UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY 

NISSIM BOTTON, On Behalf of Himself and 

All Others Similarly Situated 

 Plaintiff, 

 v. 

NESS TECHNOLOGIES, INC., AHARON 

FOGEL, AJIT BHUSHAN, SATYAM C. 

CHERUKURI, SASHI GERLITZ, P. 

HOWARD EDELSTEIN, GABRIEL 

EICHLER, DAN S. SUESSKIND, 

MORRIS WOLFSON, CITI VENTURE 

CAPITAL INTERNATIONAL, JERSEY 

HOLDING CORPORATION, AND JERSEY 

ACQUISITION CORPORATION, 

 Defendants. 

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C.A. No.: 2:11-cv-03950 

(SRC)(MAS) 

Oral Argument Requested

MEMORANDUM OF LAW IN SUPPORT OF 

THE NESS DEFENDANTS' MOTION TO DISMISS

 Robert J. Del Tufo 

 Andrew Muscato 

 SKADDEN, ARPS, SLATE, 

 MEAGHER & FLOM LLP 

(A Delaware Limited Liability Partnership) 

 Four Times Square 

 New York, New York 10036 

 Tel.: (212) 735-3000 

Fax: (212) 735-2000 

Attorneys for Defendants Ness Technologies 

Inc., Satyam C. Cherukuri, Issachar "Sachi" 

Gerlitz, Morris Wolfson, Dan S. Suesskind, 

P. Howard Edelstein and Gabriel Eichler

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TABLE OF CONTENTS

PAGE 

TABLE CASES AND OF AUTHORITIES.................................................................................. iii 

PRELIMINARY STATEMENT .....................................................................................................1 

STATEMENT OF FACTS ..............................................................................................................2 

A. The Parties ...................................................................................................2 

B. The Ness Board Forms A Special Committee Selected From Its 

Majority Of Disinterested And Independent Directors, And 

Negotiates A Premium Offer. ......................................................................3 

C. Plaintiff Files A Complaint Challenging The Special Committee's 

Sale Process But Fails To Include Any Detail About The Process. ............4 

ARGUMENT...................................................................................................................................5 

I. THE COMPLAINT SHOULD BE DISMISSED BECAUSE IT FAILS 

TO STATE A CLAIM.............................................................................................5 

II. PLAINTIFF FAILS TO STATE A CLAIM FOR BREACH OF 

FIDUCIARY DUTY................................................................................................6 

A. Plaintiff Fails To Adequately Plead A Claim For Breach Of The 

Duty Of Loyalty...........................................................................................8 

1. Plaintiff fails to allege facts challenging the 

disinterestedness or independence of a majority of Ness's 

directors............................................................................................8 

2. Plaintiff fails to state a Revlon claim. ............................................11 

(a) Plaintiff fails to allege that the Special Committee 

did not run a reasonable process. .......................................12 

(b) Merely listing standard deal terms does not state a 

claim for breach of fiduciary duty. ....................................14 

B. Plaintiff Fails To Adequately Plead A Duty Of Care Claim. ....................17 

III. PLAINTIFF FAILS TO STATE A DISCLOSURE CLAIM. ...............................18 

A. Plaintiff Fails To State A Section 14(a) Or State Law Disclosure 

Claim..........................................................................................................19 

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1. The preliminary proxy does not contain any material 

omissions regarding the background of the merger.......................20 

2. The preliminary proxy does not contain any material 

omissions regarding Jefferies' and BoA Merrill Lynch's 

analyses..........................................................................................23 

B. Plaintiff Fails To State A Section 20(a) Claim. .........................................26 

IV. PLAINTIFF FAILS TO STATE AN AIDING AND ABETTING CLAIM 

AGAINST NESS. ..................................................................................................28 

CONCLUSION..............................................................................................................................30 

 

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TABLE CASES AND OF AUTHORITIES 

CASES PAGE(S) 

In re 3Com S'holders Litig., 

C.A. No. 5067-CC, 2009 WL 5173804 (Del. Ch. Dec. 18, 2009)...............................14, 25 

Aronson v. Lewis, 

473 A.2d 805 (1984), overruled in part on other grounds sub nom. 

Brehm v. Eisner, 746 A.2d 244 (Del. 2000) ............................................................6, 17, 18 

Ashcroft v. Iqbal, 

129 S. Ct. 1937 (2009).....................................................................................................5, 6

Barkan v. Amsted Indus., Inc., 

567 A.2d 1279 (Del. 1989) ................................................................................................12 

Bell Atl. Corp. v. Twombly, 

550 U.S. 544 (2007).........................................................................................................5, 6 

Berlin Fin. Ltd. v. MPW Indus. Servs. Grp., Inc., 

No. 2:07-cv-442, 2008 WL 161309 (S.D. Ohio Jan. 15, 2008).........................................26 

Binks v. DSL.net, Inc., 

C.A. No. 2823-VCN, 2010 WL 1713629 (Del. Ch. Apr. 29, 2010)..................................28 

Blackmore Partners, L.P. v. Link Energy LLC, 

C.A. No. 454, 2005 WL 2709639 (Del. Ch. Oct. 14, 2005)................................................7 

The Bleymeyer v. Monogram Biosciences, Inc., 

C.A. No. 4703-CC (Del. Ch. July 9, 2009) (TRANSCRIPT)......................................14, 15 

Bond Opportunity Fund v. Unilab Corp., 

No. 99 Civ. 11074(JSM), 2003 WL 21058251 (S.D.N.Y. May 9, 2003)..........................24 

Cal. Pub. Emps.' Ret. Sys. v. Chubb Corp., 

394 F.3d 126 (3d Cir. 2004).........................................................................................19, 26 

In re CheckFree Corp. S'holders Litig., 

C.A. No. 3193-CC, 2007 WL 3262188 (Del. Ch. Nov. 1, 2007) ................................23, 25 

In re Cogent, Inc. S'holder Litig., 

7 A.3d 487 (Del. Ch. 2010)................................................................................................15 

In re Digital Island Sec. Litig., 

223 F. Supp. 2d 546 (D. Del. 2002), aff'd, 357 F.3d 322 (3d Cir. 2004)...........................27 

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In re Dollar Thrifty S'holder Litig., 

14 A.3d 573 (Del. Ch. 2010)..................................................................................12, 15, 16 

In re Exxon Mobil Corp. Sec. Litig., 

387 F. Supp. 2d 407 (D.N.J. 2005), aff'd, 500 F.3d 189 (3d Cir. 2007)............................19 

Fagin v. Gilmartin, 

432 F.3d 276 (3d Cir. 2005).................................................................................................6 

Fowler v. UPMC Shadyside, 

578 F.3d 203 (3d Cir. 2009).................................................................................................5 

In re Frederick's of Hollywood, Inc. S'holders Litig., 

C.A. No. 15944, 2000 WL 130630 (Del. Ch. Jan. 31, 2000) ........................................7, 10 

In re Gen. Motors (Hughes) S'holder Litig., 

C.A. No. 20269, 2005 WL 1089021 (Del. Ch. May 4, 2005), 

aff'd, 897 A.2d 162 (Del. 2006) ...................................................................................23, 24 

Globis Partners, L.P. v. Plumtree Software, Inc., 

C.A. No. 1577-VCP, 2007 WL 4292024 (Del. Ch. Nov. 30, 2007).......................... passim 

In re IXC Commc'ns, Inc. S'holders Litig., 

C.A. Nos. 17324, 17334, 1999 WL 1009174 (Del. Ch. Oct. 27, 1999) ............................15 

In re JCC Holding Co., 

843 A.2d 713 (Del. Ch. 2003)............................................................................................24 

Johnson v. Glassman, 

401 N.J. Super. 222 (App. Div. 2008) .................................................................................6 

Krim v. ProNet, Inc., 

744 A.2d 523 (Del. Ch. 1999)............................................................................................10 

In re Lear Corp. S'holder Litig., 

926 A.2d 94 (Del. Ch. 2007), subsequently dismissed for 

 failure to state a claim, 967 A.2d 640 (Del. Ch. 2008) ..................................11, 12, 15, 16 

In re Lear Corp. S'holder Litig., 

967 A.2d 640 (Del. Ch. 2008)........................................................................................8, 17 

Lewis v. Leaseway Transp. Corp., 

C.A. No. 8720, 1990 WL 67383 (Del. Ch. May 16, 1990) ...............................................17 

In re Lukens Inc. S'holders Litig., 

757 A.2d 720 (Del. Ch. 1999), aff'd mem. sub nom. 

Walker v. Lukens, Inc., 757 A.2d 1278 (Del. 2000) ..........................................................21 

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Lyondell Chem. Co. v. Ryan, 

970 A.2d 235 (Del. 2009) ..............................................................................................8, 12 

Maric Capital Master Fund, Ltd. v. Plato Learning, Inc., 

11 A.3d 1175 (Del. Ch. 2010)............................................................................................25 

