–423:17, 504:21–506:20 (Subramanian).

154 Trial Tr. at 505:6–506:1 (Subramanian) (emphasis added). 

155 Id. at 110:11–111:21 (Cogut).
29

Even a disjunctive reading of the Rights Plan’s Passive Investor Definition is quite 

narrow.

156 At the time the Board adopted the Plan, Williams had only three 13G filers in 

its stock: BlackRock, Vanguard, and State Street.

157 Read disjunctively, the Passive 

Investor Definition would include at most those three investors.158

I. Public Reaction to the Plan

The Board correctly anticipated that the market and stockholders would react 

negatively to the Plan.

159 Two of Williams’ largest stockholders reached out regarding the 

Plan shortly after its announcement,160 and ISS recommended in an April 8 report that 

stockholders vote against Bergstrom’s re-election at the Company’s annual meeting. 

In recommending against Bergstrom’s re-election, ISS cited “The board’s adoption 

of a poison pill with a 5 percent trigger is problematic, as it is highly restrictive and could 

156 Id. at 109:11–110:4 (Cogut).

157 Id. at 109:2–7 (Cogut); id. at 506:21–507:8 (Subramanian); see also Mills Report ¶¶ 37–

39 (observing that the Plan’s passive investor definition “impedes a wide range of socially 

beneficial and/or value-enhancing behavior common to many of the largest institutional 

investors, as well as routine discourse between and engagement among stockholders and 

management”).

158 Trial Tr. at 506:21–507:8 (Subramanian).

159 See JX-56 at 2 (noting that the Board discussed a “potential negative investor reaction” 

to the Plan); Trial Tr. at 550:20–551:10 (Buese); see also JX-63 (Williams’ management 

and investor relations teams anticipating the negative reaction to the Plan).

160 See JX-73 at 2–3 (Blackrock emailing Krieg the same day that the Plan was publicly 

announced, stating that the Plan “doesn’t look good from an ESG perspective. Has there 

been approaches? I think shareholders deserve to have transparency into any potential 

discussions even if they don’t make LT [long-term] value creation sense . . . .”); JX-80 at 

2–3 (Vanguard emailing Krieg on March 24, 2020, four days after the Plan was publicly 

announced, asking to “talk with the appropriate company representative about Vanguard’s 

holdings as they relate to your company’s Rights Agreement”).
30

negatively impact the market for the company’s shares as the market recovers.”161 ISS 

noted, “the pill was not a reaction to an actual threat – real or perceived – of an activist 

investor or hostile bidder.”162 ISS further opined that “the board did not appear to consider 

other alternatives,” that “[w]hen ISS asked the company whether it had considered a shorter 

term, the answer appeared to be ‘no,’” and that “[w]hen ISS asked the company whether it 

had considered adopting a more standard pill with a higher trigger and using its upcoming 

annual meeting to seek shareholder ratification of its 5 percent plan, the answer appeared 

to be ‘no.’”163

After recognizing on April 7, 2020, that “initial votes [were] trending against” 

Bergstrom due to anti-Plan backlash,164 Williams launched a stockholder outreach 

campaign to preserve Bergstrom’s seat.165 Williams engaged proxy soliciting firm Okapi 

Partners and met with stockholders in an attempt “to turn around some of the votes that 

ha[d] been cast and shore up the vote.”166 

On April 14, 2020, Williams management held an investors call. The talking points 

and agenda addressed the Plan’s adoption:

161 JX-91 at 15. Williams and ISS had communicated regarding the Plan between March 

24 and April, and ISS shared a draft of its report with Williams on April 1.

162 Id. at 16.

163 Id. at 18.

164 Id. at 1.

165 Id.; JX-88; JX-90.

166 JX-91 at 1; see also JX-108 (April 13, 2020 email from Wilson detailing a stockholder 

engagement game plan).
31

• Their stated “Rationale for Adoption” was to “[p]revent an opportunistic 

party from achieving substantial influence or control without paying a 

control premium to other stockholders.”167

• They selected the 5% threshold because with “stock market prices so 

dislocated from fundamental values, a threshold above 5% would allow 

enormous accumulations by non-passive investors (all passive investors are 

exempt)” and because of the Company’s “recent past experiences with 

activism,” when “Corvex and Sorobon [sic] owned, either as beneficial 

owners or as economic interest owners, 9.96% of the Company’s outstanding 

shares. Neither owned more than 5%.”168 

• “Many activist campaigns are conducted at levels below 10% ownership; a 

level higher than 5% simply does not protect a company against an 

opportunist.”169

• “The Rights plan is intended to . . . reduce the likelihood of those seeking 

short-term gains taking advantage of current market conditions at the 

expense of the long-term interests of stockholders, or of any person or group 

gaining control of Williams through open market accumulation or other 

tactics without paying an appropriate control premium.”170

• The Board selected a one-year duration because “[n]o one can predict the 

duration of the current crisis and the Board wants the management focused 

solely on the business, which the Rights Plan is intended to facilitate.”171

In handwritten notes made to a print-out of the investors call agenda, Chandler wrote: 

“limited scope  just activist.”172

Wilson circulated the talking points and agenda to Bergstrom and others on 

April 14. In response, Bergstrom wrote:

167 JX-187 at 3.

168 Id.

169 Id. at 6.

170 Id.

171 Id. at 7.

172 Id. at 1.
32

Only thing is [sic] would add is we saw a 50 plus percent in 

stock price and a minimal decline in cash flow and business 

fundamentals. We don’t talk about how our business didn’t 

change. I use the term you have heard of throw the baby out 

with the bath water. In our case they threw the bathtub out as 

well. That is why we put it in place at that level because that 

is exactly the kind of situation people with bad intentions look 

for. Dislocation in market where fundamentals are incongruent 

with that situation.173

Williams gave a slide presentation during the April 14 investors call and disclosed 

the presentation the next day as a proxy supplement (the “April 15 Proxy Supplement”). 

The presentation stated that the disclosure was intended to explain “the Board’s rationale 

for adopting the [Plan], the [Plan’s] key terms, the Board’s process in adopting the [Plan], 

and [the Company’s] corporate governance practices generally.”174 It stated:

• “Our Board adopted a Rights Plan on March 19, 2020 after careful 

consideration. This action was taken: [i]n light of unprecedented market 

conditions and severe market declines [and] [i]n the best long-term interest 

of our stockholders.” 

• “Rationale and purpose of adoption: To prevent an opportunistic party from 

achieving substantial influence or control without paying a control premium 

to other stockholders.”175 

• “Company experience in recent past reinforced Board’s view that 5% is the 

right threshold in this environment.”176

At the April 28, 2020 annual meeting, the stockholders re-elected Bergstrom to the 

Board, but by a slim margin—only 67% of the shares were cast in favor of Bergstrom.

177 

173 JX-114 at 10–11.

174 JX-117 at 3.

175 Id. at 5 (formatting altered).

176 Id. at 7.

177 Mills Report ¶ 76; JX-123 at 2.
33

As Director Chazen noted shortly after the vote, “no one should take great solace from the 

voting results,” as “[a] third of the vote against [Bergstrom] is much larger than I would 

have guessed.”178 Fidelity Investments, which voted in support of all directors, emailed 

the Company to note that its support was cautionary: “I would encourage you to put the 

pill up for a shareholder vote next year if it is extended or we likely will hold directors 

accountable.”179

J. The Board Fails to Redeem the Plan.

The Board has the authority to redeem or amend the Plan, but it remains in place.180

At trial, Buese offered one reason for why the Board did not redeem the Plan. She 

speculated that doing so could send a signal “that the board believed we have achieved full 

and fair value for the share price,” effectively setting “an artificial ceiling” on the value of 

Williams stock.181 Buese admitted that she did not discuss this justification with any other 

director, vet it through advisors, or submit it for Board discussion.

182 

178 JX-126 at 1.

179 JX-127 at 3–4.

180 JX-69 at 48–49; Trial Tr. at 611:3–6 (Buese).

181 Trial Tr. at 571:21–572:9 (Buese). Professor Subramanian made the same claim. See 

Subramanian Report ¶ 76 (stating that “pills have signaling effects, and eliminating a pill 

when there is no clear reason to do so could fuel speculation in the marketplace, thus 

creating unnecessary disruption to the company”). The plaintiffs’ expert disputes this. See 

Mills Rebuttal Report ¶ 46. The Board never considered the issue, so the experts’ dispute 

is irrelevant. 

182 Trial Tr. at 611:21–612:14 (Buese).
34

In fact, outside of the context of privileged discussions concerning this litigation,183

the Board never considered redeeming the Plan.184 In post-trial briefing, the defendants 

claimed that maintaining the Plan was a business judgment duly considered by the Board—

they asserted that “the evidence shows that members of the Board, and on one occasion, 

the Board as a whole, have considered whether to redeem the Plan and decided that it was 

not in the Company’s best interests to do so.”185 The defendants, however, asserted 

privilege over the “one occasion” when the “Board as a whole” supposedly considered 

whether to redeem the Plan. Consequently, there is no factual record to support the 

defendants’ claim.186

Meanwhile, Williams stock price has substantially recovered. By June 8, 2020, 

Williams stock price had returned to $21.58; it closed at $21.68 on August 24, 2020.187 

Third-quarter financial results for 2020 noted the “stability and predictability of business,” 

183 PTO ¶ 109, see also Trial Tr. at 120:22–121:15 (Cogut); id. at 355:21–356:9 (Smith); 

id. at 611:13–20 (Buese); Bergstrom Dep. Tr. at 84:7–85:18; Fuller Dep. Tr. 183:19–

184:13, 202:16–203:17.

184 PTO ¶ 109.

185 Defs.’ Opening Br. at 56.

186 Id. Plaintiffs filed a motion in limine to preclude Defendants from relying on the Board 

communications over which Defendants asserted privilege. That motion is denied as 

unnecessary. Because Defendants blocked testimony as to this Board meeting at trial and 

in discovery, there is no factual record on which to base the finding they seek—that the 

Board considered whether to redeem the Plan and determined that not doing so was in the 

best interest of the Company.

187 PTO ¶¶ 103–104.
35

and Armstrong touted the Company’s strong performance “during a year marked by 

disruption and uncertainty.”188 

K. This Litigation

Plaintiff Steven Wolosky filed this litigation on August 27, 2020. Plaintiff City of 

St. Clair Shores Police and Fire Retirement System (with Wolosky, “Plaintiffs”) filed a 

similar action on September 3, 2020. The court granted expedition on September 8 and 

consolidated the two actions on September 15.

The operative complaint asserts a direct claim for breach of fiduciary duty against 

the Director Defendants seeking declaratory and injunctive relief regarding the validity and 

enforceability of the Plan. The Complaint also names as defendants the Company and 

Computershare Trust solely in its capacity as the rights agent for the Plan (together with 

the Director Defendants, “Defendants”).189 

On November 11, 2020, over Defendants’ objection, the court certified a class 

defined as: “all record and beneficial holders of company common stock who held stock 

as of March 20, 2020, and who continue to hold stock through and including the date on 

which the rights plan expires or is withdrawn, redeemed, exercised or otherwise 

188 Id. ¶ 105.

189 PTO ¶ 26.
36

eliminated,” excluding Defendants.190 A three-day trial was held from January 12 to 14, 

2021. Post-trial briefing concluded on February 5, 2021.191

II. LEGAL ANALYSIS

Plaintiffs claim that the Director Defendants breached their fiduciary duties when 

adopting and maintaining the Plan. This decision agrees and issues a mandatory injunction 

requiring redemption.

A. Direct Versus Derivative

The parties dispute whether Plaintiffs’ claim is derivative or direct. Plaintiffs argue 

that their claim is direct. Defendants argue that Plaintiffs’ claim is derivative and thus 

subject to Court of Chancery Rule 23.1, which requires Plaintiffs to either make a pre-suit 

demand on the Board or to demonstrate that demand would have been futile. Plaintiffs did 

not make a pre-suit demand, and Defendants argue that Plaintiffs have failed to 

demonstrate demand futility, requiring judgment in Defendants’ favor.

In 2004, the Delaware Supreme Court established a two-part test for determining 

whether claims are direct or derivative in Tooley v. Donaldson, Lufkin & Jenrette, Inc.

192 

190 Dkt. 78, Tr. of 11.18.20 Oral Arg. and Rulings of the Ct. on Pls.’ Mot. for Class 

Certification Held Via Zoom at 41.

191 See Dkt. 106, The Williams Defs.’ Opening Post-Trial Br. (“Defs.’ Opening Br.”); 

Dkt. 107, Pls.’ Post-Trial Br. (“Pls.’ Opening Br.”); Dkt. 115, The Williams Defs.’ 

Answering Post-Trial Br. (“Defs.’ Answering Br.”); Dkt. 117, Pls.’ Post-Trial Answering 

Br. (“Pls.’ Answering Br.”). Computershare Trust filed memoranda with the court joining 

in the Williams Defendants’ post-trial briefing. See Dkt. 108, Def. Computershare Trust 

Company, N.A.’s Post-Trial Mem. or, Alternatively, Joinder in The Williams’ Defs.’ 

Opening Post-Trial Opening Br.; Dkt. 118, Def. Computershare Trust Company, N.A.’s 

Joinder in The Williams Defs.’ Answering Post-Trial Br.

192 845 A.2d 1031, 1033 (Del. 2004).
37

Tooley involved a third-party, two-step acquisition in which the target corporation 

consented to the acquirer postponing the closing of the first-step tender offer by twentytwo days.193 Stockholder plaintiffs sued, claiming that the stockholders of the target 

corporation had a contractual right to have the offer close on time. The plaintiffs claimed 

that had the offer closed on time, the stockholders would have gotten their money faster. 

