Opinion ID: 74978
Heading Depth: 4
Heading Rank: 2

Heading: McCormick Shares

Text: 18 The district judge also determined that Smick and Duncan did not have standing to recover for breach of the Agreement with respect to the McCormick shares because the rights granted to PersonaCare shareholders in section 6.6 of the Merger Agreement were not assignable. On appeal, the Duncan Group argues that, because TheraTx recorded the transfer from McCormick to Duncan and Smick on its stock register in October 1994 and subsequently reflected the transfer of ownership from McCormick to Duncan and Smick in the Amended Shelf Registration under which trading resumed on 30 June 1995, TheraTx acknowledged the rights of Duncan and Smick to have the McCormick Shares included in the Shelf Registration and should be estopped from asserting that Duncan and Smick did not have the right granted by section 6.6 of the Agreement to have those shares registered. In making this argument, the Duncan Group attributes TheraTx's failure to include the McCormick shares in the names of Duncan and Smick, respectively, as an oversight and mistake. TheraTx counters that it was not obligated to register any shares of TheraTx stock received by PersonaCare shareholders after the Agreement was executed. Accordingly, TheraTx was not obligated to include the McCormick shares acquired by Duncan and Smick in the Shelf Registration. Further, TheraTx asserts that the crediting of the McCormick shares to Duncan and Smick in the Amended 19 Shelf Registration after the January 1995 breach does not estop it from denying that Duncan and Smick have contractual rights with regard to the McCormick Shares. We have determined that the rights of the PersonaCare stockholders were not assignable under the clear terms of Section 6.6. Therefore, when McCormick gifted a portion of his TheraTx stock to Duncan and Smick, McCormick's contractual right for those shares to be included in the Shelf Registration was not transferred to Duncan and Smick. Further, Duncan and Smick have failed to demonstrate any conduct on the part of TheraTx which suggests that Duncan, Smick, or any other person who received restricted shares of TheraTx stock after the execution of the Agreement would be entitled to sell that stock under the Shelf Registration under an estoppel theory. The 7 December 1994 letter from TheraTx's attorney to PersonaCare stockholders explained that if the PersonaCare stockholders chose to gift their TheraTx stock to another individual or entity, the recipient would receive restricted stock and the recipient stockholder would have to be listed in the Shelf Registration Prospectus in order to be able to sell the gifted stock. The letter further requested that the PersonaCare stockholders provide TheraTx a list of any potential gift recipients. The letter, however, did not undertake any new obligation to include such gift recipients in the Shelf 20 Registration. Indeed, it specifically discussed the possibility that trading under the Shelf Registration would be suspended. Therefore, the Amended Shelf Registration's reflection of the gift could not have suggested to Duncan and Smick that they were entitled to trade the McCormick shares under the initial Shelf Registration at the time the breach occurred. See Wilson v. American Insurance Co., 209 A.2d 902, 903-904 (Del. 1965) (requiring lack of knowledge of truth and detrimental reliance to establish estoppel). Therefore, we conclude that the district court correctly determined that Duncan and Smick were not entitled to recover damages for the breach of contract with regard to the McCormick shares.