McMillan v. Intercargo Corp., 

768 A.2d 492 (Del. Ch. 2000)......................................................................................11, 14 

In re Metricom Sec. Litig., 

No. C-01-4085 PJH, 2004 WL 966291 (N.D. Cal. Apr. 29, 2004), 

aff'd sub nom., Young v. Dreisbach, 182 F. App'x 714 (9th Cir. 2006).............................21 

In re MONY Grp. Inc. S'holder Litig., 

852 A.2d 9 (Del. Ch. 2004)..........................................................................................10, 24 

In re NAHC, Inc. Sec. Litig., 

306 F.3d 1314 (3d Cir. 2002).............................................................................................19 

Nebenzahl v. Miller, 

C.A. No. 13206, 1993 WL 488284 (Del. Ch. Nov. 8, 1993).........................................9, 10 

Nebenzahl v. Miller, 

C.A. No. 13206, 1996 WL 494913 (Del. Ch. Aug. 26, 1996)...........................................28 

In re Netsmart Technologies, Inc. Shareholders Litigation, 

924 A.2d 171 (Del. Ch. 2007)......................................................................................25, 26 

In re NYMEX S'holder Litig., 

C.A. Nos. 3621-VCN, 3835-VCN, 2009 WL 3206051 

(Del. Ch. Sept. 30, 2009) .............................................................................................11, 28 

Orman v. Cullman, 

794 A.2d 5 (Del. Ch. 2002)..............................................................................................8, 9 

In re Pennaco Energy, Inc., 

787 A.2d 691 (Del. Ch. 2001)..............................................................................................9 

Porter v. Texas Commerce Bancshares, Inc., 

C.A. No. 9114, 1989 WL 120358 (Del. Ch. Oct. 12, 1989)..............................................17 

Rales v. Blasband, 

634 A.2d 927 (Del. 1993) ....................................................................................................8 

Related Westpac LLC v. JER Snowmass LLC, 

C.A. No. 5001-VCS, 2010 WL 2929708 (Del. Ch. July 23, 2010)...................................28 

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Rosenblatt v. Getty Oil Co., 

493 A.2d 929 (Del. 1985) ..................................................................................................20 

In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, 

No. 2:06-cv-5774 (SRC), 2010 WL 2464746 (D.N.J. June 9, 2010) ................................20 

SEC v. Pasternak, 

561 F. Supp 2d 459 (D.N.J. 2008) .....................................................................................26 

Seinfeld v. Becherer, 

461 F.3d 365 (3d Cir. 2006)...............................................................................................19 

Shearin v. E.F. Hutton Group, Inc., 

652 A.2d 578 (Del. Ch. 1994)............................................................................................17 

In re Siliconix Inc. S'holders Litig., 

C.A. No. 18700, 2001 WL 716787 (Del. Ch. June 19, revised June 21, 2001).................22 

Steamfitters Local Union 447 ex rel. inVentive Health, Inc. v. Walter, 

C.A. No. 5492-CC (Del. Ch. June 21, 2010) (TRANSCRIPT).........................................24 

Stroud v. Grace, 

606 A.2d 75 (Del. 1992) ....................................................................................................26 

Stone v. Ritter, 

911 A.2d 362 (Del. 2006) ....................................................................................................8 

In re Synchronoss Sec. Litig., 

705 F. Supp. 2d 367 (D.N.J. 2010) ....................................................................................27 

TCG Sec., Inc. v. S. Union Co., 

C.A. No. 11282, 1990 WL 7525 (Del. Ch. Jan. 31, 1990) ................................................22 

In re Toys "R" Us, Inc. S'holder Litig., 

877 A.2d 976 (Del. Ch. 2005)......................................................................................15, 16 

In re Tyson Foods, Inc., 

155 F. App'x. 53 (3d Cir. 2005).........................................................................................27 

Van de Walle v. Unimation, Inc., 

C.A. No. 7046, 1991 WL 29303 (Del. Ch. Mar. 7, 1991) .................................................22 

Walter v. Holiday Inns, Inc., 

985 F.2d 1232 (3d Cir. 1993).............................................................................................25 

Wayne Cnty. Emps.' Ret. Sys. v. Corti, 

954 A.2d 319 (Del. Ch. 2008)............................................................................................19 

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Wayne Cnty. Emps.' Ret. Sys. v. Corti, 

C.A. No. 3534-CC, 2009 WL 2219260 (Del. Ch. July 24, 2009), 

aff'd mem., 996 A.2d 795 (Del. 2010)................................................................................12 

Weil v. Morgan Stanley DW Inc., 

877 A.2d 1024 (Del. Ch. 2005)..........................................................................................27 

In re Wheelabrator Techs., Inc. S'holders Litig., 

C.A. No. 11495, 1992 WL 212595 (Del. Ch. Sept. 1, 1992).......................................12, 13 

Winer Family Trust v. Queen, 

503 F.3d 319 (3d Cir. 2007)...............................................................................................27 

AUTHORITIES 

15 U.S.C. § 78n(a) .........................................................................................................................19 

15 U.S.C. § 78t(a) ..........................................................................................................................26 

15 U.S.C. § 78u-4(b)(1) .................................................................................................................19 

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Defendants Ness Technologies Inc. ("Ness" or the "Company"), Satyam C. 

Cherukuri, Issachar "Sachi" Gerlitz, Morris Wolfson, Dan S. Suesskind, P. Howard Edelstein 

and Gabriel Eichler (the "Independent Directors," and, together with Ness, the "Ness 

Defendants") hereby respectfully submit this Memorandum of Law in Support of their Motion to 

Dismiss Plaintiff's Class Action Complaint For Violations of the Federal Securities Laws And 

for Breach of Fiduciary Duties (the "Complaint"). 

PRELIMINARY STATEMENT 

On June 10, 2011, Ness, a Delaware corporation, and Citi Venture Capital 

International ("CVCI") announced that they had entered into a definitive Agreement and Plan of 

Merger (the "Merger Agreement"), pursuant to which Ness stockholders will receive $7.75 per 

share in cash – a 17.6% premium over the closing price of Ness stock on June 9, 2011 (the 

"Proposed Transaction"). The Proposed Transaction is the product of an extensive eleven-month 

sales process in which twenty-seven additional strategic and financial buyers were contacted, 

five bidders emerged, and an independent special committee (the "Special Committee") obtained 

a 41% increase over the initial bid price. Nevertheless, on July 7, 2011, Plaintiff brought this 

action alleging that the Ness board of directors breached its fiduciary duties by conducting an 

inadequate sale process and approving an unfair sale price. 

The Complaint fails to state a claim and should be dismissed as a matter of law 

under Federal Rule of Civil Procedure 12(b)(6). The Independent Directors' actions are 

protected by Delaware's business judgment rule and Plaintiff makes no allegations sufficient to 

rebut the business judgment rule. Specifically, Plaintiff does not allege that a majority of Ness's 

board of directors: (i) engaged in self-dealing or were otherwise interested in the transaction; (ii) 

lacked independence; or (iii) conducted a grossly negligent search for the best value reasonably 

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available for Ness's stockholders. Plaintiff also fails to allege adequately that the preliminary 

proxy omitted any material facts. Thus, Plaintiff has not set forth any factual allegations from 

which this Court could reasonably infer that there is a plausible claim that the Ness Defendants 

breached their fiduciary duties under Delaware law. Where, as here, a plaintiff offers only 

unsupported criticisms of an extensive sales process resulting in a proposed transaction that 

offers stockholders the opportunity for a remarkable premium, the complaint should be 

dismissed. 

STATEMENT OF FACTS1

A. The Parties 

Defendant Ness is a Delaware corporation, with world headquarters in Tel Aviv, 

Israel. (Compl. ¶ 13) Ness operates in North America, Europe, Israel and India and is publicly 

traded on the NASDAQ Global Select Market and the Tel Aviv Stock Exchange under the 

symbol "NSTC." (Compl. ¶¶ 13, 35) 

Defendant CVCI is a Delaware corporation specializing in private equity 

investments and investment advisory services. (Compl. ¶ 24) 

Defendants Jersey Acquisition Corporation and Jersey Holding Corporation are 

Delaware corporations. Jersey Acquisition Corporation is a wholly-owned subsidiary of Jersey 

Holding Corporation, which is an affiliate of CVCI. (Compl. ¶¶ 25-26) 

Defendant Ajit Bhushan is a member of the Ness Board of Directors (the "Ness 

Board") and is one of the managing directors of CVCI. (Compl. ¶ 15) 

 

1

 Facts in the Complaint are assumed true only for the purposes of this motion. 

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Defendant Issachar "Sachi" Gerlitz is a member of the Ness Board as well as 

Ness's president and CEO. (Compl. ¶ 17) He has not negotiated any continued employment 

with CVCI. (Compl. ¶ 53) 

Defendant Morris Wolfson is a member of the Ness Board and is the founder of 

Ness. (Compl. ¶ 21) 

The remaining five defendants comprise the rest of the Ness Board and have no 

affiliation with Ness or CVCI other than their presence on the Ness Board. (Compl. ¶¶ 14, 16, 

19-20)2

B. The Ness Board Forms A Special Committee Selected From Its Majority Of 

Disinterested And Independent Directors, And Negotiates A Premium Offer. 