As damages, the plaintiffs sought the time value of money that they had lost from the 

delay.194

The Court of Chancery held that the claims were derivative and dismissed them 

under Rule 23.1.195 In reaching this conclusion, the trial court relied on Delaware decisions 

employing the concept of “special injury” to determine when a plaintiff could sue 

directly.196 Those decisions defined special injury as a wrong “separate and distinct from 

that suffered by other shareholders . . . or a wrong involving a contractual right of a 

shareholder.”197 

Applying the special-injury test, the trial court held that there was no meaningful 

distinction between the contract rights of the tendering and non-tendering stockholders, 

such that they all held parallel contract rights.198 The decision then reasoned that 

193 Id. at 1034.

194 Id.

195 Id. at 1033.

196 Id. at 1035; see Lipton v. News Int’l, Plc, 514 A.2d 1075, 1079 (Del. 1986).

197 Moran v. Household Int’l, Inc., 490 A.2d 1059, 1070 (Del. Ch. 1985) (“Moran I”), aff’d, 

500 A.2d 1346 (Del. 1985) (internal citations omitted).

198 Tooley, 845 A.2d at 1035.
38

“[b]ecause this delay affected all . . . shareholders equally, plaintiffs’ injury was not a 

special injury, and this action is, thus, a derivative action at most.”199 In other words, the 

trial court accepted the argument that it was appropriate to treat a claim—there, a 

contractual claim—as derivative if all of the stockholders held the same right and all 

suffered the same injury to their parallel right. 

The Delaware Supreme Court reversed. The high court recognized that the concept 

of special injury had become “amorphous and confusing”200 and traced much of the 

uncertainty to Bokat v. Getty Oil Co., where it held that “[w]hen an injury to corporate 

stock falls equally upon all stockholders, then an individual stockholder may not recover 

for the injury to his stock alone, but must seek recovery derivatively in [sic] behalf of the 

corporation.”201 The Tooley court described Bokat as “confusing and inaccurate” for the 

following reasons: 

It is confusing because it appears to have been intended to 

address the fact that an injury to the corporation tends to 

diminish each share of stock equally because corporate assets 

or their value are diminished. In that sense, the indirect injury 

to the stockholders arising out of the harm to the corporation 

comes about solely by virtue of their stockholdings. It does not 

arise out of any independent or direct harm to the stockholders, 

individually. That concept is also inaccurate because a direct, 

individual claim of stockholders that does not depend on harm 

to the corporation can also fall on all stockholders equally, 

without the claim thereby becoming a derivative claim.202

199 Tooley v. Donaldson, Lufkin & Jenrette, Inc., 2003 WL 203060, at *4 (Del. Ch. 

Jan. 21, 2003).

200 Tooley, 845 A.2d at 1035.

201 262 A.2d 246, 249 (Del. 1970), abrogated by Tooley, 845 A.2d at 1038–39.

202 Tooley, 845 A.2d at 1037 (emphasis added).
39

In this passage, Tooley reframed the analysis in a way intended to remedy the 

confusion caused by Bokat by distinguishing between (i) an injury that fell indirectly on all 

stockholders equally, which supported a derivative claim, and (ii) an injury that affected 

stockholders directly, even if all stockholders suffered the same injury, which gave rise to 

a direct claim.203 Tooley then expressly rejected the special-injury test in favor of a new, 

two-part standard, asking: “(1) who suffered the alleged harm (the corporation or the suing 

stockholders, individually); and (2) who would receive the benefit of any recovery or other 

remedy (the corporation or the stockholders, individually)?”204 

No decision since Tooley has addressed whether a claim seeking to enjoin a 

stockholder rights plan is derivative. In one decision, this court dismissed under Rule 23.1 

a claim for damages challenging a defensive action, but the defensive action did not involve

a rights plan and the plaintiff did not dispute that the claim was derivative.205 In another 

decision considering a challenge to a series of anti-takeover measures, the court deemed 

the direct-derivative distinction immaterial to the outcome and thus declined to determine 

whether the claims were solely derivative.206 

203 See generally In re El Paso Pipeline P’rs, L.P. Derivative Litig., 132 A.3d 67, 97–99 

(Del. Ch. 2015) (describing Tooley’s treatment of the analysis in Bokat), rev’d on other 

grounds sub nom, El Paso Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248 (Del. 

2016).

204 Tooley, 845 A.2d at 1033.

205 Ryan v. Armstrong, 2017 WL 2062902, at *10, *18 (Del. Ch. May 15, 2017) (dismissing 

a concededly derivative stockholder challenge to a defensive measure where the plaintiff 

failed to plead that a majority of the board was interested in the transaction and instead 

relied on “Unocal to get around the demand requirement”). 

206 In re Ebix, Inc. S’holder Litig., 2014 WL 3696655, at *14–16 (Del. Ch. July 24, 2014) 

(denying motion to dismiss claims challenging, in part, a golden parachute award as an 
40

Tooley, however, did not expressly overrule the cases applying the special-injury 

test, and the decision suggested that some of those cases might have reached the right 

outcome, thus opening the door for litigants to rely on decisions predating Tooley.

207 In 

briefing, Defendants rely on this court’s pre-Tooley decision in Moran (“Moran I”) for the 

proposition that poison pill challenges must be brought derivatively. 

In Moran I, the board of Household International, Inc. (“Household”) adopted a 

rights plan with 20% and 30% triggers as a preventive measure to fend off a potential 

takeover by an entity affiliated with one of Household’s own directors.

208 Applying the 

special-injury test, the trial court concluded that the stockholder plaintiff’s challenge was 

derivative:

[W]here, as here, no shareholder is presently engaged in a 

proxy battle, and the alleged manipulation of corporate 

machinery does not directly prohibit proxy contests, such an 

action must be brought derivatively on behalf of the 

corporation.”209 

unreasonable anti-takeover device, concluding that “whether this claim is direct or 

derivative is immaterial” to the outcome on a motion to dismiss); see also In re Gaylord 

Container Corp. S’holders Litig., 747 A.2d 71, 81 (Del. Ch. 1999) (finding under the preTooley special-injury test that a claim challenging a rights plan was direct in nature, but 

observing that claims “implicating the heightened scrutiny required by Unocal” will pass 

the demand futility test under Aronson); In re Chrysler Corp. S’holders Litig., 1992 

WL 181024, at *4 (Del. Ch. July 27, 1992) (concluding under the pre-Tooley special-injury 

test that the court “need not (and therefore does not) decide whether the plaintiffs’ recission 

claims [challenging a rights plan] are solely derivative” because they satisfied the Aronson

test).

207 See Tooley 845 A.2d at 1039.

208 Moran I, 490 A.2d at 1066. 

209 Id. at 1070.
41

Defendants interpret the above-quoted language as creating a rule that all poison pill 

challenges are derivative subject to a narrow exception that applies during an active proxy 

contest.

210 For simplicity, this decision refers to this characterization of Moran I as the 

“derivative presumption.” Based on this presumption, Defendants argue that because 

Plaintiffs are not engaged in a proxy contest, they cannot pursue their claims directly.

As with any pre-Tooley holding, a court must determine whether the ruling resulted 

from the now-defunct special-injury test.211 The derivative presumption of Moran I suffers 

from this flaw, as language found just two sentences after the above-quoted language

reveals: “Because the plaintiffs are not engaged in a proxy battle, they suffer no injury 

distinct from that suffered by other shareholders as a result of this alleged restraint on the 

ability to gain control of Household through a proxy contest.”212 The emphasized language 

reflects that the Moran I court viewed the exception—a stockholder’s active pursuit of a 

proxy battle—as a “separate and distinct” feature giving rise to a special injury. Absent 

that special injury, the Moran I court saw the pill as affecting the rights of all stockholders 

to the same degree. The derivative presumption of Moran I thus appears to be a direct 

application of the special-injury test, and this aspect of Moran I was thus impliedly 

abrogated by Tooley. 

Even before Tooley, the derivative presumption of Moran I drew criticism. Just a

few months after the Delaware Supreme Court issued Moran II, which affirmed Moran I

210 Defs.’ Opening Br. at 22.

211 See Tooley, 845 A.2d at 1039.

212 Moran I, 490 A.2d at 1070 (emphasis added).
42

without addressing the derivative question, a federal court rejected a pleading-stage 

argument that a claim challenging a poison pill adopted by the board of Crown Zellerbach 

Corporation was derivative in nature.213 

In 1994, the American Law Institute’s Principles of Corporate Governance

highlighted the issue, commenting that “[c]ases have divided as to whether the issuance of 

a ‘poison pill’ security can be challenged by a direct action on the grounds that it chills 

voting rights or restricts the alienability of the shareholder’s stock.”214 Foreshadowing the 

law’s development in Tooley, the passage criticized Moran I because its “focus on the 

similarly of treatment misses the central point that fundamental shareholder rights (e.g., 

voting and alienability) can be infringed by a variety of board actions that treat existing 

shareholders alike.”215

In 1999, this court in Gaylord criticized the derivative presumption in Moran I.

216 

There, management owned a majority of the company’s Class B, super-voting stock, which 

gave management control of the company.217 A Chapter 11 restructuring required that the 

company reclassify its Class B stock and issue additional equity, which would reduce

management’s voting power from 74% to 20%.218 Planning ahead, the management213 See Duman v. Crown Zellerbach Corp., 107 F.R.D. 761, 764–65 (E.D. Ill. 1985).

214 2 Principles of Corporate Governance: Analysis and Recommendations § 7.01 n.3, at 29 

(Am. L. Inst. 1994). 

215 See id. 

216 See Gaylord, 747 A.2d at 76–79.

217 Id. at 72–73.

218 Id. at 73.
43

dominated board developed a strategy to maintain their control. First, the board adopted a 

poison pill with a 15% trigger that made it economically impractical for anyone to 

accumulate a meaningful block without the board’s approval. Second, management 

exercised its power at both the board and stockholder levels to adopt a series of defensive

charter and bylaw amendments before their voting control expired.

219 The stockholders 

challenged the defensive measures and the claims survived a motion to dismiss.220 

On a motion for class certification, then-Vice Chancellor Strine was required to 

determine whether the complaint pled derivative or direct claims.221 He criticized the 

reasoning of the rule of Moran I on multiple grounds, centering on Moran I’s failure to 

acknowledge who suffered the harm.222 He pointedly asked “why a board’s action to 

interpose itself between stockholders who are ordinarily free to sell their shares, and 

purchasers who are ordinarily free to buy those shares—if improper—works an injury on 

the corporation as an entity.”223 By contrast, he thought it was “obvious” that the plan 

infringed on stockholders’ fundamental rights to sell and vote.

224 In the end, the Vice 

Chancellor followed the derivative presumption of Moran I but observed that the ruling 

219 Id.

220 Then-Vice Chancellor Balick denied the motion, concluding that Unocal applied 

without analyzing whether the plaintiff’s claims were direct or derivative in nature, 

reasoning that invocation of Unocal sufficed to defeat a motion to dismiss. In re Gaylord 

Container Corp. S’holders Litig., 1996 WL 752356, at *2 (Del. Ch. Dec. 19, 1996).

221 See Gaylord, 747 A.2d at 74–75.

222 See id. at 76–79.

223 Id. at 78 (emphasis added).

224 Id.
44

was immaterial on the facts of the case.

225 The Vice Chancellor explained that if the 

plaintiff stated a claim implicating Unocal, then the practical effect was “automatic demand 

excusal” under Aronson.

226

Tooley addressed the faulty logic of Moran I’s derivative presumption. It is now 

possible to embrace the reasoning of Gaylord and acknowledge that poison pills, if 

improper, work an injury on stockholders directly by interfering with at least two 

fundamental stockholder rights. 

“Modern corporate law recognizes that stockholders have three fundamental, 

substantive rights: to vote, to sell, and to sue.”227 From these fundamental rights flow 

225 Id. at 82–83; see Moran I, 490 A.2d at 1069–71.

226 Gaylord, 747 A.2d at 83; id. at 81 (observing that “[s]o long as the plaintiff states a 

claim implicating the heightened scrutiny required by Unocal, demand has been excused 

under” Aronson). At the time, that statement accurately described of Delaware law. The 

Aronson test announced in 1984 used “the standard of review for the challenged decision 

as a proxy for whether directors face a substantial likelihood of liability sufficient to render 

demand futile.” United Food and Commercial Workers Union v. Zuckerberg, 2020 

WL 6266162, at *15 (Del. Ch. Oct. 26, 2020). For many years following Aronson, 

application of enhanced scrutiny or entire fairness had the collateral effect of satisfying the 

pleading-stage demand futility analysis. Id. at *9–11. Delaware law subsequently evolved 

to imbue the derivative-direct distinction with greater practical import. As Vice Chancellor 

Laster explained in his recent Zuckerberg decision, the standard of review no longer serves 

as a proxy for determining whether demand will be futile, and the hair-splitting directderivative distinction now has greater significance in the current jurisprudential landscape 

of Delaware law. Id. at *15–16; see also Armstrong, 2017 WL 2062902, at *13 (rejecting 

a per se rule that a well-pled Unocal claim is sufficient to survive a Rule 23.1 demand 

futility analysis).

227 Strougo v. Hollander, 111 A.3d 590, 595 n.21 (Del. Ch. 2015); see also EMAK 

Worldwide, Inc. v. Kurz, 50 A.3d 429, 433 (Del. 2012); Unitrin, 651 A.2d at 1379 

(affirming stockholders’ fundamental right to vote).
45

subsidiary rights, including the right to communicate with other stockholders,228 nominate 

directors,229 and communicate with (and even oppose) management and the Board.230 As 

this court has observed, “[o]ne of the basic rights of a stockholder is to be able to 

communicate with his fellow stockholders on matters germane to such stock, and, if 

necessary, to organize other stockholders for corporate action.”231 

All rights plans interfere to a some degree with the right to sell and the right to vote, 

but Moran held that the level of interference is nominal in the traditional anti-takeover pill 

that has both a relatively high trigger and an exception for soliciting revocable proxies. A 

traditional pill did not attempt to restrict stockholder communications. As discussed below, 

the Plan goes beyond a traditional pill by combining a parsimonious trigger of 5% with the 

AIC Provision and a limited passive ownership exception. Through this combination of 

provisions, the Plan limits the act of communicating itself, whether with other stockholders 

or management. It also restricts the stockholder’s ability to nominate directors. It thus 

infringes on the stockholders’ ability to communicate freely in connection with the 

stockholder franchise, much of which occurs outside the context of proxy contests.

232 This 

articulation of the harm flows to stockholders and not the Company.

233 In this way, 

228 B.F. Goodrich Co. v. Nw. Indus., Inc., 1969 WL 2932, at *2 (Del. Ch. Mar. 26, 1969).

229 Harrah’s Ent., Inc. v. JCC Hldg. Co., 802 A.2d 294, 310–11 (Del. Ch. 2002).

230 Abajian v. Kennedy, 1992 WL 8794, at *6 (Del. Ch. Jan. 17, 1992).

231 B.F. Goodrich, 1969 WL 2932, at *2.

232 Trial Tr. 189:13–190:14 (Mills).

233 Defendants argue that Plaintiffs cannot show injury because Wolosky testified that he 

does not intend on running a proxy contest, replacing any director, acquiring more than 5% 

of Williams stock, engaging in a takeover transaction, or engaging with other stockholders, 
46

enjoining the Plan is a remedy that affects stockholders alone and not the Company. Thus, 

Plaintiffs’ claim is direct under Tooley.

234

B. The Standard of Review

The parties also dispute the applicable standard of review. Plaintiffs contend that 

Unocal governs the court’s analysis. Defendants argue that the more deferential business 

judgment standard applies. 

Since the Delaware Supreme Court’s decision in Moran, this court “and the 

Supreme Court have used Unocal exclusively as the lens through which the validity of a 

contested rights plan is analyzed.”235 

Defendants nevertheless argue that the Board’s adoption and maintenance of the 

Plan should be subject to business judgment review. Defendants say that the sole 

and he is not aware of any Williams stockholders who have refrained from taking this 

action because of the Rights Plan. See Defs.’ Opening Br. at 21–22. They portray 

Wolosky’s harm as entirely speculative. But it is not incumbent on a class representative 

to prove a negative. Given the Plan’s features, the absence of stockholder activism could 

be a consequence of the Plan. And the fact that the Plan is alleged to have impeded the 

stockholder franchise suffices to render Plaintiffs’ claims direct.

234 At trial, Wolosky testified that the Plan impairs the value of the Company as a whole 

by stifling value-enhancing activities. Trial Tr. at 28:21–23 (Wolosky). Defendants seize 

on this testimony to argue that any damages would flow to the Company as a whole and 

not its stockholders directly. See Defs.’ Opening Br. at 20 (quoting Trial Tr. at 28:11–23 

(Wolosky)). Defendants’ argument might have merit if Plaintiffs were pursuing a claim 

for damages, but Plaintiffs seek only injunctive relief. See Wolosky Compl., Prayer for 

Relief at 20–21. Because Plaintiffs are not seeking damages, this court need not resolve 

whether such a claim would be derivative in nature.

235 Third Point LLC v. Ruprecht, 2014 WL 1922029, at *15 (Del. Ch. May 2, 2014); see 

also eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 28 (Del. Ch. 2010) (“Enhanced 

scrutiny has been applied universally when stockholders challenge a board’s use of a rights 

plan as a defensive device.”).
47

justification for Unocal’s enhanced standard is “the omnipresent specter that a board may 

be acting primarily in its own interests, rather than those of the corporation and its 

shareholders.”236 Defendants argue that this specter is not present where a poison pill is 

designed to address stockholder activism as opposed to hostile takeover attempts.

There are many possible responses to Defendants’ attempt to parse finely the 

concept of entrenchment, but it suffices for present purposes to say that Defendants’ 

contention runs contrary to the Delaware Supreme Court’s decision in Selectica II.

237 

There, the poison pill was adopted for the purpose of preserving NOL assets and not 

warding off hostile takeover attempts.238 The court held that the Unocal standard 

nevertheless applied because all poisons pills, “by . . . nature,” have a potentially 

entrenching “effect.”239 It is therefore settled law that the Board’s compliance with their 

236 Defs.’ Opening Br. at 27 (quoting Unocal, 493 A.2d at 954 (Del. 1985)); see also 

Gaylord Container Corp. S’holders Litig., 753 A.2d 462, 474 (Del. Ch. 2000) (observing 

the “omnipresent specter” implicated “[w]hen a board adopts measures designed to deter 

or defend against an acquisition offer and thereby also against the possibility that the board 

and management will lose their positions after the acquisition”).

237 5 A.3d 586.

238 Selectica II, 5 A.3d at 599.

239 Id. (“Any NOL poison pill’s principal intent . . . is to prevent the inadvertent forfeiture 

of potentially valuable assets, not to protect against hostile takeover attempts. Even so, 

any Shareholder Rights Plan, by its nature, operates as an antitakeover device. 

Consequently, notwithstanding its primary purpose, a NOL poison pill must also be 

analyzed under Unocal because of its effect and its direct implications for hostile 

takeovers.” (emphasis added)); see also Third Point, 2014 WL 1922029, at *15 & n.10 

(applying Unocal to an anti-activist poison pill, observing that Delaware courts have “used 

Unocal exclusively as the lens through which the validity of a contested rights plan is 

analyzed” and that “[t]his includes cases in which a rights plan has been used outside of 

the hostile takeover context”); Air Prods. and Chems. v. Airgas, Inc., 16 A.3d 48, 94 

(Del. Ch. 2011) (observing that “[t]he Unocal standard of enhanced judicial scrutiny—not 

the business judgment rule—is the standard of review that applies to a board’s defensive 
48

fiduciary duties in adopting and then failing to redeem the Plan must be assessed under 

Unocal.

240 

C. The Unocal Analysis

Having addressed the two threshold issues, this decision now turns to the merits of 

the enhanced scrutiny analysis. Unocal calls for a two-part inquiry. “The first part of 

Unocal review requires a board to show that it had reasonable grounds for concluding that 

a threat to the corporate enterprise existed.”241 Framed more broadly, directors must 

demonstrate that they acted in good faith to achieve a “legitimate corporate objective.”242 

actions taken in response to a hostile takeover,” and that “[t]his is how Delaware has always 

interpreted the Unocal standard”); eBay, 16 A.3d at 28 (observing that “[e]nhanced 

scrutiny has been applied universally when stockholders challenge a board’s use of a rights 

plan as a defensive device”); Yucaipa Am. Alliance Fund II, L.P. v. Riggio, 1 A.3d 310, 

330–36 (Del. Ch. 2010) (applying Unocal to an anti-activist poison pill).

240 Defendants attempt to meet Selectica with an overly narrow concept of entrenchment. 

“Entrench” means to fortify a position—to make change difficult or unlikely. See, e.g., 

Entrench, Merriam Webster, https://www.merriam-webster.com/dictionary/entrench 

(defining “entrench’ as “to place within or surround with a trench especially for defense,” 

“to place (oneself) in a strong defensive position,” and “to establish solidly”); Entrench, 

Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/entrench 

(defining “entrench” as “to firmly establish something . . . so that it cannot be changed”); 

Entrench, Lexico, https://www.lexico.com/en/definition/entrench (defining “entrench” as 

to “[e]stablish (a person or their authority) in a position of great strength or security,” noting 

that the word originates from “the sense ‘place within a trench’”). As discussed below, the 

Board in this case acted with the purpose of insulating the Board and management from 

stockholder influence during a time of uncertainty. This conduct thus seems to fit the 

definition of entrenchment.

241 Selectica II, 5 A.3d at 599. 

242 See Mercier v. Inter-Tel (Del.), Inc., 929 A.2d 786, 807–810 (Del. Ch. 2007) (cautioning 

against placing “too much emphasis on the word ‘threat’” when conducting a Unocal

review); id. (stating that “[t]he core of Unocal’s utility really rests in the burden it asserts 

on directors to: (1) identify the proper corporate objectives served by their actions; and (2) 

justify their actions as reasonable in relationship to those objectives”).
49

To satisfy the first part of Unocal, Defendants must demonstrate that the Board 

conducted a “good faith and reasonable investigation.”243 The reasonableness of the 

investigation is “materially enhanced”244 where the corporate decision is approved by a 

board comprising a majority of outside, nonemployee directors “coupled with a showing 

of reliance on advice by legal and financial advisors.”245 

To meet their burden under the first part of Unocal, however, Defendants must do 

more than show good faith and reasonable investigation. “[T]he first part of Unocal review 

requires more than that; it requires the board to show that its good faith and reasonable 

investigation ultimately gave the board ‘grounds for concluding that a threat to the 

corporate enterprise existed.’”246 In other words, after conducting a reasonable 

investigation and acting in good faith, the board must show that it sought to serve a 

legitimate corporate objective by responding to a legitimate threat. If the threat is not 

legitimate, then a reasonable investigation into the illegitimate threat, or a good faith belief 

that the threat warranted a response, will not be enough to save the board. 

The second part of Unocal requires a board to show that the defensive measures 

were “reasonable in relation to the threat posed.”247 This element of the Unocal test 

243 Unocal, 493 A.2d at 955.

244 Id.

245 Selectica, Inc. v. Versata Enters., Inc., 2010 WL 703062, at *12 (Del. Ch. Feb. 26, 2010)

(“Selectica I”).

246 Air Prods., 16 A.3d at 104 (quoting Selectica II, 5 A.3d at 599) (emphasis added).

247 493 A.2d at 949. By adopting the nomenclature of Unocal, this court does not place 

“too much emphasis on the word ‘threat.’” Mercier, 929 A.2d at 807.
50

recognizes that a board’s powers to act “are not absolute” and that a board “does not have 

unbridled discretion to defeat any perceived threat by any Draconian means available.”248

When applying the reasonableness standard, the court does not substitute its judgment for 

that of the board. The court instead determines whether the measure falls within “the range 

of reasonableness.”249

When conducting the proportionality analysis, the court also examines the 

relationship between the defensive action that the directors took and the problem they 

sought to address.250 The court thus examines “the reasonableness of the end that the 

directors chose to pursue, the path that they took to get there, and the fit between the means 

and the end.”251 It is the specific nature of the threat that “sets the parameters for the range 

248 493 A.2d at 949. 

249 Unitrin, 651 A.2d at 1387–88 (quoting Paramount, 637 A.2d at 45–46).

250 See Mercier, 929 A.2d at 808.

251 See Obeid v. Hogan, 2016 WL 3356851, at *13 (Del. Ch. June 10, 2016) (providing 

overview of enhanced scrutiny); Mercier, 929 A.2d at 810–811 (explaining that when 

directors take action that affects stockholder voting, enhanced scrutiny requires that the 

defendant fiduciaries bear the burden of proving (i) that “their motivations were proper and 

not selfish,” (ii) that they “did not preclude the stockholders from exercising their right to 

vote or coerce them into voting a particular way,” and (iii) that the directors' actions “were 

reasonable in relation to their legitimate objective”); id. at 811 (“If for some reason, the fit 

between means and ends is not reasonable, the directors would also come up short.”); see 

also In re Dollar Thrifty S’holder Litig., 14 A.3d 573, 598 (Del. Ch.2010) (explaining that 

when applying enhanced scrutiny, “the court seeks to assure itself that the board acted 

reasonably, in the sense of taking a logical and reasoned approach for the purpose of 

advancing a proper objective, and to thereby smoke out mere pretextual justifications for 

improperly motivated decisions”); id. at 599–600 (“[T]he reasonableness standard requires 

the court to consider for itself whether the board is truly well motivated (i.e., is it acting for 

the proper ends?) before ultimately determining whether its means were themselves a 

reasonable way of advancing those ends.”); cf. Yucaipa, 1 A.3d at 337 (“Unitrin left room 
51

of permissible defensive tactics” and a “reasonableness analysis requires an evaluation of 

the importance of the corporate objective threatened; alternative methods for protecting 

that objective; impacts of the defensive action and other relevant factors.”252 

1. The Director Defendants’ Reasons for Acting

The Director Defendants’ actual and articulated reason for taking action figures 

prominently in the Unocal analysis. In the traditional language of Unocal, the directors 

must have identified and responded to a legitimate corporate threat. They cannot justify 

their conduct based on threats that they never identified or beliefs they did not hold.253 

Before turning to the question of whether the threat is legitimate, the court must determine 

why the Director Defendants acted. This decision therefore starts by making factual 

findings concerning the threat or corporate objective to which the Board was responding 

when adopting the Plan.

a. The Actual Threats That the Board Identified

It is often difficult to distill a unified purpose behind a decision made by a group of 

people; often, members of the group have different reasons for supporting a decision. It is 

particularly difficult to discern such a purpose in the context of litigation, where there is 

for a determination that a non-preclusive, non-coercive defensive measure was nonetheless 

unreasonable in light of the threat faced by the corporation.”).

252 Selectica I, 2010 WL 703062, at *19 (internal quotation marks omitted) (first quoting 

Unitrin, 651 A.2d at 1384, and then quoting Paramount Commc’ns, Inc. v. Time Inc., 

571 A.2d 1140, 1154 (Del. 1989)) (internal quotation marks omitted). 

253 See, e.g., Chesapeake Corp. v. Shore, 771 A.2d 293, 332 (Del. Ch. 2000) (finding that 

board did not identify and consider a threat it later relied on at trial).
52

always the risk that fact witnesses will recall events that occurred prior to litigation through 

the lens of newly crafted litigation positions. 