The Proposed Transaction was approved by both a board comprised of a majority 

of disinterested and independent directors and by the subset of those directors who served on the 

Special Committee. In response to an initial unsolicited indication from CVCI that it would be 

interested in exploring a possible transaction in which affiliated funds of CVCI would pay $5.50 

to $5.75 per share to acquire all of Ness's outstanding equity securities, the Ness Board 

established the Special Committee – originally comprised of four disinterested and independent 

directors. (Compl. ¶ 51) The Special Committee hired independent legal and financial advisors, 

Ropes & Gray LLP and Jefferies & Co. ("Jefferies"). (Compl. ¶ 51) The Ness Board (excluding 

Mr. Bhushan, who had a conflict because of his position with CVCI) was independently advised 

by Olshan Grundman Frome Rosenzweig & Wolosky LLP as its legal advisor and Merrill Lynch, 

Pierce, Fenner & Smith Incorporated ("BoA Merrill Lynch") as its financial advisor. (Compl. ¶ 

 

2

 The Plaintiff names Aharon Fogel as a defendant, stating that he has been a member and 

Chairman of the Ness Board since 1999. (Compl. ¶ 14) However, Mr. Fogel retired from the 

Ness Board effective January 31, 2011. (Ness Technologies, Inc., Current Report (Form 8-K) 

(Feb. 2, 2011)) 

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51) The Special Committee ran a thorough process in which it solicited bids from more than two 

dozen strategic and financial partners. (Compl. ¶¶ 51-52) Ultimately, the Special Committee 

unanimously recommended the Proposed Transaction to the Ness Board because it "deliver[ed] 

significant value and [was] in the best interest of [Ness] stockholders." (Compl. ¶ 51) The Ness 

Board (excluding Mr. Bhushan) – comprised of a majority of disinterested and independent 

directors – approved the Proposed Transaction upon receiving the recommendation of the 

Special Committee. (Compl. ¶¶ 14, 16-17, 19-21, 51)3

On June 10, 2011, Ness and CVCI announced the Merger Agreement whereby an 

affiliate of CVCI will acquire all of Ness's outstanding shares (other than shares then owned by 

CVCI or its affiliates) for $7.75 per share. (Compl. ¶ 2) The Proposed Transaction represents a 

value of $307 million for the Ness stockholders. (Compl. ¶ 1) 

C. Plaintiff Files A Complaint Challenging The Special Committee's Sale Process 

But Fails To Include Any Detail About The Process. 

Plaintiff's Complaint closes by asking this Court to enjoin the transaction "unless 

and until the Company adopts and implements a procedure or process to obtain a Proposed 

Transaction agreement providing the best possible terms." (Compl. Prayer C) But Plaintiff 

never alleges anything that was deficient about the sale process nor any reason to believe the 

Proposed Transaction does not already represent "the best possible terms." Nowhere does 

Plaintiff allege that: 

• the Special Committee members were not disinterested and independent; 

• the Special Committee or the Ness Board failed to hire independent 

advisors; 

 

3

 Both Jefferies and BoA Merrill Lynch deemed the Proposed Transaction fair to the Ness 

stockholders. (Compl. ¶¶ 67-68) 

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• the Special Committee failed to meet regularly' 

• the Special Committee failed to contact other possible strategic partners; 

• the Special Committee pushed through a quick and cursory process; 

• the Special Committee or the Ness Board was uninformed about (i) the 

Proposed Transaction, (ii) the markets in which Ness competes, (iii) the 

business and value of Ness, (iv) the future prospects of Ness, or (v) the 

negotiation process that led to the Merger Agreement; 

• the Special Committee failed to ask the many bidders it solicited for more 

money; 

• Mr. Bhushan (the one director who had a conflict) was in any way 

involved with the process; and 

• the Ness Board is not comprised of a majority of disinterested and 

independent directors. 

In the complete absence of any allegations that would rebut the business judgment rule, the 

Complaint should be dismissed. 

ARGUMENT 

I. THE COMPLAINT SHOULD BE DISMISSED BECAUSE IT FAILS TO STATE 

A CLAIM. 

"Threadbare recitals of the elements of a cause of action, supported by mere 

conclusory statements, do not suffice" to state a claim. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 

(2009) (citation omitted). Accord Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). See also

Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (the pleading standard after Iqbal

and Twombly is "a more heightened form of pleading, requiring a plaintiff to plead more than the 

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possibility of relief to survive a motion to dismiss"). Rather, to survive a motion to dismiss, "a 

complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is 

plausible on its face.'" Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570). Thus, the 

factual allegations must "raise a reasonable expectation that discovery will reveal evidence of" 

each necessary element. Twombly, 550 U.S. at 556. 

As explained below, Plaintiff fails to adequately allege any facts showing (i) that 

the Independent Directors breached their fiduciary duties of loyalty and due care, (ii) that the 

Independent Directors omitted any material facts from the preliminary proxy statement, and (iii) 

that Ness aided and abetted the purported breaches of fiduciary duty by the Independent 

Directors. Accordingly, the Complaint should be dismissed. 

II. PLAINTIFF FAILS TO STATE A CLAIM FOR BREACH OF FIDUCIARY 

DUTY. 

"A cardinal precept of the General Corporation Law of the State of Delaware is 

that directors, rather than shareholders, manage the business and affairs of the corporation." 

Aronson v. Lewis, 473 A.2d 805, 811 (1984), overruled in part on other grounds sub nom. 

Brehm v. Eisner, 746 A.2d 244 (Del. 2000). See also Johnson v. Glassman, 401 N.J. Super. 222, 

229 (App. Div. 2008) (same).4 This "'cardinal precept'" is embodied in the business judgment 

rule, which is the "'presumption that in making a business decision the directors of a corporation 

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

 

4

 "Under New Jersey's choice-of-law rules, the law of the state of incorporation governs 

internal corporate affairs." Fagin v. Gilmartin, 432 F.3d 276, 282 (3d Cir. 2005). Because 

Ness is a Delaware corporation (Compl. ¶ 13), the substantive law of Delaware applies. See 

id. (applying Delaware law to fiduciary duty claims because defendant was a Delaware 

corporation). 

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best interests of the company.'" Globis Partners, L.P. v. Plumtree Software, Inc., C.A. No. 1577-

VCP, 2007 WL 4292024, at *4 (Del. Ch. Nov. 30, 2007) (citation omitted). 

A complaint that fails to contain factual allegations sufficient to rebut the business 

judgment rule must be dismissed. Globis, 2007 WL 4292024 at *9 (dismissing plaintiffs' claim 

that the defendants breached their fiduciary duties because the board's decision to engage in the 

merger was protected by the business judgment rule). To rebut the business judgment rule, a 

plaintiff must adequately allege a breach of either the duty of loyalty or the duty of care. 

Moreover, it is not enough simply to allege such a breach by a minority of directors. To rebut 

the business judgment rule, a plaintiff must allege facts that establish a material conflict of 

interest or gross negligence by a majority of a board of directors. See, e.g., Blackmore Partners, 

L.P. v. Link Energy LLC, C.A. No. 454, 2005 WL 2709639, at *7 (Del. Ch. Oct. 14, 2005) 

(noting that protections of the business judgment rule insulate a board decision from challenge so 

long as a majority of directors approving the transaction remain disinterested and independent); 

In re Frederick's of Hollywood, Inc. S'holders Litig., C.A. No. 15944, 2000 WL 130630, at *7 

(Del. Ch. Jan. 31, 2000) (dismissing fiduciary duty claim because plaintiff alleged that only one 

of four directors was interested and because the challenged merger was approved by a majority 

of disinterested and independent directors). 

In this case, in order that to rebut the business judgment rule, Plaintiff must 

successfully challenge the disinterest and independence of four of the seven members of the Ness 

Board. Plaintiff has failed to include any such allegations. 

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A. Plaintiff Fails To Adequately Plead A Claim For Breach Of The Duty Of Loyalty. 

1. Plaintiff fails to allege facts challenging the disinterestedness or 

independence of a majority of Ness's directors. 

To state a claim for breach of the duty of loyalty, Plaintiff must establish that a 

majority of the board of directors was: (1) "interested" in the merger – meaning they "received, 

or [were] entitled to receive, a personal financial benefit from the challenged transaction which is 

not equally shared by the stockholders," Rales v. Blasband, 634 A.2d 927, 933 (Del. 1993); (2) 

"lacked independence" in connection with the merger – meaning that a majority of the directors 

was "so under [the] influence" of an interested party "that their discretion was sterilized," id. at 

936; or (3) failed to act in good faith – meaning they consciously acted in a manner contrary to 

the interests of stockholders. In re Lear Corp. S'holder Litig., 967 A.2d 640, 652 (Del. Ch. 

2008).5 

"To establish that a board was interested or lacked independence, a plaintiff must 

allege facts as to the interest and lack of independence of the individual members of that board." 