This challenging task is further complicated here because the lawyer-drafted 

documents to which one would typically look for a statement of a board’s purpose—e.g., 

board resolutions, board minutes, company disclosures—do not reflect the Board’s actual 

intent. The materials from the March 19 Board meeting, including the resolution, the 

March 20 Press Release, and the March 30 Proxy Supplement, all state that the Plan was 

intended in part to serve as a takeover deterrent.

254 But the Plan was not designed for that 

254 JX-67 at 2 (March 19 Board meeting minutes) (“The Board deems it desirable and in 

the best interests of the Company and its stockholders that steps be taken to preserve for 

the Company’s stockholders the long-term value of the Company in the case of a coercive 

or inadequate takeover or rapid accumulations of large positions by persons not having a 

passive intent.” (emphasis added)); JX-69 at 2 (March 20 Williams press release) (“The 

Board . . . has adopted the [Plan] to reduce the likelihood that a potential acquirer would

gain (or seek to influence or change) control of the Company by open market accumulation 

or other tactics without paying an appropriate premium for the Company’s shares. 

(emphasis added)); JX-82 at 3 (March 30 Proxy Supplement) (“The Board determined that 

the adoption of the [Plan] is appropriate in light of the extreme market dislocation that has 

resulted in the company’s stock being fundamentally undervalued. The conditions 

stemming from the impact of COVID-19 on the economy and the volatility of the oil 

market have resulted in significant decline in the company’s stock price. The [Plan] is 

intended to enable all Williams stockholders to realize the full value of their equity 

investment and to reduce the likelihood of those seeking short-term gains taking advantage 

of current market conditions at the expense of the long-term interests of stockholders or of 

any person or group gaining control of Williams through open market accumulation or 

other tactics (especially in volatile markets) without paying an appropriate control 

premium.” (emphasis added)); id. (“The company has, as of the date of this supplement, 

reached out to all of our major stockholders regarding our rights plan. Most of the 

stockholders we have engaged with to date have informed us that they understand the need 

for the adoption of our [Plan] in the context of the highly unusual and extreme 

circumstances that led to the current severe market conditions and the need to protect the 

interests of the company and its long-term stockholders.” (emphasis added)).
53

purpose, and some of the directors did not have that in mind when adopting the Plan.255 

The Plan was not adopted with the objective of deterring takeover attempts.

In fact, the Plan was not adopted to protect against any specific threat at all.

256 The 

255 See Trial Tr. at 93:16–19 (Cogut) (confirming that “the pill wasn’t intended or designed 

to deal with the risk of a takeover at all”); id. at 515:1–7 (Subramanian) (opining that “this 

rights plan was not meant to be a hostile takeover deterrent” and that “the pill would have 

been virtually irrelevant for that kind of hostile bid” because the company was vulnerable 

to takeover activity for other reasons). Other witnesses were more qualified in their 

statements, testifying that the Plan was not intended to deal with a specific takeover threat. 

See, e.g., id. at 599:7–10 (Buese) (confirming that “the pill was not adopted in response to 

any person or group attempting to take control of the company”); Bergstrom Dep. Tr. at 

179:23–180:16 (testifying that he was “not aware of any specific takeover threat at the 

time”). But see Fuller Dep. Tr. at 56:8–20 (testifying that “we were doing something to 

protect the long-term shareholders and prevent someone coming in and, you know, sort of 

acquiring stock at very low levels and possibly . . . forcing a sale of the company below its 

long-term value” (emphasis added)).

256 PTO ¶ 82; Trial Tr. at 544:8–15 (Buese) (testifying that “there was no actual threat”); 

Bergstrom Dep. Tr. at 181:13–19 (testifying that “we were not aware of any specific threat, 

as I earlier testified”); Fuller Dep. Tr. at 234:22–235:5 (testifying that she perceived no 

“current threat” to Williams when the Plan was adopted); see also JX-78 at 11 (Chandler 

telling investors during a Mar. 25, 2020 business update call: “we did not adopt that [rights] 

plan . . . in response to any specific threat”); JX-187 at 12 (Krieg emailing Wilson and 

Chandler on Apr. 13, 2020, with points for Apr. 15, 2020 investor relationship call, stating 

that the “[p]lan was not adopted in response to any known / specific threat”); JX-62 at 1 

(Chandler writing in a Mar. 19, 2020 email: “I do think it is important to leave the reader 

with the belief this [adoption of the Plan] is not being done because of some ominous 

business results that will be coming out . . . . But purely because we don’t think the market 

price is reflective of our value.” (ellipses in original)); id. at 2 (Chandler writing in a 

Mar. 18, 2020 email: “We will want to alleviate fears that we are doing this because 

something ominous is coming.”); id. (Krieg writing in a Mar. 18, 2020 email that “the 

strong position of our business is not being recognized by the market; we don’t want 

opportunist [sic] to swoop in and claim the true value of the business at an artificially low 

value”); Trial Tr. at 92:5–10 (Cogut) (“I think it’s an open question as to whether or not 

there needed to be a threat for us to have taken this action.”); id. at 353:6–354:2 (Smith) 

(testifying that he was not aware of any activists, or persons generally, seeking to take 

advantage of Williams stock price at the time the Plan was adopted).
54

Board was not concerned about any specific activist threat.257 Nor was the Board acting to 

preserve any specific asset like an NOL.

258 Instead, the Board was acting pre-emptively to 

interdict hypothetical future threats.259

The Plan was also not adopted in light of the Company’s prior experience with 

activism, although Defendants took that position throughout this litigation.

260 It is true that 

257 See Trial Tr. at 321:8–10 (Smith) (testifying that he was not aware of “any particular 

risks with respect to shareholder activism”); id. at 93:20–94:7 (Cogut) (“There was, to the 

best of our knowledge at that point, very little activist involvement, but there was . . . 

a market opportunity for people who might want to come in and exercise influence and 

control over the company. . . .”); id. at 599:11–14 (Buese) (confirming that the Plan “was 

not adopted in response to any person or group attempting to exercise influence over the 

company”); Bergstrom Dep. Tr. at 182:5–9 (testifying that “[t]here was not any specific 

activist investor threat”); Fuller Dep. Tr. at 196:3–13 (testifying that the “danger” was that 

“someone could amass a fair amount of stock and put itself in a position of forcing the 

board to take action that was not in the best interest of the long-term shareholders”).

258 Trial Tr. at 598:23–599:2 (Buese); id. at 346:19–22 (Smith); Chandler Dep. Tr. at 

195:17–21.

259 See JX-73 at 1 (Wilson emailing management on Mar. 20, 2020: “I think I can help 

convince [Blackrock] that this was solely a proactive effort, that we monitor our positions 

frequently and that we have no indication of anyone being in our stock. We can also be 

very definitive that we have not received an offer. I also think its fair game to point out 

that the company has been through this once before recently and saw how an activist can 

destroy long term value – again purely proactive.” (emphasis added)); id. at 2 (Wilson 

emailing management on Mar. 20, 2020: “I think we can craft a very good argument that 

this should be viewed by our long term investors as good governance. . . . Activists always 

push the needle in the wrong direction on those issues, so we are being proactive to prevent 

an activist from making a lot of short term money at the cost of the very things Blackrock 

views as most important.” (emphasis added)).

260 JX-144 at Response to Interrogatory No. 1 (“The Board’s views and conclusions were 

also reinforced by Williams’ experience during the 2013 to 2016 time period with two 

shareholder activists, each of whom held less than 5% of Williams stock but who acted 

together in a coordinated attempt to exert substantial influence over Williams.”); 

Subramanian Report ¶ 16 (“I understand from my review of deposition testimony taken in 

this action that one of the factors that motivated the Board’s adoption of a poison pill in 
55

Williams management cited prior activism as a justification for the Plan when 

communicating with stockholders in advance of the annual meeting.261 It is also true that

Smith’s prior experience appears to have contributed to his support of the Plan.

262 But

there is no evidence that it was a motivating factor of the Board as a whole. The Board

simply did not discuss the Company’s prior experience with activism during the March 18 

or March 19 meetings.263 This justification appears to have emerged at the Board level 

after the Plan had been adopted.

264 Indeed, Cogut testified that “the fact that the company 

March 2020 was Williams’ past experience with shareholder activists several years 

earlier.”).

261 See, e.g., JX-117 at 7 (communicating to stockholders that “Company experience in 

recent past reinforced Board’s view that 5% is the right threshold in this environment”); 

JX-70 at 1 (strategizing a response to Blackrock’s concerns, Wilson noting that “it’s fair 

game to point out that the company has been through this once before recently and saw 

how an activist can destroy long term value”); JX-187 at 3 (noting, in a document 

containing talking points for conversations with investors, that Company representatives 

should discuss: “Company recent past experiences with activism – Corvex and Sorobon 

[sic] owned, either as beneficial owners or as economic interest owners, 9.96% of the 

Company’s outstanding shares. Neither owned more than 5%.”).

262 See JX-46 (Smith emailing Wilson on the evening of March 17 that he was “[v]ery 

happy about the upcoming discussion on a shareholders rights plan especially after 

recounting to [Cogut] what we went thru [sic] in 2015/16”); see also Trial Tr. at 322:9–

323:12 (Smith) (testifying that his email referred to the activism Williams had previously 

faced, but that he had not discussed that experience “at this particular time”); id. at 351:23–

352:24 (Smith). 

263 Trial Tr. at 334:1–10 (Smith); id. at 548:23–549:3 (Buese); id. at 143:21–144:4 (Cogut).

264 For example, Cogut’s first mention of the prior activism appears in an April 9, 2020 

email exchange with Wilson where Wilson suggested adding to the “talking points” to be 

discussed with stockholders that “Corvex and Sorobon [sic] owned, either as beneficial 

owners or as economic interest owners, 9.96% of our outstanding shares. We’ll have that 

in the talking points or facts. It goes to the very reason we did 5%.” JX-104. But see Trial 

Tr. at 169:5–12 (Cogut) (testifying that the 5% trigger “was there for a number of reasons, 

but not because the Corvex and other guys had 9.6”). And testimony by the Director 

Defendants unequivocally confirms that the subject was never discussed by the Board in 
56

had to deal with activists before was not a motivating force”265 and that he “would have 

had the same idea whether or not the company had ever had activist experience.”266

The record is clear that the Company’s declining stock price was the initial catalyst 

for the Board’s decision. Testimony and contemporaneous emails align on this fact.

267

The context and timing of the Plan’s adoption further corroborates it, as the Board called 

an “urgent” meeting as its stock price continued to decline in the wake of the market 

disruption caused by COVID-19 and the oil pricing war.268

When asked during trial and at their respective depositions about the reasons for 

adopting the Plan, Cogut, Smith, Buese, Bergstrom, and Fuller testified generally that the 

connection with its pill deliberations. Id. at 143:21–144:4 (Cogut); id. at 334:1–19; 

352:15–353:5 (Smith); id. at 548:23–549:15, 577:23–579:11 (Buese).

265 Trial Tr. at 143:21–24 (Cogut).

266 Id. at 144:2–4 (Cogut).

267 See JX-50; JX-62; JX-171; Trial Tr. at 320:1–24 (Smith); id. at 551:7–10, 554:18–555:3 

(Buese); Bergstrom Dep. Tr. at 182:5–14; see also Trial Tr. at 147:20–148:5 (Cogut) 

(“And, obviously, other than being concerned that there would be market dislocation 

because of COVID, you know, I had no expectation that, you know, over the course of the 

next two to three weeks that the stock would fall the way it did.”). 

268 See JX-45 at 1 (proposing “an urgent special telephonic board meeting to discuss the 

possibility of a shareholder rights plan”); PTO ¶ 83 (“The conditions that caused the 

significant decline in Williams stock price stemmed from the impact of COVID-19 on the 

economy and the volatility of the oil market relating to the pricing war . . . .”); PTO Ex. A 

(noting Williams’ declining stock price during March 2020). In briefing, Plaintiffs made 

much of the fact that Cogut testified that he “wasn’t really concerned that the [stock] price 

was low,” see Pls.’ Opening Br. at 20, but Cogut made this statement almost immediately 

after affirming his concern that “the stock price would create a certain amount of 

opportunism and availability” for activism to emerge. Trial Tr. at 143:9–20 (Cogut). 

Cogut’s testimony, therefore, does not undermine the weight of evidence reflecting that the 

market-wide dislocation was the impetus behind the Plan.
57

intent of the Plan was to deter stockholder activism, although they all added their own gloss 

when articulating this purpose.

Cogut’s testimony was the most unadorned and refreshingly candid. He testified 

that he proposed the Plan to insulate the Board and management from all forms of 

stockholder activism during the uncertainty of the pandemic. In Cogut’s words: 

• The Rights Plan was a “novel concept” that used “the technology of 

shareholder rights plans to provide insulation [for] management during the 

uncertainty created by the pandemic.”269 

• The Plan’s objective was agnostic regarding different kinds of activism. 

When asked whether Cogut was “drawing distinctions between different 

kinds of activism” the Plan was trying to halt, he responded: “Any activism 

that would influence control over the company at an aggregate level above 

5 percent, yeah.”270

• The Plan’s value was its ability “to prevent against an activist buying a 

toehold of 5 percent or more or acting in concert with other activists so that 

our management could be freed up . . . to run a company during 

COVID.”271 

• The Plan’s power was immense: “[T]he shareholder rights plan is the 

nuclear weapon of corporate governance,” and “nuclear weapons are 

deterrents” that would force activists to deal with the Board instead of talking 

to each other.272 

• The Plan’s objective was to impose a “one-year moratorium” on activism.273

269 Trial Tr. at 69:8–11 (Cogut) (emphasis added); see also id. 69:22–70:1 (Cogut) 

(confirming his view that the purpose of the pill was to “protect against activists during 

COVID”); JX-41 (Cogut writing in a March 17, 2020 email that “[t]he goal is to prevent a 

raider from taking advantage of the current situation”).