Orman v. Cullman, 794 A.2d 5, 22 (Del. Ch. 2002) (emphasis in original). Whether a director 

has a disabling self-interest under Delaware law is determined based upon a subjective standard 

and arises in two circumstances: (1) when the director personally receives a benefit or suffers a 

detriment resulting from a transaction which is not shared with or suffered by other shareholders 

and the benefit or detriment "is of such ... material significance to that particular director that it is 

reasonable to question whether that director objectively considered the advisability of the 

 

5

 The duty of good faith is properly viewed as one component of a director's duty of loyalty. 

Stone v. Ritter, 911 A.2d 362, 369-70 (Del. 2006). In order to plead a breach of good faith, 

Plaintiff must allege facts showing that the Independent Directors "utterly failed to attempt to 

obtain the best sale price." Lyondell Chem. Co. v. Ryan, 970 A.2d 235, 244 (Del. 2009). 

Plaintiff makes no attempt to do so here – nor could he – so the Ness Defendants do not 

address this prong. 

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challenged transaction to the corporation and its shareholders," and (2) when "a director stands 

on both sides of the challenged transaction." Id. at 25 n.50. In the situation where a director is 

alleged to have received a benefit not equally shared by the stockholders, facts must be alleged 

showing materiality "'in the context of the director's economic circumstances.'" Id. at 23 

(citation omitted). 

While Plaintiff claims in conclusory fashion that the Ness Board acted disloyally 

(Compl. ¶¶ 32, 90), his claim fails as a matter of law because the Complaint does not allege – let 

alone allege with any specificity – that a majority of the Ness Board members were interested or 

lacked independence in the Proposed Transaction. Generally, Plaintiff tries to demonstrate that a 

majority of the Ness Board is interested in the merger by lumping all of the directors together 

and making essentially one broad allegation: that they stand to receive change of control 

payments in connection with the Proposed Transaction.6

 (Compl. ¶ 53) This does not state a 

claim against the directors for breach of fiduciary duty. See Nebenzahl v. Miller, C.A. No. 13206, 

1993 WL 488284, at *3 (Del. Ch. Nov. 8, 1993) (finding no reasonable probability of breach of 

the duty of loyalty simply because merger agreement included the guarantee of payment of 

 

6

 Plaintiff makes a similar allegation against Ness's executives and officers, stating that 

"members of the Company's management will continue their employment with the Company 

following the consummation of the Proposed Transaction." (Compl. ¶ 53) This does not 

state a claim that the Ness Board was interested. First, the mere fact that an executive has a 

change of control agreement and may retain his or her position in a post-merger company 

does not state a claim. See In re Pennaco Energy, Inc., 787 A.2d 691, 709-10 (Del. Ch. 2001) 

(describing the utility of change of control payments and refusing to enjoin tender offer 

which would trigger change of control payments for two directors and several key 

executives). Second, even if this did somehow make an officer interested, Plaintiff does not 

allege how the benefits to Ness officers confer material benefits on Ness directors. See 

Globis, 2007 WL 4292024, at *8 n.58 ("[Plaintiff] also highlights the compensation received 

by several non-Defendant Plumtree executives. The Court does not see the relevance of 

these non-Defendants or the benefits they received."). In any event, Plaintiff admits that 

there are no employment agreements between the Ness Board and CVCI. (Compl. ¶ 53) 

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change of control benefits to directors); In re MONY Grp. Inc. S'holder Litig., 852 A.2d 9, 20 

(Del. Ch. 2004) (rejecting, as a matter of law, plaintiff's argument that board was not 

disinterested and independent because CEO (who negotiated transaction) stood to gain from 

change of control benefits). Plaintiff also states "all unvested stock options and restricted stock 

units will immediately vest and will entitle the holders to immediate payment." (Compl. ¶ 55) 

But under Delaware law, this does not state a claim. The Delaware Court of Chancery has held 

that "accelerated vesting of options does not create a conflict of interest because the interests of 

the shareholders and directors are aligned in obtaining the highest price." Globis, 2007 WL 

4292024, at *8; Krim v. ProNet, Inc., 744 A.2d 523, 528 (Del. Ch. 1999) ("Defendant directors 

disclosed in the Proxy Statement that their options would vest and some ProNet directors would 

retain board seats in the merged entity.... [N]either the vesting of the options nor the fact some 

ProNet directors retained board seats in the merged entity created a 'substantial conflict'...."). 

Specifically, Plaintiff alleges that Mr. Gerlitz is conflicted because he will receive 

a financial bonus as result of the Proposed Transaction. (Compl. ¶¶ 54, 55) This claim fails for 

two reasons. First, nowhere does Plaintiff allege that Mr. Gerlitz was a member of the Special 

Committee or that he approved his own change of control package. Second, as discussed above, 

change of control plans do not alone support a claim for breach of the duty of loyalty. See 

Nebenzahl, 1993 WL 488284, at *3. Thus, Plaintiff fails to adequately allege any facts 

demonstrating that Mr. Gerlitz was anything other than an independent and disinterested director 

when he approved the Proposed Transaction. 

Even assuming that Mr. Gerlitz was conflicted (which he was not), this still leaves 

a majority of the Ness Board unchallenged by Plaintiff. See In re Frederick's of Hollywood, 

2000 WL 130630, at *7 (dismissing loyalty claim because Plaintiff alleged that only one of four 

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directors was interested, meaning that challenged merger was approved by a majority of 

disinterested directors). The Complaint makes no individualized allegations at all about five of 

the Independent Directors (including the three members of the Special Committee). 

For these reasons, Plaintiff's duty of loyalty claim must be dismissed. In re 

NYMEX S'holder Litig., C.A. Nos. 3621-VCN, 3835-VCN, 2009 WL 3206051, at *6 (Del. Ch. 

Sept. 30, 2009) ("At the outset, the Court observes that the Plaintiffs must plead sufficient facts 

to show that a majority of the Board of Directors breached the fiduciary duty of loyalty; whether 

they otherwise would have stated a claim against [two interested directors] would not be 

controlling. That two directors may have been conflicted does not, by itself, impinge upon the 

independence of the remaining members of the Board – all of whom supported the merger.") 

(emphasis in original); McMillan v. Intercargo Corp., 768 A.2d 492, 496 (Del. Ch. 2000) 

(dismissing claims where allegations about directors were "sparse at best," and holding that "the 

complaint alleges no facts suggesting that the independence and disinterestedness of these five 

directors were in any way compromised"). 

2. Plaintiff fails to state a Revlon claim.

"Revlon and its progeny stand for the proposition that when a board has decided 

to sell the company for cash or engage in a change of control transaction, it must act reasonably 

in order to secure the highest price reasonably available." In re Lear Corp. S'holder Litig., 926 

A.2d 94, 115 (Del. Ch. 2007), subsequently dismissed for failure to state a claim, 967 A.2d 640 

(Del. Ch. 2008). Plaintiff claims that the sales process and the standard deal terms in the Merger 

Agreement resulted in an offer that "undervalued" Ness. (Compl. ¶¶ 4, 52) This claim must fail 

because (i) Plaintiff alleges no facts demonstrating that the Special Committee failed to run a 

reasonable sale process and (ii) merely listing standard deal terms – as Plaintiff does here – does 

not adequately state a Revlon claim. 

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(a) Plaintiff fails to allege that the Special Committee did not run a 

reasonable process. 

Plaintiff's scattershot allegations about the sale process undertaken by the Special 

Committee are not enough to state a Revlon claim. Delaware law provides "no single blueprint" 

by which directors must satisfy their obligations in the context of a sale of control. See Barkan v. 

Amsted Indus., Inc., 567 A.2d 1279, 1286 (Del. 1989). Indeed, the Delaware Supreme Court 

recently stated that "there are no legally prescribed steps that directors must follow to satisfy 

their Revlon duties." Lyondell Chem. Co. v. Ryan, 970 A.2d 235 at 243. See also Wayne Cnty. 

Emps.' Ret. Sys. v. Corti, C.A. No. 3534-CC, 2009 WL 2219260, at *14 (Del. Ch. July 24, 2009) 

(citing Lyondell, and stating "Delaware law does not hold directors liable for failing to carry out 

a perfect process in a sale of control"), aff'd mem., 996 A.2d 795 (Del. 2010). Revlon duties 

merely require a board to act reasonably. Globis, 2007 WL 4292024, at *14; In re Lear Corp., 

926 A.2d at 115. "The duty to act reasonably is just that, a duty to take a reasonable course of 

action under the circumstances presented." In re Lear Corp., 926 A.2d at 115. See also In re 

Dollar Thrifty S'holder Litig., 14 A.3d 573, 597 (Del. Ch. 2010) ("The question is whether the 

alternative approach that the Dollar Thrifty Board adopted was itself a reasonable choice that a 

loyal and careful board would adopt in the circumstances."). For example, in In re Wheelabrator 

Technologies, Inc. Shareholders Litigation, the Delaware Court of Chancery dismissed Revlon

claims, holding that there were "no facts ... alleged that support a cognizable claim that [Revlon] 

duties were breached here." C.A. No. 11495, 1992 WL 212595, at *8 (Del. Ch. Sept. 1, 1992). 