270 Trial Tr. at 70:20–71:5 (Cogut) (emphasis added).

271 Id. at 114:24–125:13 (Cogut) (emphasis added).

272 Id. at 114:10–20 (Cogut) (emphasis added).

273 Id. at 118:11–18 (Cogut) (emphasis added).
58

Smith similarly testified that he hoped to protect the company from outside 

pressures to allow the Board and management to “get our job done.”274 Smith expressed a 

desire to protect long-term interests. Smith also expressed a desire to force stockholders 

seeking to accumulate stock in excess of 5% to negotiate with the Board. In Smith’s words:

• He described the rights plan as “one more arrow in the quiver” to “protect 

the company from more outside pressures so we can get our job done.”275

• His concern was: “[H]ow do we protect our long-term shareholders? And 

how do we protect this company?”276

• He was not focused on “any particular risks with respect to shareholder 

activism,” but he instead sought to “creat[e] a pathway that would allow us 

to move forward.”277

• He viewed the Plan as a form of buffer—“guardrails along the track so that 

we could have a map to be able to rationally deal with any type of event that 

might occur under a shareholder rights plan.”278

Buese too was concerned about stockholder activism, but she focused more 

specifically on “short-term-oriented investors.”279 She also expressed concerns about the 

“rapid accumulation by shareholders.”280 In Buese’s words: 

• “[I]n the energy space, and the MLP sector in particular, there were a 

number of well-known short-termist parties and hedge funds who were 

274 Id. at 320:19–20 (Smith).

275 Id. at 320:15–321:5 (Smith) (emphasis added).

276 Id. at 320:21–24 (Smith) (emphasis added).

277 Id. at 321:8–10 (Smith); see also JX-46 (Smith writing in a March 17, 2020 email that 

he was “[v]ery happy about the upcoming discussion on a shareholders rights plan

especially after recounting to [Cogut] what we went thru [sic] in 2015/16”).

278 Trial Tr. at 354:19–23 (Smith) (emphasis added).

279 Id. at 539:22 (Buese).

280 Id. at 601:16–17 (Buese).
59

known to work together in certain circumstances and had done so in the 

past.”281

• The volatility in Williams stock price “was creating a lot of uncertainty and 

risk for the long-term value of the company that was completely 

unwarranted and not borne out by the performance of the company.”282

• “[S]hort-term-oriented investors not infrequently will take the opportunity 

to build up, accumulate shares, and may act in a way or attempt to act in a 

way that is not consistent with the long-term, best interests of the overall 

shareholder group.”283 

• “[T]he rapid accumulation and the very low share price, even in just raw 

dollars, would potentially invite short-termism and hedge funds to jump 

in.”284

• “[Y]ou see the short-termism come out of the woodwork” where “the 

market was reacting to the macro conditions with a great deal of 

velocity.”285 

• The Board discussed the threat of a rapid accumulation of stock at the 

March 19 meeting and Morgan Stanley advised that the Plan “would deter 

an activist from taking advantage of the current market dislocation and 

challenges in monitoring unusual trading patterns that results in a rapid 

accumulation of a >5% stake.”286

• “[P]art of the fiduciary duty of the board members is that . . . if an offer is 

provided to the board and/or to management, that it’s our job to consider it 

and give it due course. The entire purpose of the [P]lan is to make sure that 

that was not done in a way that is only for the interests of the short-term 

investor taking that action and not in the overall best interests of the entire 

shareholder group for the longer term.”287

281 Id. at 548:12–16 (Buese) (emphasis added).

282 Id. at 539:5–18 (Buese) (emphasis added).

283 Id. at 539:21–540:2 (Buese) (emphasis added).

284 Id. at 556:23–557:6 (Buese) (emphasis added).

285 Id. at 539:5–13 (Buese) (emphasis added).

286 Id. at 556:7–23 (Buese) (emphasis added).

287 Id. at 566:9–21 (Buese) (emphasis added).
60

• But the Board was not aware of a “rapid accumulation of Williams stock by 

any particular investor” at the time the Plan: “[T]here was no actual 

threat. . . . [I]t was a perceived threat . . . .”288 

Bergstrom testified that the Plan specifically targeted activists. He echoed the 

“guardrails” and “rapid accumulation” concerns raised by Smith and Buese. In 

Bergstrom’s words:

• The Plan was “being used to avoid raiders – activists getting involved at the 

company because the stock had dropped from $24 to eight and made it much, 

much easier for somebody to come in who wanted to disrupt the company at 

that point in time. And that was the . . . concern that I had.”289

• Activist activity was the “big concern from my perspective. I’m not sure 

how widely -- how wide that was a concern of the rest of the board. That 

was clearly mine.”290

• The Plan “allows the company to -- the board to negotiate and talk to the 

shareholder who jumps in the middle and wants to do something different 

dramatically or different than what the company currently is doing.”291

• When the Plan was adopted, “[t]here was not any specific activist investor 

threat,” but “the result in stock price decline certainly made it much, much 

easier for that to occur.”292

• He further explained that “we thought if we did nothing, that the company 

was at risk for activist investors to do things that were not in the best interest 

of the total shareholder base. . . . Plus, at that point, you know, the stock 

price, our cash flow had not changed materially and the stock price had 

dropped . . . by threefold. And the price was not representative of the value 

288 Id. at 544:8–15 (Buese) (emphasis added).

289 Bergstrom Dep. Tr. at 52:19–53:2 (emphasis added).

290 Id. at 50:11–14 (emphasis added).

291 Id. at 31:9–25 (emphasis added).

292 Id. at 182:5–9.
61

of the cash flows going forward. And so we felt like as a board we needed 

to do something . . . to protect it.”293

Fuller testified that the Plan was intended to avoid disruption by insulating the 

management team to allow them to focus on long-term interests. She too testified as to her 

desire to protect the Company against short-termism and the rapid accumulation of stock. 

In Fuller’s words:

• “The company is dealing with a whole host of very significant and serious, 

serious issues at this time. And what’s being discussed is something to put 

in place for the short-term to at least make sure that a group of activists don’t 

just take a position without having to declare themselves and their 

intention. . . . And I really wanted this excellent management team to at 

least be focused on making sure that we weren’t vulnerable.”294

• “What was foremost in my mind was making sure that we got the best value 

for shareholders. And that . . . the management team was focused on 

making sure the company navigated and that shareholders, long-term 

shareholders . . . would not be in a position where there was a sale that was 

way below what the company was truly worth.”295

• The “danger” posed was that the stock “was so underpriced that someone 

could amass a fair amount of stock and put itself in a position of forcing the 

board to take action that was not in the best interest of the long-term 

shareholders.”296

• When asked about threats to corporate policy and effectiveness, she 

responded that she was “aware of . . . what had happened in a generic sense 

in 2013. And that it had been pretty really disruptive to the management of 

the company. And thinking about disruption, we are already in a disruptive 

environment, hugely disruptive, was something that I was concerned would 

have a negative effect on the operations of the company.”297 

293 Id. at 184:10–185:7.

294 Fuller Dep. Tr. at 233:3–234:19 (emphasis added).

295 Id. at 57:25–58:13 (emphasis added).

296 Id. at 196:3–13 (emphasis added).

297 Id. at 225:16–25 (emphasis added).
62

A few themes emerge from the Director Defendants’ testimony. First, they all 

expressed the sentiment that the Plan was intended to deter stockholder activism.

298 

Second, they desired to insulate the board from activists pursuing “short-term” agendas 

and from distraction and disruption generally. Third, they were concerned that a 

stockholder might stealthily and rapidly accumulate large amounts of stock.

299 

b. The Legitimacy of the Actual Threats

The first prong of Unocal requires evaluating whether the Board has demonstrated 

that it conducted a good faith reasonable investigation and had “grounds for concluding 

that a threat to the corporate enterprise existed.”300 Defendants have demonstrated that the 

Board conducted a good faith, reasonable investigation when adopting the Plan. The 

Director Defendants are nearly all independent, outside directors. They considered the 

Plan over the course of two meetings. Although aspects of the record create the impression 

that the second Board meeting was window dressing, it is clear that there was genuine 

298 See also JX-187 at 1 (Chandler writing: “limited scope  just activist”).

299 This last purpose features prominently in the documentary record as well. See JX-171 

at 2 (Krieg writing: “One thing we are interested in is folks who may be getting close to 

the 5% ownership line in real-time (so surveillance data). Could you all produce a report 

that shows folks where [sic] are close to crossing the 5% ownership line or folks who look 

like they might be ramping up their position (close to that line)?”); JX-172 at 3 (Krieg 

writing: “[C]ould you all take a look at the surveillance data with a view to who might be 

working their position upward, towards a 5% ownership position?”); JX-65 at 4 (Morgan 

Stanley March 19 Board presentation stating that “[t]he rights plan would deter an activist 

from taking advantage of the current market dislocation and challenges in monitoring 

unusual trading patterns that results in a rapid accumulation of a >5% stake”); JX-117 at 5 

(April 15 disclosure stating that the goal was “[t]o prevent an opportunistic party from 

achieving substantial influence or control without paying a control premium to other 

stockholders”).

300 Air Prods., 16 A.3d at 104 (quoting Selectica II, 5 A.3d at 599).
63

deliberation concerning the Plan. Defendants were advised by outside legal and financial 

advisors who were available to answer questions. Certainly, aspects of the process were 

less than perfect.

301 Still, nothing about the process jumps out as unreasonable.302

The real problem is not the process that Defendants followed, but the threats they 

identified. The first threat was quite general—the desire to prevent stockholder activism 

during a time of market uncertainty and a low stock price. The second threat was only 

slightly more specific—the concern that activists might pursue “short-term” agendas or 

distract management. The third threat was just a hair more particularized—the concern

that activists might rapidly accumulate over 5% of the stock and the possibility that the 

Plan could serve as an early detection device to plug the gaps in the federal disclosure

regime.303 Each of the three threats were purely hypothetical; the Board was not aware of 

301 See generally Pls.’ Answering Br. at 23–26.

302 See Gaylord, 753 A.2d at 478–79 (finding a good faith, reasonable investigation under 

similar circumstances); Moran II, 500 A.2d at 1356 (finding a good faith reasonable 

investigation where the board received information from advisors, was informed as to “the 

essentials of the [p]lan,” and had a “three-page summary” of the plan). To be sure, it would 

have been better if the Director Defendants read the Plan or at least had a more meaningful 

discussion of its features before adopting it. But these defects are not fatal. It is generally 

true that a director does not need to read every work of a dense legal document to 

demonstrate that the investigation was reasonable. See Moran I, 490 A.2d at 1068, 1083 

(upholding rights plan even though “some directors were not conversant with the 

implications of the plan”); Yucaipa, 1 A.3d at 343, 361 (upholding plan even though “some 

directors admittedly had difficulty interpreting” it and observing that such difficulty was 

“understandable because it [was] a complex agreement”). “Delaware law does not require 

that a senior decision-maker . . . read every agreement in haec verba.” ASB Allegiance 

Real Estate Fund v. Scion Breckenridge Managing Member, LLC, 2012 WL 1869416, 

at *15 (Del. Ch. May 16, 2012), aff’d, 68 A.3d 665 (Del. 2013).

303 See Subramanian Report ¶¶ 79–81.
64

any specific activist plays afoot. The question presented is whether these hypothetical 

threats present legitimate corporate objectives under Delaware law. 

i. Stockholder Activism

“Stockholder activism” is a broad concept that refers to a range of stockholder 

activities intended to change or influence a corporation’s direction.

304 Activists may 

pressure a corporation to make management changes, implement operational 

improvements, or pursue a sale transaction. They may seek to catalyze or halt a merger or 

acquisition. More recently, “ESG activism” has come to the fore, and stockholders have

begun pressuring corporations to adopt or modify policies to accomplish environmental, 

social, and governance goals.305 Many forms of stockholder activism can be beneficial to 

a corporation, as Defendants themselves recognize.306

Under Delaware law, the board of directors manages the business and affairs of the 

corporation.307 Thus, stockholder activism is directed to the board. And activists’ ability 

304 Mills Report ¶ 31; accord. Goldfarb Report ¶ 16 (“An activist investor is a shareholder 

that seeks to induce management and the board of directors to make changes at a 

company.”).

305 See Mills Report ¶ 31; see also Omari Scott Simmons, Chancery’s Greatest Decision: 

Historical Insights on Civil Rights and the Future of Shareholder Activism, 76 Wash. & 

Lee L. Rev. 1259, 1289–90 (2019) (referring to ESG activism as “[t]he new wave of 

corporate social activism” involving “the public-private spheres, evolution of corporate 

social responsibility efforts, and expansion of corporate political rights”). Former-Chief 

Justice Strine has also suggested that the “E” in “ESG” refers to employee-related action. 

See Leo E. Strine, Jr. Toward Fair and Sustainable Capitalism 6 (U. Pa. Inst. For L. & 

Econ. Res., Paper No. 19-39, 2019) (reframing ESG as “EESG,” noting “the vital missing 

‘E’—the interests of companies’ employees”). 

306 See Trial Tr. at 73:7–10 (Cogut); id. at 536:2–16, 581:17–23 (Buese).

307 8 Del. C. § 141(a).
65

to replace directors through the stockholder franchise is the reason why boards listen to 

activists. Most activists hold far less than a hard majority of a corporation’s stock, making 

the main lever at an activist’s disposal a proxy fight. In this way, stockholder activism is 

intertwined with the stockholder franchise.