The court explained: 

[E]ven if there occurred a "fundamental change of corporate control" that 

triggered Revlon duties under Barkan, the plaintiffs have not alleged that WTI's 

directors were so uninformed about WTI's value that they violated their Revlon

duties by not conducting an active survey of the market, or "market check." 

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13 

What the plaintiffs do allege is that WTI's directors failed to conduct a market 

check to assure themselves that there were no superior alternative transactions. 

That, without more, is insufficient. Under Barkan the plaintiffs must allege that 

WTI's directors did not have adequate information about the value of WTI. Here, 

the Complaint says nothing about what the directors did (or did not) know about 

WTI's value. 

In re Wheelabrator, 1992 WL 212595, at *8-9. See also Globis, 2007 WL 4292024, at *4 

(granting motion to dismiss Revlon claims).

Here, Plaintiff does not even allege that the Special Committee failed to undertake 

a market check – nor could he. Instead, he offers unsupported general criticisms about the 

Special Committee's sale process without ever explaining what the process entailed. For 

example, Plaintiff questions why the Ness Board "refused to continue to negotiate in good faith 

with competing bidders, such as the bidder identified in the Proxy as Bidder D ...." (Compl. ¶ 

52) But Plaintiff never alleges that Bidder D provided a superior offer, or even a comparable 

offer, to the offer ultimately made by CVCI. Plaintiff never alleges what Bidder D's last offer 

was. Plaintiff never alleges that any of the other bidders were willing to continue negotiations. 

And Plaintiff never alleges that the Special Committee failed to ask Bidder D, or any of the other 

bidders solicited by the Special Committee, for more money. 

In addition, there is no allegation in the Complaint to support an inference that 

any of the Independent Directors failed to act reasonably during the sale process. Likewise, 

there is no allegation that any of the Independent Directors were uninformed about (i) the 

Proposed Transaction, (ii) the markets in which Ness competes, (iii) the business and value of 

Ness, (iv) the future prospects of Ness, or (v) the negotiation process that led to the Merger 

Agreement. On the contrary, the Complaint concedes that the Special Committee's extensive 

process resulted in a premium offer for the Ness stockholders. (Compl. ¶ 51) 

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(b) Merely listing standard deal terms does not state a claim for 

breach of fiduciary duty. 

Nor does Plaintiff state a Revlon claim by making various conclusory allegations 

that the Ness Board members agreed to standard deal terms in the Merger Agreement. Plaintiff 

alleges that the Ness Board breached its fiduciary duties and precluded a higher offer when it 

agreed to three standard deal terms: (1) a no-shop provision; (2) matching rights; and (3) a 

termination fee. (Compl. ¶¶ 57-58, 60) The Delaware Court of Chancery has held that "if [the 

plaintiff] is going to attack deal protection devices, like match rights, or like no-shops, or like 

termination fees ... [the plaintiff must] specify exactly how they run afoul of a Delaware Court 

of Chancery decision." The Bleymeyer v. Monogram Biosciences, Inc., C.A. No. 4703-CC, at 31 

(Del. Ch. July 9, 2009) (TRANSCRIPT) (denying plaintiff's motion to expedite for failure to 

state a colorable claim), attached to the Certification of Andrew Muscato as Exhibit B. Plaintiffs 

fail to do so here. In fact, negotiated deal terms such as these are not indicative of a breach of 

fiduciary duty – they are commonplace. See, e.g., In re 3Com S'holders Litig., C.A. No. 5067-

CC, 2009 WL 5173804, at *7 (Del. Ch. Dec. 18, 2009) (holding that the no-shop provision, the 

matching rights provision, and the termination fee provision were standard merger terms, were 

not per se unreasonable, and did not constitute breaches of fiduciary duty). 

(i) The no-shop provision. 

No-shop provisions, which prevent the target corporation from soliciting 

additional bids after signing a merger agreement, are common and unobjectionable. McMillan v. 

Intercargo Corp., 768 A.2d 492 at 506 ("[T]he fact that the merger agreement contained a rather 

standard no-shop provision does little to bolster the plaintiffs' claim."). Plaintiff admits that the 

no-shop provision allows the Ness Board to comply with its fiduciary duties and engage third 

parties if they submit a superior proposal – a so-called "fiduciary out". (Compl. ¶ 59) When a 

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no-shop provision contains a fiduciary out, it will be upheld. See, e.g., In re Cogent, Inc. 

S'holder Litig., 7 A.3d 487, 502 (Del. Ch. 2010) (approving a no-shop provision that "allows the 

Board to engage with any bidder who makes an offer that the Board determines in good faith 

'would reasonably be expected to result in or lead to, a Superior Proposal'") (citation omitted); In 

re Dollar Thrifty, 14 A.3d at 593 (approving a no-shop provision with fiduciary out that 

permitted the target to engage "with another bidder if the bidder has made a proposal that the 

Board determines is reasonably likely to lead to a superior offer"); In re IXC Commc'ns, Inc. 

S'holders Litig., C.A. Nos. 17324, 17334, 1999 WL 1009174, at *6 (Del. Ch. Oct. 27, 1999) 

(applying business judgment rule and dismissing claim that board breached its duty of care in 

agreeing to no-shop provision because the board was well-informed about the value of the 

company and the no-shop provision was subject to a fiduciary out). 

(ii) The matching rights provision. 

A "matching rights" provision allows an original buyer to match any competing 

offer made by a third party after the execution of a merger agreement. (Compl. ¶ 58) Like a noshop provision, matching rights "are hardly novel" and have been upheld as reasonable in the 

face of breach of fiduciary duty claims. The Bleymeyer, C.A. No. 4703-CC, Tr. at 31 ("Citing 

me to the Iowa law review and Stanford law review with respect to match rights is quibbling 

with our law. The plaintiffs may not like our law, but we've upheld match rights as legitimate 

provisions in merger agreements."); In re Lear Corp., 926 A.2d 94 at 120 (upholding matching 

rights and noting "the undisputed reality that second bidders have been able to succeed in the 

face of a termination fee/matching right combination"). See also In re Toys "R" Us, Inc. S'holder 

Litig., 877 A.2d 976, 1018-19 (Del. Ch. 2005) (noting that "it would not be unreasonable for the 

board to grant a substantial termination fee and matching rights ... if that was necessary to 

successfully wring out a high-value bid"); In re Cogent, Inc., 7 A.3d at 502 ("Potential suitors 

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often have a legitimate concern that they are being used merely to draw others into a bidding war. 

Therefore, in an effort to entice an acquirer to make a strong offer, it is reasonable for a seller to 

provide a buyer with some level of assurance that he will be given adequate opportunity to buy 

the seller, even if a higher bid later emerges .... Plaintiffs have not shown that Company D or 

any other bidder was precluded by the challenged provisions from successfully making a higher 

offer."). 

Here, Plaintiff's conclusory allegation that the matching rights "discourage 

bidders from making a competing bid" stands in stark contrast to settled case law and common 

practice. (Compl. ¶ 62) In addition, nowhere has Plaintiff alleged that another bidder is waiting 

in the wings to offer a superior bid but unwilling or unable to bid because of the matching rights 

provision. 

(iii) The termination fee. 

Reasonable termination fees are also routinely upheld. They compensate an 

initial acquirer when a topping bidder emerges. Indeed, courts routinely approve termination 

fees of 3-4% of the deal value. See, e.g., In re Lear Corp., 926 A.2d at 119-20 (approving a 

termination fee of 3.5% of the equity value and 2.4% of the enterprise value); In re Toys "R" Us 

S'holder Litig., 877 A.2d 975 at 1019-21 (upholding a 3.75% termination fee and matching 

rights). The termination fee maximizes stockholder value in two important ways: 1) it 

encourages premium deal-making because a "stalking horse" initial acquirer is compensated for 

its expenses, and 2) it deters "fractional topping" from another bidder. In re Dollar Thrifty, 14 

A.3d at 575 (stating that a termination fee forces a third-party bidder to "dig deep" and come up 

with a materially better offer). Here, Plaintiff alleges that the Individual Defendants breached 

their fiduciary duties by agreeing to an $8.35 million termination fee. (Compl. ¶ 60) This fee 

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represents only 2.7% of the deal value and is well below termination fees routinely approved by 

the Delaware Court of Chancery. 

In short, Plaintiff fails to allege any facts that indicate this transaction was flawed 

in any way. Implicit in Plaintiff's allegations concerning other bidders is the conclusion that this 

deal was "fully shopped." (Compl. ¶ 52) Without any viable process allegations, Plaintiff's 

Complaint boils down to one claim: that the price is unfair. (Compl. ¶¶ 4, 37-50, 52, 91) He 

spends pages detailing Ness's promising financial prospects (Compl. ¶¶ 37-50), but "repeated 

allegations of the inadequacy of the merger price do not themselves create a claim" and "may be 

disposed of summarily." Porter v. Texas Commerce Bancshares, Inc., C.A. No. 9114, 1989 WL 

120358, at *4-5 (Del. Ch. Oct. 12, 1989). See also Shearin v. E.F. Hutton Group, Inc., 652 A.2d 

578, 592 (Del. Ch. 1994) (dismissing an unfair price claim because complaint "alleges no 

procedural defect in the course of the merger or other non-price related basis for an injunction or 

other equitable remedy"); Lewis v. Leaseway Transp. Corp., C.A. No. 8720, 1990 WL 67383 at 

*5 (Del. Ch. May 16, 1990) (dismissing an unfair price claim that did not "adequately allege selfdealing, lack of independence, or failure, on the part of the [target] board, to adequately inform 

itself"). 

B. Plaintiff Fails To Adequately Plead A Duty Of Care Claim. 

For similar reasons, Plaintiff has also failed to plead a duty of care claim against 

the Ness Board. To adequately plead a duty of care claim, a plaintiff must aver facts showing 

"gross negligence" by the board of directors. Aronson v. Lewis, 473 A.2d at 812 & n.6. "The 

definition of gross negligence used in [Delaware] corporate law jurisprudence is extremely 

stringent." In re Lear Corp., 967 A.2d at 651-52. It is defined as "'reckless indifference to or a 

deliberate disregard of the whole body of stockholders or actions which are without the bounds 

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of reason.'" Id. at n.45 (citing Tomczak v. Morton Thiokol, Inc., C.A. No. 7861, 1990 WL 42607, 

at *12 (Del. Ch. Apr. 5, 1990)). 

The Complaint does not even come close to alleging that the Independent 

Directors acted with gross negligence in considering whether to approve the Proposed 

Transaction. Nowhere does Plaintiff allege that the Special Committee failed to meet regularly. 

Nowhere does Plaintiff allege that the Special Committee failed to contact other possible 

strategic partners. Nowhere does Plaintiff allege that the Special Committee pushed through a 

quick and cursory process. Nowhere does Plaintiff allege that the Special Committee or the Ness 

Board was uninformed about (i) the Proposed Transaction, (ii) the markets in which Ness 

competes, (iii) the business and value of Ness, (iv) the future prospects of Ness, or (v) the 

negotiation process that led to the Merger Agreement. Nowhere does Plaintiff allege that the 

Special Committee failed to ask the multiple bidders it solicited for more money. In fact, the 

Complaint would not state a claim for lack of due care even if mere negligence were the 

applicable standard, and it is not. Aronson, 473 A.2d at 812 (stating that the standard for breach 

of the duty of care is "predicated upon concepts of gross negligence"). 

III. PLAINTIFF FAILS TO STATE A DISCLOSURE CLAIM. 

Plaintiff alleges that the Ness Defendants violated Section 14(a) of the Securities 

and Exchange Act of 1934 (the "Exchange Act") and breached their state law fiduciary duty of 

disclosure by omitting material facts from the preliminary proxy. (Compl. ¶¶ 76, 90) Relatedly, 

Plaintiff alleges that because the Ness Defendants violated Section 14(a) of the Exchange Act, 

they also violated Section 20(a) of the Exchange Act. For the reasons discussed below, these 

claims must fail. 

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A. Plaintiff Fails To State A Section 14(a) Or State Law Disclosure Claim. 

Plaintiff alleges that Ness's preliminary proxy omits material facts in violation of 

Section 14(a) and state law fiduciary duties. (Compl. ¶ 7) Plaintiff's claims fail because he does 

not actually identify any material fact that is not disclosed to Ness stockholders. Section 14(a) 

claims are governed by The United States Private Securities Litigation Reform Act of 1995 (the 

"PSLRA"), which requires that a complaint "shall specify each statement alleged to have been 

misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding 

the statement or omission is made on information and belief, the complaint shall state with 

particularity all facts on which that belief is formed." 15 U.S.C. § 78n(a); 15 U.S.C. § 78u4(b)(1). See also In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1329 (3d Cir. 2002) (applying 

PSLRA standards to Section 14(a) claims); Cal. Pub. Emps.' Ret. Sys. v. Chubb Corp., 394 F.3d 

126, 160 (3d Cir. 2004) (affirming district court's dismissal of 14(a) claims because plaintiffs did 

not meet the PSLRA's particularity requirements); In re Exxon Mobil Corp. Sec. Litig., 387 F. 

Supp. 2d 407 (D.N.J. 2005) (stating a "Section 14(a) claim must meet the PSLRA particularity 

requirements"), aff'd, 500 F.3d 189 (3d Cir. 2007). Likewise, Delaware law requires a plaintiff 

to establish "'that facts are missing from the [disclosure] statement, identify those facts, state why 

they meet the materiality standard and how the omission caused injury.'" Wayne Cnty. Emps.' 

Ret. Sys. v. Corti, 954 A.2d 319, 330 (Del. Ch. 2008) (quoting Skeen v. Jo-Ann Stores, Inc., 750 

A.2d 1170, 1173 (Del. 2000)). 

An alleged omission will only violate Section 14(a) "if either the SEC regulations 

specifically require disclosure of the omitted information in a proxy statement, or the omission 

makes other statements in the proxy statement materially false or misleading.'" Seinfeld v. 

Becherer, 461 F.3d 365, 369 (3d Cir. 2006) (quoting Resnik v. Swartz, 303 F.3d 147, 151 (2d Cir. 

2002)). "Information is deemed material for purposes of a 14(a) claim 'if there is a substantial 

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likelihood that a reasonable shareholder would consider it important in deciding how to vote.'" 

In re NAHC, 306 F.3d at 1331 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 

(1976)). Likewise, Delaware uses the TSC Industries materiality standard and requires the 

disclosure of all material facts. Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985). 

Here, the only SEC rule cited in the Complaint is Rule 14a-9 – the catch-all 

provision – which prohibits the omission of "any material fact necessary in order to make the 

[proxy] statements therein not false or misleading." (Compl. ¶ 75) Thus, Plaintiff can only 

prevail on both his federal and state law disclosure claims if he identifies a material fact omitted 

from the preliminary proxy. He fails to, and his disclosure claims should be dismissed. 

1. The preliminary proxy does not contain any material omissions 

regarding the background of the merger. 

Plaintiff alleges that the preliminary proxy does not disclose certain information 

regarding the background leading up to the merger, including: (i) details regarding the sale 

process leading up to the transaction; (ii) an adequate explanation as to why the Ness Board 

chose to abandon merger negotiations with Bidder D; and (iii) why Bidder D is accusing Ness of 

violating an exclusivity agreement and other specific allegations listed in the June 27, 2011 letter 

it sent to Ness. (Compl. ¶ 66) Plaintiff's claim fails for several reasons. First, the allegedly 

omitted information is actually disclosed at length in the detailed fourteen-page discussion in the 

preliminary proxy relating to the background and negotiation of the merger. (Ness Technologies 

Inc., Proxy Statement (Schedule 14A) at 20-33 (June 30, 2011), attached to the Certification of 

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21 

Andrew Muscato as Exhibit A)7 The preliminary proxy lays out in painstaking detail, all 

material information about the merger, including, among other things: 

• The eleven-month sale process in which twenty-seven potential strategic 

and financial partners were contacted, a total of five bidders emerged with 

multiple rounds of increasingly higher offers at the insistence of the 

Special Committee. This process ultimately culminated in CVCI's blowout offer of $7.75 – $0.65 per share higher than Bidder D and providing a 

68% premium to Ness's unaffected stock price. (Prelim. Proxy at 21-31) 

• The extensive negotiations with Bidders A, B, C, D and CVCI relating to 

the price of the merger. Contrary to Plaintiff's allegation, the preliminary 

proxy clearly states why Ness stopped negotiations with Bidder D –Bidder 

D refused to increase its price above $7.10. (Prelim. Proxy at 31)8

• The Ness financial projections that Jefferies and BoA Merrill Lynch relied 

upon. (Prelim. Proxy at 48) 

Understandably, courts consistently dismiss disclosure claims when the public filings that 

allegedly contain misleading disclosures actually disclose the matters that plaintiffs claim are 

 

7

 This Court may consider "'document[s] integral to or explicitly relied upon in the complaint'" 

on a motion to dismiss. In re Schering-Plough Corp. Intron/Temodar Consumer Class 

Action, No. 2:06-cv-5774 (SRC), 2010 WL 2464746, at *2 n.8 (D.N.J. June 9, 2010) 

(quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)). 

Here, Plaintiff repeatedly references the preliminary proxy. (Compl. ¶¶ 6, 7, 52, 64-69, 74, 

76, 77, 80-84) Citations to the preliminary proxy will be in the form "(Prelim. Proxy at _)." 

8

 In fact, the preliminary proxy details why each of the four other bidders lost out to CVCI's 

ultimate offer. Bidder C, whose only offer was $6.50 per share, withdrew from the process 

because "it could not effect a transaction without a partner." (Prelim. Proxy at 24) Bidder B, 

whose final offer was $7.00 per share, "declined to proceed with further discussions 

regarding a potential transaction with Ness." (Prelim. Proxy at 25) Bidder A was unwilling 

to increase its price of $7.30 per share. (Prelim. Proxy at 26) Bidder D dropped its earlier 

offer to $7.10 per share and "indicated that it would not be willing to increase its price ...." 