Under Delaware law, directors cannot justify their actions by arguing that “without 

their intervention, the stockholders would vote erroneously out of ignorance or mistaken 

belief” in an uncoerced, fully informed election.308 “The notion that directors know better 

than the stockholders about who should be on the board is no justification at all.”309 

Viewing all stockholder activism as a threat is an extreme manifestation of the 

proscribed we-know-better justification for interfering with the franchise. That is, 

categorically concluding that all stockholder efforts to change or influence corporate 

direction constitute a threat to the corporation runs directly contrary to the ideological 

underpinnings of Delaware law. The broad category of conduct referred to as stockholder 

activism, therefore, cannot constitute a cognizable threat under the first prong of Unocal. 

To be sure, Delaware law does not categorically foreclose the possibility that certain 

conduct by activist stockholders might give rise to a cognizable threat. Defendants cite to 

four cases where a Delaware court upheld defensive actions taken in response to types of 

stockholder activism.310 All involved different scenarios and more specific threats.

308 Pell v. Kill, 135 A.3d 764, 788 (Del. Ch. 2016).

309 Mercier, 929 A.2d at 811.

310 See Defs.’ Opening Br. at 32–36 (citing Third Point, 2014 WL 1922029, at *21–22;

Yucaipa, 1 A.3d at 343; Polk v. Good, 507 A.2d 531, 537 (Del. 1986); Cheff v. Mathes,

199 A.2d 548, 556 (Del. 1964)).
66

Defendants first cite to Polk, a stockholder challenge to Texaco’s agreement to 

repurchase the shares of the Bass Brothers, well-known takeover artists and 

greenmailers,

311 and who had acquired just under 10% of the company’s stock.312 The 

Bass brothers were poised to launch “some hostile . . . move” on Texaco at a time when 

the company was “vulnerable” because “management was consumed with . . . obtaining 

government and shareholder approval” of its $10 billion acquisition of Getty Oil 

Company—at the time, “one of the biggest corporate acquisitions in history.”313 The 

purchase of the Bass Brothers’ shares drew multiple stockholder lawsuits. The company 

settled the lawsuits by agreeing to provide extensive supplemental disclosures and modify 

a standstill agreement that was part of the transaction.314 This court approved the 

settlement over the objection of certain Texaco stockholders, and the objectors appealed.

On appeal, the high court found that the board reasonably identified a cognizable 

threat under Unocal based on the “disruptive effect and the potential long-term threat” 

posed by the Bass Brothers.

315 In support of this conclusion, the high court simply cited 

311 See Peter Applebome, Texas Deal Maker: Robert M. Bass; A Younger Brother Steps 

Out on His Own, N.Y. Times (June 5, 1988), https://www.nytimes.com/1988/06/05/ 

business/texas-deal-maker-robert-m-bass-a-younger-brother-steps-out-on-his-own.html;

see also Michael H.Q.L. Lau, Adequate Remedies For Tender Offer Abuse: Resurrecting 

Manipulation and Reforming The Business Judgment Rule, 9 U. Haw. L. Rev. 209, 

216 n.59 (1987) (referring to the Bass Brothers as “examples of major investors who 

profited greatly in 1984 from tremendous greenmail profits”). 

312 Polk, 507 A.2d at 533.

313 Id. at 533–34.

314 Id. at 535.

315 Id. at 537.
67

Unocal, which involved defensive measures adopted in response to takeover activity. The 

high court’s abbreviated reference to Unocal suggests that the Delaware Supreme Court 

credited that the Bass Brothers presented a takeover threat. The lack of more extensive

analysis also is not surprising because Polk involved an appeal from a decision approving 

a negotiated settlement. The court thus applied a doubly-deferential legal standard:

settlements are approved at the discretion of the trial court, and those decisions are 

reviewed on appeal with deference.316 The Polk case does no validate a generalized 

concern about activism as a threat that supports a defensive response. 

Defendants next cite to Cheff, where the board of Holland Furnace Company 

(“Holland”) rejected a merger proposal from Arnold H. Maremont of Maremont 

Automotive Product, Inc. (“Motor Products”).317 Unbeknownst to the Holland board at the 

time, Motor Products had acquired a large block of Holland shares on the open market, and 

after Holland rebuffed Maremont’s merger proposal, Maremont began using his stock 

holding to agitate for control and a restructuring of the company. He demanded that he be 

named to the Holland board, “threat[ened] to liquidate the company,” and threatened to 

“substantially alter” Holland’s sales force, which Holland viewed as a “vital factor in the 

company’s success.”318 Maremont’s threats caused operational disruption—“substantial 

316 Polk, 507 A.2d at 536 (observing that “our standard of review is whether under all the 

facts and circumstances the Chancellor abused his discretion” and “we must find the 

evidence so strongly to the contrary as to amount to an abuse of discretion” (citing Rome 

v. Archer, 197 A.2d 49, 54 (Del. 1964)).

317 Cheff, 199 A.2d at 551–53.

318 Id.
68

unrest . . . among the employees” that caused twenty-five of the Holland’s “key men” to 

resign.

319 

As in Polk, the Holland board responded to Maremont’s activity by repurchasing 

his shares at a premium, and the repurchase precipitated derivative stockholder actions 

alleging that the repurchase constituted a breach of fiduciary duties.

320 The trial court held 

in the plaintiffs’ favor. On appeal, the Supreme Court found that the Holland board acted 

with justification in response to a reasonable threat to Holland’s existence: “[T]he

board . . . believed, with justification, that there was a reasonable threat to the continued 

existence of Holland, or at least existence in its present form, by the plan of Maremont to 

continue building up his stock holdings.”321 Like Polk, Cheff did not involve generalized 

concern about activism. It involved a concrete takeover attempt and a specific and on-going 

threat.

Defendants further cite to Yucaipa, where Ron Burkle’s activist hedge fund Yucaipa 

had acquired a 17.8% stake in Barnes & Noble and disclosed in its 13D that it might acquire 

as much as 50%.322 Another hedge fund with a history of piggybacking on Yucaipa’s 

investments increased its stake from 6.37% to 17.44% of the company.323 In response, the 

319 Id. at 551–52.

320 Id. at 552–53.

321 Id. at 556.

322 Yucaipa, 1 A.3d at 318, 323.

323 Id. at 324–25.
69

company adopted a pill with a 20% threshold while grandfathering the 30% stake of the 

company’s founder and CEO.324 Yucaipa brought litigation challenging the pill. 

After trial, the court upheld the pill under Unocal. When evaluating the first prong 

of Unocal, the court found that the board acted with justification in response to the threat 

of a “creeping acquisition” and that the pill was a reasonable response.325 Like Polk and 

Chef, Yucaipa involved a specific takeover attempt—there through a creeping 

acquisition—that manifested as a concrete threat. Nothing in Yucaipa validates a general 

concern regarding stockholder activism.

Defendants lastly cite to Third Point, as case that resembles Yucaipa. Dan Loeb’s 

activist hedge fund Third Point acquired just under 10% of Sotheby’s stock, publicly filed 

a “poison pen” letter decrying various board decisions, began spreading rumors that he 

intended to replace management, and launched a proxy contest to replace three incumbents 

on Sotheby’s twelve-person board.326 Sotheby’s also detected “several hedge funds” in 

addition to Third Point “accumulating its stock simultaneously.”327 Sotheby’s board 

adopted a pill with a 10% threshold.328 Loeb requested a waiver of the pill, which the board 

refused.329 Third Point brought litigation challenging the adoption and refusal to waive the 

pill and sought to preliminarily enjoin the annual meeting pending resolution of its claims. 

324 Id. at 320–21.

325 Id. at 352–53, 359–60.

326 Third Point, 2014 WL 1922029, at *6–9.

327 Id. at *17.

328 Id. at *10.

329 Id. at *14.
70

On a decision denying the motion for preliminary injunction, this court concluded 

that the plaintiffs were not likely to succeed on their claims. When evaluating the first 

prong of Unocal, the court found that the board was justified in adopting the pill for the 

purpose of defending against “creeping control.”330 The court acknowledged, however, 

that the creeping-control threat was no longer present when the board determined not to 

waive the pill at Loeb’s request. By that time, the threat had morphed into a concern that 

Third Point would improperly exercise “effective, rather than explicit, negative control” as 

Sotheby’s largest stockholder.331 The court cautioned against viewing “effective negative 

control” as “a license for corporations to deploy defensive measures unreasonably” and 

observed that the circumstances in Third Point rendered the threat legitimate in part 

because Loeb had acted in an “aggressive and domineering manner.”332 Third Point thus 

involved a specific takeover attempt that started as an effort to obtain creeping control. The 

Third Point decision does not validate a general concern about activism as a legitimate 

threat.

None of these decisions support the notion that generalized concern about 

stockholder activism constitutes a cognizable threat under Unocal. Rather, these cases 

demonstrate that a board has authority to respond to a specific takeover attempt, even when 

the attempt does not involve a traditional tender offer. Read broadly, the cases support the 

proposition that a Board can adopt defensive measures in response to concrete action by a 

330 Id. at *17.

331 Id. at *22.

332 Id.
71

stockholder activist. The Board’s general concern about stockholder activism is 

insufficient.

ii. Short-Termism and Distraction

The Board’s second concern was that activists might pursue short-term agendas or 

disrupt or distract management. The “short-termism” justification refers to the concern 

that “a particular activist seeks short-term profit without regard to the impact on the 

company’s long-term prospects.”333 The “disruption” justification typically refers to the 

concern that the actions of the activists might cause operational disruption, as in Cheff. 

Here, the Director Defendants instead frame this concern as a desire to insulate the

management team from distraction.334 

No case has evaluated under Unocal whether these types of particularized activist 

concerns constitute cognizable threats. The threats validated in Defendants’ four cases 

discussed above involved threats that differed materially from the factual context here. 

Each of Defendants’ cases, unlike this case, involved takeover threats. In Polk, the 

Bass Brothers had obtained a substantial equity stake in the company.335 In Cheff, an 

333 Anti-Activist Poison Pills at 931 (internal quotation marks omitted).

334 See supra notes 269, 271, 275, 294, 295 and accompanying text.

335 See Polk, 507 A.2d at 533–34. As discussed above, the Polk court found the “disruptive 

effect and the potential long-term threat” posed by a stockholder as cognizable under the 

first prong of Unocal. Id. at 537. Although this passing language seems supportive of 

Defendants’ position, the facts of this case reveal that the board of Texaco acted in response 

to a takeover threat. Also, the court’s reasoning on this point was underdeveloped, perhaps 

because Unocal was nascent and the court was applying a highly deferential legal standard. 

Consequently, this court does not view reference to a “potential long-term threat” and 

“disruptive effect” in Polk as supporting of a holding that such threats standing alone are 

cognizable under Delaware law. See id.
72

acquirer had made a merger proposal and acquired a substantial bock, then used that block 

to advocate for a takeover, resulting in operational disruptions were so severe as to threaten 

the corporation’s existence.

336 In Yucaipa and Third Point, the directors responded to 

creeping takeovers, which in Third Point could have left the activist with “effective 

negative control.”337 None of the cases involved a response to activism per se.

338 

Moreover, each of Defendants’ cases, unlike this case, involved defensive measures

adopted in response to a specific activist or group of activists. The threat was not 

hypothetical.339 

Reasonable minds can dispute whether short-termism or distraction could be 

deemed cognizable threats under Delaware law. These sorts of justifications, particularly 

short-termism, are conspicuous in the policy debate,340 but they become nebulous when 

336 Cheff, 199 A.2d at 551, 556.

337 See Third Point, 2014 WL 1922029, at *21–22; Yucaipa, 1 A.3d at 352–53.

338 See, e.g., Anti-Activist Poison Pills at 934–36 (discussing the presence of “creeping 

control” concerns in Third Point and Yucaipa).

339 See Third Point, 2014 WL 1922029, at *18, 21–22; Yucaipa, 1 A.3d at 348; Polk, 507 

A.2d at 537; Cheff, 199 A.2d at 551–52, 556. Although Cheff was decided in 1964, over 

twenty years before Unocal, it was cited favorably in Unocal and thus bears continued 

relevance on the application of intermediate scrutiny. See Unocal, 493 A.2d at 953–54 

(citing Cheff for the proposition that, when adopting defensive measures, “a Delaware 

corporation may deal selectively with stockholders, provided the directors have not acted 

out of a sole or primary purpose to entrench themselves in office”).

340 See, e.g., Martin Lipton, The Threat to the Economy and Society from Activism and 

Short-Termism Updated, Harv. L. Sch. F. on Corp. Governance (Jan. 27, 2015) 

https://corpgov.law.harvard.edu/2015/01/27/the-threat-to-the-economy-and-society-fromactivism-and-short-termism-updated/; Leo E. Strine, Jr., One Fundamental Corporate 

Governance Question We Face: Can Corporations Be Managed For The Long Term 

Unless their Powerful Electorates Also Act and Think Long Term?, 66 Bus. Law. 1 (2010). 

See generally Anti-Activist Poison Pills at 930.
73

viewed through a doctrinal lens. The central criticism of short-termism is that 

“shareholders who favor short-termism . . . are hurting themselves as much as they are 

hurting their fellow shareholders.”341 This is a valid policy argument, but as one group of 

scholars have commented, the “‘short-termism’ argument just particularizes the concern 

that shareholders will cast votes in a mistaken assessment of their own best interests.”342 

That is, short-termism and distraction concerns boil down to the sort of we-know-better 

justification that Delaware law eschews in the voting context. 

Although there is room to disagree as to whether short-termism or distraction could 

be deemed cognizable threats under Delaware law, this decision does not resolve that issue. 