(Prelim. Proxy at 32) The preliminary proxy also details that Ness was negotiating with both 

CVCI and Bidder D and that "Ropes & Gray compared Bidder D's latest proposed revisions 

to the merger agreement to the proposed revisions that CVCI had submitted on June 2, 2011. 

Overall Ropes & Gray concluded that the terms of CVCI's proposed revisions were more 

favorable to us than the terms of Bidder D's latest proposed revisions." (Prelim. Proxy at 31) 

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omitted. See In re Metricom Sec. Litig., No. C-01-4085 PJH, 2004 WL 966291, at *27 (N.D. Cal. 

Apr. 29, 2004) (dismissing claims based on alleged omissions in a proxy statement because the 

proxy statement disclosed the information that plaintiff claimed was omitted), aff'd sub nom., 

Young v. Dreisbach, 182 F. App'x 714 (9th Cir. 2006); In re Lukens Inc. S'holders Litig., 757 

A.2d 720, 736 (Del. Ch. 1999) (dismissing disclosure claims because "the process [was] 

described in considerable detail in the proxy statement"), aff'd mem. sub nom. Walker v. Lukens, 

Inc., 757 A.2d 1278 (Del. 2000). Likewise, the disclosure claims should be dismissed for this 

reason alone. 

Second, each of these alleged omissions is immaterial as a matter of law. Courts 

consistently hold that where an "'arm's-length negotiation has resulted in an agreement which 

fully expresses the terms essential to an understanding by shareholders of the impact of the 

merger, it is not necessary to describe all the bends and turns in the road which led to that 

result.'" Van de Walle v. Unimation, Inc., C.A. No. 7046, 1991 WL 29303, at *15 (Del. Ch. Mar. 

7, 1991) (citation omitted). See also In re Siliconix Inc. S'holders Litig., C.A. No. 18700, 2001 

WL 716787, at *14 (Del. Ch. June 19, revised June 21, 2001) ("there is no right to a 'play-byplay' of the negotiation or review process"). "The simple fact of the matter is that a reasonable 

line has to be drawn or else disclosures in proxy solicitations will become so detailed and 

voluminous that they will no longer serve their purpose." TCG Sec., Inc. v. S. Union Co., C.A. 

No. 11282, 1990 WL 7525, at *7 (Del. Ch. Jan. 31, 1990). 

Furthermore, Plaintiff does not allege how Bidder D's letter is material to any 

reasonable investor. Indeed, it is irrelevant to the transaction. Although Ness could always add 

"additional information" on any subject, "Delaware law does not require disclosure of 'all 

available information' simply because available information 'might be helpful.' The plaintiff has 

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23 

the burden of demonstrating materiality." In re Siliconix Inc. S'holders Litig., 2001 WL 716787, 

at *9 (citations omitted). Plaintiff does not explain how a letter claiming that Ness violated 

exclusivity could possibly have lowered CVCI's price, and Bidder D refused to increase its price 

above $7.10 long before sending the letter. (Prelim. Proxy at 31) Accordingly, Plaintiff's claim 

that the Ness Defendants omitted material information regarding the sale process fails as a matter 

of law. 

2. The preliminary proxy does not contain any material omissions 

regarding Jefferies' and BoA Merrill Lynch's analyses. 

Plaintiff alleges that the preliminary proxy fails to disclose certain information 

regarding Jefferies' and BoA Merrill Lynch's analyses, including the following: "the criteria to 

select the companies" in its Selected Companies Analysis, "the rationale for selecting the 

companies used" in its Selected Transactions Analysis, the "definition of 'free cash flows' used in 

its Discounted Cash Flow Analysis, Ness's projected unlevered free cash flows, and the rationale 

for selecting various multiples and ranges." (Compl. ¶¶ 67-69) Once again, Plaintiff's claim 

fails for two reasons. First, the preliminary proxy discloses much of the information that 

Plaintiff claims was omitted. For example, it discloses that all of the selected companies were 

information technology and consulting service companies. (Prelim. Proxy at 39, 43) It also 

states that the transactions selected for Jefferies' and BoA Merrill Lynch's Selected Transactions 

Analyses all involved information technology consulting and business service companies. 

(Prelim. Proxy at 40, 44) In addition, the preliminary proxy discloses extensive financial data 

and projections, including detailed information regarding the raw inputs Jefferies and BoA 

Merrill Lynch used, such as multiples, ranges, discount rates and dates. (Prelim. Proxy at 37-46) 

Second, the law requires only a fair summary of the valuation analyses performed 

by Jefferies and BoA Merrill Lynch. In re CheckFree Corp. S'holders Litig., C.A. No. 3193-CC, 

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24 

2007 WL 3262188, at *3 (Del. Ch. Nov. 1, 2007) (dismissing disclosure claims because the 

"proxy statement contains an adequate and fair summary" of the investment banker's analysis). 

See also In re Gen. Motors (Hughes) S'holder Litig., C.A. No. 20269, 2005 WL 1089021, at *16 

(Del. Ch. May 4, 2005) (rejecting the argument that raw data underlying summaries of fairness 

opinions must be disclosed, noting that "[t]he fact that the financial advisors may have 

considered certain non-disclosed information does not alter this analysis"), aff'd, 897 A.2d 162 

(Del. 2006). A "fair summary" of an investment banker's valuation conclusions "does not 

require the Board to include [the banker's] entire report exactly as it saw it when it made its 

decision to recommend the Agreement." In re MONY Grp. Inc. S'holder Litig., 852 A.2d at 28. 

In reality, Plaintiff's so-called omissions concerning Jefferies' and BoA Merrill Lynch's fairness 

opinion are merely "quibbles" about the substance of their opinion, and thus, do not state a 

disclosure claim. See In re JCC Holding Co., 843 A.2d 713, 721 (Del. Ch. 2003) ("quibble with 

the substance of a banker's opinion does not constitute a disclosure claim"); In re Gen. Motors 

(Hughes) S'holder Litig., 2005 WL 1089021, at *17 ("Plaintiffs simply think the bankers got it 

wrong – this alone does not state a disclosure claim.") (citation omitted). See also Bond 

Opportunity Fund v. Unilab Corp., No. 99 Civ. 11074(JSM), 2003 WL 21058251, at *5-7 

(S.D.N.Y. May 9, 2003) (dismissing plaintiff's complaints about the proxy's purportedly 

insufficient disclosure of projections, interests of the financial advisor, and underlying data 

because they "fail[ed] to meet the demanding pleading standards set out by the PSLRA and in 

the cases"). 

Likewise, Plaintiff's allegation that the preliminary proxy is materially 

misleading because it does not "disclose Ness's unlevered free cash flows or even the key inputs 

necessary to reach free cash flows" fails. (Compl. ¶ 69) But free cash flows are not per se

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25 

material, and Plaintiff alleges no facts that would cause them to be material here. See

Steamfitters Local Union 447 ex rel. inVentive Health, Inc. v. Walter, C.A. No. 5492-CC, at 8-9 

(Del. Ch. June 21, 2010) (TRANSCRIPT) (denying motion to expedite because free cash flow 

projections were not material; attached to the Certification of Andrew Muscato as Exhibit C); In 

re 3Com, 2009 WL 5173804, at *2-3 (denying expedition where bankers' discounted cash flow 

analysis was not accompanied by free cash flow projections because the plaintiffs "failed to 

assert a colorable claim as to why management should be required to provide full versions of the 

projections underlying the already disclosed summaries"). The law is clear that directors are not 

required to bombard stockholders with all of the information that would be necessary for them to 

perform their own independent valuation analyses. Thus, "[a] disclosure that does not include all 

financial data needed to make an independent determination of fair value is not per se misleading 

or omitted a material fact. The fact that financial advisors may have considered certain nondisclosed information does not alter this analysis." In re Checkfree Corp., 2007 WL 3262188, at 

*2. See also Walter v. Holiday Inns, Inc., 985 F.2d 1232, 1244 (3d Cir. 1993) (affirming 

judgment for defendants on breach of fiduciary duty claims and holding that the "failure to 

disclose the 1981 cash flow projection was not a material omission"). 

 Plaintiff will likely rely on Maric Capital Master Fund, Ltd. v. Plato Learning, 

Inc., 11 A.3d 1175, 1178 (Del. Ch. 2010), for the proposition that free cash flow estimates are 

clearly material. But Maric does not hold that free cash flow estimates must be disclosed; the 

court in Maric merely held that in cases where management prepared free cash flow estimates 

and then excised them from the projections disclosed to stockholders, it should put them back in. 

Likewise, Plaintiff will likely rely on In re Netsmart Technologies, Inc. Shareholders Litigation, 

924 A.2d 171 (Del. Ch. 2007), for the proposition that disclosures are materially incomplete if 

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26 

cash flow projections are not disclosed. (Op. Br. at 13) However, the court in Netsmart required 

disclosure of the free cash flow projections because management had provided its financial 

advisor with an updated set of projections, but only disclosed an older set in the proxy. 