Even if justifications of short-termism or disruption could rise to the level of a cognizable 

threat, hypothetical versions of these justifications cannot. The concerns in this case are 

raised in the abstract—there is no “specific, immediate” activist play seeking short-term 

profit or threatening disruption.343 When used in the hypothetical sense untethered to any 

concrete event, the phrases “short-termism” and “disruption” amount to mere euphemisms 

for stereotypes of stockholder activism generally and thus are not cognizable threats.

341 Anti-Activist Poison Pills at 931–32. 

342 Id. at 931.

343 Trial Tr. at 544:12–15 (Buese) (“No, there was no actual threat. From our perspective, 

it was a perceived threat . . . .”).
74

iii. Rapid Accumulation of Stock

The third justification for the Plan is the concern that activists might rapidly 

accumulate over 5% of the stock and the belief that the Plan could serve as an earlydetection devise to plug the gaps in the federal disclosure regime.

In his March 2015 Harvard Business Review article, Corporate Governance 2.0, 

Professor Subramanian advocates for boards of public companies to adopt what he calls an 

“advance notice” pill with a 5% threshold.344 He argues that “when an activist investor 

threatens a proxy contest or a strategic buyer makes a hostile tender offer,” boards often 

react with a “no-holds-barred, scorched-earth” defense rather than providing stockholders 

with an “orderly shareholder voice.”345 As a contributing factor to this problem, he cites 

“lightning strike attacks,” which are rapid, undetected accumulation of stock in a short 

period of time, the precise concern articulated by the Board in this action.

346 Corporate 

Governance 2.0 cites to one instance of a lightning-strike raid in 2010 involving J.C. 

Penney, where two activist groups acquired more than a quarter of the company’s shares 

before the ten-day disclosure requirement expired.347 

Lightning strikes go undetected under the federal disclosure regime, which requires 

stockholders to disclose their ownership position after crossing the 5% threshold but gives 

344 JX-169 (“Corporate Governance 2.0”) at 15.

345 Id. at 12–14.

346 Id. at 15. 

347 Corporate Governance 2.0 at 14–15. The J.C. Penney anecdote demonstrates that 

lightning-strike attacks can happen, though the record lacks empirical evidence of their 

frequency or likelihood generally or Williams’ susceptibility to such an event. 
75

stockholders ten days to do so. The federal disclosure regime does not prohibit 

stockholders from continuing to acquire stock during that ten-day period and does not 

capture “wolf pack” activity.348 

To avoid lightning strikes and promote an “orderly shareholder voice,” 

Subramanian recommends that boards effectuate a private-ordering response in the form 

of an advance-notice pill.349 A similar private-ordering solution to perceived defects in the 

federal disclosure regime was endorsed by Professors John Coffee and Dairus Palia in their 

Spring 2016 article, The Wolf at the Door: The Impact of Hedge Fund Activism on 

Corporate Governance (“Wolf at the Door”).350 This decision refers to the privateordering solutions discussed in both Corporate Governance 2.0 and Wolf at the Door as 

“gap-filling pills.”

This decision need not address whether a true gap-filling pill would be permissible. 

As discussed below, the features of the Plan are more extreme than any of the gap-filling 

pills discussed in Corporate Governance 2.0 or Wolf at the Door. At this stage of the 

analysis, the question is whether the desire to fill gaps in federal disclosure laws through 

private ordering constitutes a legitimate corporate objective under Unocal. A related 

question is whether the gap-filling objective becomes more viable in the face of market 

348 Corporate Governance 2.0 at 15.

349 Id.

350 John C. Coffee, Jr. & Darius Palia, The Wolf at the Door: The Impact of Hedge Fund 

Activism on Corporate Governance, 41 J. Corp. L. 545, 601–02 (2015).
76

uncertainty or a precipitous stock drop resulting in a stock price that undervalues the 

corporation. 

Reasonable minds can dispute whether a gap-filling purpose standing alone is a 

legitimate corporate purpose under Unocal. The main concern is that if gap filling were a 

legitimate corporate objective that justified the adoption of a poison pill, then all Delaware 

corporations subject to the federal disclosure regime would have a ready-made basis for 

adopting a pill. These policy concerns are only slightly mitigated by a precipitous stock 

drop, which is not an uncommon occurrence. 

Recognizing an omnipresent justification for poison pills would constitute a 

dramatic turn in Delaware law, which has consistently held that a pill’s adoption and 

maintenance raises concerns sufficient to give rise to enhanced scrutiny. This court 

routinely views poison pills as situationally specific defenses and has conducted factintensive inquiries to determine whether the action is justifiable under the unique 

circumstances of the case. Put differently, Delaware law has handled these “nuclear 

weapon[s] of corporate governance” with the delicacy they deserve.351 Delaware’s 

approach has created an appropriate culture of caution in the board room. For example, 

last year prominent defense firms recommended against the reflexive adoption of a pill in 

response to COVID-19, noting the need for “[c]ompany-specific circumstances as well as 

indicia of emerging or present threats” to justify a pill’s adoption.352

351 See Trial Tr. at 53:18–55:10, 114:10–12 (Cogut).

352 See, e.g., David Katz & Sebastian V. Niles, Rights Plans (“Poison Pills”) in the 

COVID-19 Environment—“On the Shelf and Ready to Go”?, Harv. L. Sch. F. on Corp. 

Governance (Apr. 2, 2020), https://corpgov.law.harvard.edu/2020/04/02/rights-plans-
77

Just as this decision need not decide in the abstract whether a gap-filling pill is 

permissible, this decision also need not address whether gap-filling represents a legitimate 

corporate objective. This decision instead assumes for the purposes of analysis that gap

filling to detect lightning strikes at a time when stock price undervalues the corporation is 

a legitimate corporate purpose under the first prong of Unocal. The question becomes 

whether the adoption of the Plan was a proportional response to that assumedly valid threat.

2. The Proportionality of the Response

Because Plaintiffs do not claim that the Plan is coercive or preclusive,353 the second

prong of the Unocal inquiry requires the court to evaluate whether Defendants proved that 

adopting the Plan fell within a range of reasonable responses to the lightning-strike threat 

posed.354

The thirty-thousand-foot view looks bad for Defendants. As Morgan Stanley 

advised the Board at the March 19 Meeting, the 5% trigger alone distinguished the Plan; 

only 2% of all plans identified by Morgan Stanley had a trigger lower than 10%.355 Even 

among pills with 5% triggers, the Plan ranked as one of only nine pills to ever utilize a 5% 

poison-pills-in-the-covid-19-environment-on-the-shelf-and-ready-to-go/ (issuing general 

guidance to companies initially responding to the COVID-19 pandemic).

353 Plaintiffs failed to brief and thus waived these arguments. See Emerald P’rs v. Berlin, 

726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”); accord.

Adams v. Calvarese Farms Maint. Corp., 2010 WL 3944961, at *21 (Del. Ch. 

Sept. 17, 2010) (“Because [plaintiff] did not address these items in her post-trial briefs or 

otherwise cogently present evidence and argument regarding them in connection with the 

trial, she has waived them.”).

354 See Unitrin, 651 A.2d at 1387–88 (quoting Paramount, 637 A.2d at 45–46).

355 JX-57 at 4 (noting that “[n]o precedents exist below 5%”).
78

trigger outside the NOL context.356 Among Delaware corporations, it was one of only two. 

The other Delaware corporation to adopt a 5% trigger for a non-NOL pill did so in 

distinguishable circumstances—in the face of a campaign launched by an activist who held 

7% of the company’s outstanding shares at the time the pill was adopted.357 Of the twentyone pills adopted between March 13 and April 6, 2020, only the Plan had a 5% triggering 

threshold.358 Of the twenty-one companies that adopted pills during that time, thirteen 

faced ongoing activist campaigns when adopting their pill.

359 

The Plan’s other key features are also extreme. The Plan’s “beneficial ownership” 

definition goes beyond the default federal definitions to capture synthetic equity, such as 

options.

360 The Plan’s definition of “acting in concert” goes beyond the express-agreement 

default of federal law to capture “parallel conduct” and add the daisy-chain concept. The 

Plan’s “passive investor” definition goes beyond the influence-control default of federal 

law to exclude persons who seek to direct corporate policies. In sum, the Plan increases 

the range of Williams’ nuclear missile range by a considerable distance beyond the 

ordinary poison pill.361

356 Mills Report ¶ 47. 

357 Id.

358 JX-92 at 3.

359 Id.

360 See Anti-Activist Poison Pills at 949–50.

361 See Mills Report ¶¶ 35, 47 (“Among the COVID Pills, the Williams Pill is by far the 

most restrictive. The Williams Pill contains a suite of features that, in combination, appears 

to be unprecedented.”).
79

The fact that the Plan’s features depart from the default federal disclosure 

regulations is consistent with a gap-filling purpose, but the Plan’s features do not compare 

well against those of gap-filling pills. As discussed above, in 2015 and 2016, Professor 

Subramanian in Corporate Governance 2.0 and Professors Coffee and Palia in Wolf at the 

Door each endorsed different versions of a gap-filling pill. The Plan’s features exceed 

what commentators have proposed. 

Professor Subramanian described one gap-filling pill in Corporate Governance 2.0. 

His advance-notice pill had a 5% threshold tempered by an exemption for stockholders that 

disclose their position within two days of crossing the threshold.362 

The authors of Wolf at the Door discuss two gap-filing pills. The first proposal is a 

“standing” poison pill that defines a “group” more broadly than the express-agreement 

default of federal disclosure law.363 This standing pill would “preclude any shareholder—

with some possible exemption for ‘passive’ shareholders—from exceeding a specified 

level (either 15% or possibly 10%)” and would include an “acting in concert” provision 

defined broadly so as to capture persons acting “‘in conscious parallelism’ with the leader 

of the ‘wolf pack.’”364 The authors observe, however, that the standing pill “will create 

considerable uncertainty and place high demands on courts.”365 

362 Corporate Governance 2.0 at 15. Although the article is silent as to the pill’s other 

features, one can assume that the designer had parallel-conduct AIC provisions and other 

expansive features in mind. See Subramanian Report ¶¶ 37–39, 50, 81.

363 Wolf at the Door at 601–02.

364 Id.

365 Id. at 602.
80

The authors’ second proposal is a window-closing pill, which builds off of a 

proposal made in 2010 by a New York law firm following the J.C. Penney lightning-strike 

attack.366 This pill would maintain the express-agreement acting in concert default of the 

federal disclosure regime but include a lower trigger threshold “of as little as 5.1% of the 

target’s stock if the acquirer did not file a Schedule 13D before purchasing stock in excess 

of the specified threshold.”367 The window-closing pill “has a limited objective . . . of 

compelling disclosure so that a board of directors, stockholders and the trading markets 

366 See id.; Peter S. Golden, The Window Closing Pill – One Response to Stealth Stock 

Acquisitions, Harv. L. Sch. F. on Corp. Governance (Jan. 6, 2011), 

https://corpgov.law.harvard.edu/2011/01/06/the-window-closing-pill-one-response-tostealth-stock-acquisitions/ [hereinafter The Window Closing Pill]. The concept of a 

window-closing pill has been endorsed by commentators, including former Chief Justice 

Strine in his extra-judicial writing. See Leo E. Strine, Jr., Who Bleeds When the Wolves 

Bite?: A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange 

Corporate Governance System, 126 Yale L.J. 1870, 1963–64 (2017); Arthur Fleischer, Jr., 

Alexander R. Sussman & Gail Weinstein, Takeover Defense: Mergers and Acquisitions

§ 5.01[A][1] (8th ed. 2018) (describing the window-closing pill as “essentially benign, 

since the acquiror is not precluded from acquiring more than 5% of the target’s outstanding 

voting securities once position disclosure has been made”); Simon M. Lorne and Joy 

Marlene Bryan, 11A Acquisitions & Mergers: Negotiated and Contested Transactions

§ 5:68.60 (2020) (“The plan is benign because the acquirer is not precluded from acquiring 

more than a five percent voting or financial interest in a company and it would not create 

an impediment to purchasing shares pursuant to a tender offer.”); William R. Tevlin, Note, 

The Conscious Parallelism of Wolf Packs: Applying the Antitrust Conspiracy Framework 

to Section 13(D) Activist Group Formation, 84 Fordham L. Rev. 2335, 2349 (2016) (noting 

that “corporations may utilize” a window pill “to fight off wolf packs”). But see Maria 

Lucia Passador, The Woeful Inadequacy of Section 13(D): Time for a Paradigm Shift?, 

13 Va. L & Bus. Rev. 279, 295 (2019) (commenting that “shortening the reporting window 

would affect the ability of investors to launch campaigns for corporate control, reducing 

the staggering profits accumulated as a result of their toehold, and making the accumulation 

of shares more expensive”).

367 Wolf at the Door at 602 (emphasis added).
81

can evaluate the ownership position of a substantial non-passive investor.”368 As originally 

conceived, the window-closing pill would have a “transitory five plus percent flip-in 

trigger,” meaning that it is only triggered if a stockholder exceeds 5% ownership within 

the ten-day window before disclosing the triggering acquisition.369

The authors recognize that the window-closing pill too “would be subject to legal 

challenge” and would “anger the proxy advisors (who would then recommend that 

institutions withhold their votes for the directors of this corporation).”370 Accordingly, 

they identify a series of “compromises” designed to mitigate the impact of the windowclosing pill.371 For example, the window-closing pill “might compensate for its short fuse 

by allowing the bidder to accumulate a greater level of stock (say, 15 or 20%), so long as 

it filed with the SEC immediately after crossing 5%.”372 Alternatively, it “might permit a 

100% bid to be made” upon the bidder’s disclosure.373 In the authors’ view, “[e]ither 

concession should lead the Delaware courts to accept such a pill because neither pill is 

‘preclusive.’”374

368 The Window Closing Pill.

369 Id.

370 Wolf at the Door at 602.

371 Id.

372 Id.

373 Id.

374 Id. (quoting Unitrin, 651 A.2d at 1387).
82

The Plan includes more aggressive features than any of the gap-filling pills. The 

standing pill includes a higher trigger threshold of “either 15% or possibly 10%.”375 The 

window-closing pill contemplates a comparable threshold (“as little as 5.1%.”), but a less 

inclusive acting-in-concert provision (an express-agreement provision).376 To that 

structure, the authors recommended a series of potential compromises. Even the most 

extreme of the gap-filling pills, the advance-notice pill, contemplates an exemption for 

“shareholders that disclosed their positions within two days of crossing the threshold.”377 

Had the Board desired to close some of the gaps in the federal disclosure regime, 

the Board might have considered one of the less extreme options aimed at detection and 

designed to compel stockholder disclosure. Instead, the Board selected a Plan with features 

that went beyond those of gap-filling pills. Regardless of whether the Board intended to 

gap fill federal disclosure regulations—and whether that intent is permissible—the Plan’s 

combination of features created a response that was disproportionate to its stated 

hypothetical threat.

The Plan’s features also raise concerns when evaluated independently and divorced 

from comparisons. As Plaintiffs’ proxy solicitor testified at trial, the Plan’s combination 

of features are likely to chill a wide range of anodyne stockholder communications.378 

375 Id. at 601–02.

376 Id. at 602.

377 Corporate Governance 2.0 at 15. 

378 See Trial Tr. at 209:7–23, 231:6–14, 233:4–11, 255:7–12 (Mills); see also Mills Report 

¶¶ 55–56, 64–68, 73 (describing various forms of pre-proxy contest stockholder activism 

that the Plan’s combination of features deters).
83

Although the 5% trigger is a marked departure from market norms, it is not the most 

problematic aspect of the Plan, because a 5% ownership limit still permits an activist to 

buy a larger dollar value toehold in Williams than the vast majority of other poison pills 

with higher triggers.379 The primary offender is the AIC Provision, whose broad language 

sweeps up potentially benign stockholder communications “relating to changing or 

influencing the control of the Company.”380 The definition gives the Board discretion to 

determine whether “plus” factors as innocuous as “exchanging information, attending 

meetings, [or] conducting discussions” can trigger the Plan.381 This language encompasses 

routine activities such as attending investor conferences and advocating for the same 

corporate action.382 It gloms on to this broad scope the daisy-chain concept that operates 

to aggregate stockholders even if members of the group have no idea that the other 

stockholders exist.383 

In their 2019 doctrinal and policy analysis of anti-activist poison pills, Professors 

Marcel Kahan and Edward Rock express concerns over the breadth of a nearly acting-inconcert provision.384 In their view, “wolf-pack provisions suffer from two fatal flaws, each 

379 See Trial Tr. 369:15–371:20, 377:9–24 (Subramanian).

380 See JX-69 at 18 (emphasis added).

381 Id.

382 Trial Tr. at 190:8–14, 196:2–15, 266:8–267:5 (Mills); Mills Report ¶¶ 58–59.

383 See Trial Tr. 103:14–18 (Cogut) (agreeing that stockholders have no way to know with 

any certainty with whom they are aggregated); id. 608:4–610:14 (Buese) (same); Fuller 

Dep. Tr. at 139:24–140:6 (same).

384 See Anti-Activist Poison Pills at 962–66. In a blog posted at the beginning of the 

pandemic and after Williams had adopted the Plan, Professor Rock wrote that the pandemic 

presented “a time to put the ordinary debate [about rights plans] aside” and for stockholders 
84

of which would on its own be sufficient to render them invalid.”385 First, they “do not 

clearly specify what activities would result in aggregation.”386 Key terms like “parallel,” 

“relating to,” and “influencing” are hard to apply, and “plus factors like ‘exchanging 

information’ and ‘attending meetings’” are quite broad.387 “Because triggering a pill would 

have severe adverse consequences, such vague provisions would have a chilling effect on 

an activist’s ability to communicate with other shareholders.”388 Second, “the very purpose 

of wolf-pack provisions—to make illicit parallel actions that are not the product of an 

agreement—is based on a fundamental misconception of how shareholders ought to 

interact.”389 Expounding on this last criticism, the authors explain that “[t]hese sorts of 

and proxy advisory firms “to provide boards with space to respond to the multiple 

challenges of protecting firms, employees, consumers, and the country” without “worrying 

that they will soon find an activist on their doorstep demanding answers.” JX-94 at 2–3. 

Professor Rock then forwarded this blog to Cogut. Id. at 1. Defendants treat this exchange 

as a recantation of the conclusions drawn by Professors Kahan and Rock in their 2019 

article, but that is an exaggeration. Professor Rock’s blog is best understood as an appeal 

to activists and boards alike to use common sense during a global emergency. See, e.g., id. 

(cautioning that “boards shouldn’t take advantage of this crisis to erect entrenched 

defensive measures like staggered boards that shareholders have clearly rejected”).

385 Anti-Activist Poison Pills at 964.

386 Id.

387 Id.

388 Id.; see also In re Versum Materials, Inc. S’holder Litig., C.A. No. 2019-0206-JTL, at 

53–54 (Del. Ch. July 16, 2020) (TRANSCRIPT) (expressing concern over the breadth of 

a nearly identical AIC provision and explaining: “What the act[ing]-in-concert provision 

attempts to cut off, or at least threaten, is all of the activities that lead up to the giving of 

the revocable proxy or the making of the revocable tender. So it nominally preserves the 

end product . . . but . . . interdicts all of the preliminary steps that lead to the customary 

rendering of that proxy . . . .”).

389 Anti-Activist Poison Pills at 964.
85

provisions threaten to chill the sort of shareholder interaction upon which sound corporate 

governance depends and that decades of reform have sought to encourage.”390

To illustrate both fatal flaws and the effect of wolfpack provisions on stockholder 

activity, the authors present a hypothetical about Remus and Lupin, which this decision 

takes the liberty of altering to illustrate the same points.391 Imagine that Remus and Lupin

each own 3% of Williams stock. Each is aware of the other’s activities solely from rumors 

and public disclosures. Remus sends a letter to Williams asking for ESG initiatives and 

threatening to buy up stock and run a proxy contest if the Board does not adopt his proposal. 

Lupin has reviewed and agrees with Remus’s proposal. 

Can Lupin meet with the Board, Remus, or other Williams stockholders to discuss 

Remus’s ESG proposal without triggering the Plan? Probably not. Can Remus

communicate with other stockholders to determine whether there is support for his ESG 

proposal before launching the proxy context without fear of triggering the Plan? Not 

without risk of aggregating those stockholders under the AIC Provision. 

Defendants have a few responses to these criticisms of the AIC Provision. First, 

they say that the Plan does not preclude any stockholder from launching a proxy contest, 

and that “[a]ny purported impact the Plan might have on routine activism, short of a proxy 

contest, is irrelevant under Unocal.”392 That argument misunderstands the proportionality 

inquiry of Unocal, which is not limited to the analysis conducted in Moran; rather, the 

390 Id. at 964–65.

391 See id. at 965.

392 Defs.’ Opening Br. at 43.
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proportionality analysis is tied to a pill’s purpose, and with new purposes come new 

considerations.393 Moreover, as Plaintiffs’ expert opined, activity leading up to a proxy 

contest can impede a stockholder’s ability to launch a proxy contest by cutting off private 

communications in advance of proxy contests.394 Mills explained that stockholders 

frequently “take the temperature” of other stockholders in advance of launching a proxy 

contest in light of the risk of financial and reputational damage resulting from a failed 

contest.395 

Second, Defendants observe that the AIC Provision is limited to actions that

“relating to changing or influencing control” of Williams.396 Defendants contend that most 

routine forms of stockholder activism do not involve changing or influencing control of a

company. Defendants argue that the AIC Provision contains several other “guardrails” 

limiting its applicability even when stockholders’ do act in ways “relating to changing or 

393 See, e.g., eBay, 16 A.3d at 31 (stating that “[t]he intermediate standard of review is not 

limited to the historic and now classic paradigm”).

394 See generally Trial Tr. at 190:3–14, 212:10–13, 276:9–277:10 (Mills); see also Mills 

Report ¶¶ 64–66. 

395 Mills Report ¶ 64. Defendants’ expert proxy solicitor disputes these conclusions. In 

his view, the AIC Provision would not substantially impede a stockholders’ ability to 

obtain information to assess the likelihood of success before launching a proxy contest. 

Goldfarb Report ¶ 45. Goldfarb argues that proxy solicitors could aid in this effort, in part 

by reaching out stockholders who fall within the definition of “passive investor.” Id. 

Goldfarb was a highly qualified and credible witness, but this aspect of his testimony 

ignores the possibility that proxy solicitors would trigger the daisy chain provision, see 

Trial Tr. 196:16–197:8 (Mills), and relies on a definition of “passive investor” that this 

decision has rejected.

396 Defs.’ Opening Br. at 47, 51; Trial Tr. at 566:23–567:19 (Buese); id. 396:10–16 

(Subramanian).
87

influencing control” of the Company.397 To echo the concerns of Professors Kahan and 

Rock, however, terms like “relating to” and “influencing,” along with the other broad 

guardrails, are nebulous and broad. Moreover, Cogut conceded at trial that facts similar to 

the above hypothetical would change or influence control of a company and be included 

within the AIC Provision.398 

Third, Defendants argue that the Board would never trigger the Plan in response to 

an activist play like the Remus Lupin hypothetical.399 They describe such an outcome is 

“farfetched,” and they say that the court should not presume that the Board would misuse 

its power under the Plan.400 But this line of logic would excuse nearly any combination of 

poison pill terms and does not support a finding that the Plan’s terms were reasonable in 

relation to the threat posed.

401 It also provides cold comfort to Remus and Lupin, and 

397 Defs.’ Opening Br. at 52–54.

398 Trial Tr. 169:20–170:20 (Cogut).

399 See Defs.’ Opening Br. at 49–52.

400 Defs.’ Opening Br. at 49 (quoting Trial Tr. at 254:13–258:4 (Mills) (“[I]t might be 

farfetched that they would trigger. But it’s not farfetched that they would call [an activist] 

on their behavior and say, ‘look what our pill says and look what you’re 

doing. . . . [Y]ou should shut up or bring your position below 5 percent.’”)).

401 Defendants’ argument overlooks the stifling impact the Plan has on stockholder 

communications, a chilling effect that exists whether the Board triggers the Plan or not. 

See, e.g., id.; Mills Report ¶¶ 68, 73 (concluding that the Plan is likely to stifle normal 

stockholder communications); Mills Rebuttal Report ¶¶ 48–51 (concluding that the 

“guardrails” in the AIC Provision place investors at the mercy of the Board’s broad 

discretion, noting that Board discretion and after-the-fact litigious remedies don’t “address 

or mitigate the current chilling effect of the Wolfpack Provisions on stockholder activism 

and the free exercise of the stockholder franchise”). 
88

stockholders like them, who cannot rely on the Board’s benevolence and must regulate 

their behavior based on what the Board could do.402

The Passive Investor Definition sets another easily activated tripwire. Mills cites to 

a concrete example of this concern. On the day the Plan was announced, a representative 

of BlackRock, which holds over 5% of Williams’ outstanding common stock [and a 13G 

filer], criticized Williams for failing to be fully transparent concerning the adoption of the 

Plan, stating “[t]his doesn’t look good from an ESG perspective.”403 This email reflects 

BlackRock “exercising the power to direct or cause the direction of the management and 

policies of the Company” and thus excludes BlackRock from the Passive Investor 

Definition.404 While it is probably true that the Board would exempt Blackrock and not 

risk angering a major stockholder player, other stockholders may not be so fortunate.

In the end, Defendants “bear the burden to show their actions were reasonable.”405 

They have failed to show that this extreme, unprecedented collection of features bears a 

402 See, e.g., id.; Mills Report ¶¶ 68, 73 (concluding that the Plan is likely to stifle normal 

stockholder communications); Mills Rebuttal Report ¶¶ 48–51 (concluding that the 

“guardrails” in the AIC Provision place investors at the mercy of the Board’s broad 

discretion, noting that Board discretion and after-the-fact litigious remedies don’t “address 

or mitigate the current chilling effect of the Wolfpack Provisions on stockholder activism 

and the free exercise of the stockholder franchise”). 

403 JX-73 at 3.

404 See JX-69 at 22.

405 Mercier, 929 A.2d at 807 (citing Unocal, 493 A.2d at 955); eBay, 16 A.3d at 35 (holding 

that where a rights plan “falls outside the range of reasonableness” the defendants fail “to 

meet their burden of proof under the second prong of Unocal”); accord Air Prods., 16 A.3d 

at 92, 113 (holding that “the target board must show . . . that any board action . . . is 

‘reasonable in relation to the threat posed” and that the “Defendants bear the burden of 

showing that their defenses . . . fall within a ‘range of reasonableness.’” (quoting Unitrin, 
89

reasonable relationship to their stated corporate objective. Because Defendants failed to 

prove that the Plan falls within the range of reasonable responses, the Plan is invalid.

III. CONCLUSION

For the foregoing reasons, judgment is entered in favor of the certified class

declaring the Plan unenforceable and permanently enjoining the continued operation of the 

Plan. Having concluded that the Plan is unenforceable because the Director Defendants 

breached their fiduciary duties under Unocal when adopting it, this decision need not 

resolve whether the Director Defendants independently breached their fiduciary duties by 

failing to redeem the Plan. 

651 A.2d at 1388)); Yucaipa, 1 A.3d at 331 (“[T]he board bears the burden to show that 

the pill is reasonable”).