Netsmart, 924 A.2d at 202-03. Here, Plaintiff cannot allege that management even prepared free 

cash flow estimates – let alone updated estimates – or that they erased them from the projections 

they gave to Jefferies or BoA Merrill Lynch. Id. See also Stroud v. Grace, 606 A.2d 75, 84 

(Del. 1992) (stating that directors have a duty to disclose only "material information within the 

board's control" and not information that does not exist) (emphasis added). Therefore, Plaintiff's 

disclosure claims must be dismissed. 

B. Plaintiff Fails To State A Section 20(a) Claim. 

Plaintiff's Section 20(a) claim against the Individual Defendants and Ness fails 

because Plaintiff has not adequately pled a primary violation of Section 14(a). (Compl. ¶¶ 78-86) 

Section 20(a) of the Exchange Act provides that a person who controls someone that violates 

Section 14(a) may be held liable to the same extent as the controlled person. See 15 U.S.C. § 

78t(a). However, "control person liability under section 20(a) of the 1934 Act ... is premised 

upon a predicate violation of the 1934 Act," thus, Section 20(a) claims must be dismissed if there 

is no underlying violation. Cal. Pub. Emps.' Ret. Sys. v. Chubb Corp., 394 F.3d at 142, 160 

(affirming district court dismissal of Section 20(a) claim because the underlying Section 14(a) 

claim failed). See also Berlin Fin. Ltd. v. MPW Indus. Servs. Grp., Inc., No. 2:07-cv-442, 2008 

WL 161309, at *10 (S.D. Ohio Jan. 15, 2008) (granting motion to dismiss plaintiff's Section 20(a) 

claim under Federal Rule 12(b)(6), with prejudice, because "'the lack of any predicate violation 

of the Securities Exchange Act of 1934 compels dismissal of control person claims'") (quoting 

Cal. Pub. Emps.' Ret. Sys., 394 F.3d at 159). 

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Even if Plaintiff had adequately pleaded a Section 14(a) claim – which he has not 

– Plaintiff has still failed to adequately plead a Section 20(a) claim because he does not allege 

that each individual director was a "controlling person." See SEC v. Pasternak, 561 F. Supp 2d 

459, 502 (D.N.J. 2008) (stating that a necessary element of a Section 20(a) claim is establishing 

that the defendant was a "controlling person"). Indeed, "it is well-settled that '[t]he mere fact that 

an individual is a director of a firm is not sufficient to show he is a control[ling] person of the 

firm.'" In re Digital Island Sec. Litig., 223 F. Supp. 2d 546, 561 (D. Del. 2002), aff'd, 357 F.3d 

322 (3d Cir. 2004) (citations omitted). Other than Mr. Gerlitz, none of the other Independent 

Directors are alleged to have any responsibilities with Ness besides their directorship. Yet, 

"even a CEO is not automatically a 'controlling person' under section 20(a)." Id. at 561 n.9 

Furthermore, Plaintiff's conclusory allegation that "each of the Individual 

Defendants had direct and supervisory involvement in the day-to-day operations of the 

Company" is insufficient because it requires this Court to adopt the "group pleading" doctrine. 

(Compl. ¶ 82) But, the PSLRA abolished "group pleading." See Winer Family Trust v. Queen, 

503 F.3d 319, 337 (3d Cir. 2007) ("We ... hold the group pleading doctrine is no longer viable in 

private securities actions after the enactment of the PSLRA."). See also In re Tyson Foods, Inc., 

155 F. App'x. 53 (3d Cir. 2005); In re Synchronoss Sec. Litig., 705 F. Supp. 2d 367, 404 n.49 

(D.N.J. 2010) (noting that the Third Circuit has held the PSLRA forecloses the practice of group 

pleading). Thus, the Section 20(a) claim must be dismissed because Plaintiff has failed to 

adequately plead an underlying Section 14(a) claim, and he does not allege facts to establish that 

the individual directors were controlling persons. 

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IV. PLAINTIFF FAILS TO STATE AN AIDING AND ABETTING CLAIM AGAINST 

NESS. 

Even assuming a company can aid and abet itself, to state an aiding and abetting 

claim, a complaint must adequately allege both an underlying claim for breach of fiduciary duty 

and the necessary elements of aiding and abetting. Weil v. Morgan Stanley DW Inc., 877 A.2d 

1024, 1039 (Del. Ch. 2005) (dismissing aiding and abetting claim for two independent reasons: 

plaintiff "failed to state an underlying claim for breach of fiduciary duty" and "fail[ed] to allege 

any facts that support an inference that [aiding and abetting defendant] knowingly participated in 

any breach"). "The standard for an aiding and abetting claim is a stringent one, one that turns on 

proof of scienter of the alleged abettor." Binks v. DSL.net, Inc., C.A. No. 2823-VCN, 2010 WL 

1713629, at *10 (Del. Ch. Apr. 29, 2010). As discussed above, Plaintiff has failed to allege any 

underlying breach of fiduciary duty claim – a fact fatal to his aiding and abetting claim. Globis, 

2007 WL 4292024, at *15 (dismissing aiding and abetting claim because "this Court has 

determined that the Complaint fails to state a claim for any underlying breach of fiduciary duty"); 

Related Westpac LLC v. JER Snowmass LLC, C.A. No. 5001-VCS, 2010 WL 2929708, at *8 

(Del. Ch. July 23, 2010) ("Furthermore, because the breach of fiduciary duty claim is dismissed, 

the aiding and abetting claim must also be dismissed."). But even if Plaintiff had stated an 

underlying breach of fiduciary duty – which he has not – he must still allege facts (not mere 

conclusions) demonstrating: "(1) the existence of a fiduciary relationship; (2) the fiduciary 

breached its duty; (3) a defendant, who is not a fiduciary, knowingly participated in a breach; and 

(4) damages to the plaintiff resulted from the concerted action of a fiduciary and the 

nonfiduciary." Globis, 2007 WL 4292024, at *15 (emphasis added). 

Here, Plaintiff fails to allege any facts demonstrating that Ness "knowingly 

participated" in any purported breach of fiduciary duty by the Ness Board. Indeed, Plaintiff's 

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conclusory allegations merely stating that Ness acted with knowledge of a purported breach of 

fiduciary duty or knowingly aided and abetted the Individual Defendants' wrongdoing are 

routinely rejected. See, e.g., Nebenzahl v. Miller, C.A. No. 13206, 1996 WL 494913, at *7 (Del. 

Ch. Aug. 26, 1996) (dismissing claim because plaintiffs alleged only a conclusion that defendant 

knowingly participated in fiduciary's breach); In re NYMEX S'holder Litig., C.A. Nos. 3621-

VCN, 3835-VCN, 2009 WL 3206051, at *12 (Del. Ch. Sept. 30, 2009) ("[C]onclusory 

allegations such as '[aiding and abetting defendant] had knowledge of the [fiduciary d]efendants' 

fiduciary duties and knowingly and substantially participated and assisted in the [fiduciary 

d]efendants' breaches of fiduciary duty, and therefore, aided and abetted such breaches of 

fiduciary duties' are insufficient as a matter of law.") (brackets in original). So too here.9

 

9

 Plaintiff's claims against CVCI, the Jersey Holding Corporation, and the Jersey Acquisition 

Corporation for aiding and abetting fail for the same reasons set forth in this section and 

should be dismissed as well. 

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659973-Wilmington Server 1A - MSW 

CONCLUSION 

For the foregoing reasons, the Ness Defendants' motion to dismiss should be 

granted, and the Complaint should be dismissed with prejudice. 

 /s/ Andrew Muscato

Robert J. Del Tufo 

Andrew Muscato 

SKADDEN, ARPS, SLATE, 

 MEAGHER & FLOM LLP 

(A Delaware Limited Liability Partnership) 

Four Times Square 

New York, New York 10036 

Tel.: (212) 735-3000 

Fax: (212) 735-2000 

OF COUNSEL: 

John D. Donovan, Jr. 

Brendon O. Carrington 

ROPES & GRAY LLP 

Prudential Tower 

8000 Boylston Street 

Boston, Massachusetts 02199-3600 

Tel.: (617) 951-7566 

Fax: (617) 235-0023 

Attorneys for Defendants Satyam C. Cherukuri, 

P. Howard Edelstein and Morris Wolfson 

Edward P. Welch 

Robert S. Saunders 

Ronald N. Brown, III 

Arthur R. Bookout 

SKADDEN, ARPS, SLATE, 

 MEAGHER & FLOM LLP 

One Rodney Square 

P.O. Box 636 

Wilmington, Delaware 19899-0636 

Tel.: (302) 651-3000 

Fax: (302) 651-3001 

Attorneys for Defendants Ness Technologies 

Inc., Satyam C. Cherukuri, Issachar "Sachi" 

Gerlitz, Morris Wolfson, Dan S. Suesskind, P. 

Howard Edelstein and Gabriel Eichler 

DATED: July 21, 2011

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