Opinion ID: 2165124
Heading Depth: 2
Heading Rank: 2

Heading: Applicability of the Exceptions to Section 102(b)(7)

Text: Plaintiff argues that the individual defendants' conduct implicates the duty of loyalty and the proscription against knowing, intentional violations of law. [32] He argues that the individual defendants' conduct falls within the exceptions in Section 102(b)(7)(i) & (ii) because they: (i) improperly interfer[ed] with the voting process by knowingly or deliberately failing to make proper disclosure; (ii) acted in bad faith and recklessly; and (iii) improperly granted no-shop and lock-up clauses as part of the Merger. [33] Plaintiff also contends that Connell and Stang were interested directors who violated their duty of loyalty and that Connell's actions in his role as an officer fall outside Section 102(b)(7)'s protection. The individual defendants counter that plaintiff's claims are essentially conclusory for there is no affirmative proof that they knowingly or deliberately failed to disclose facts they knew were material. That is, they argue that they balanced in good faith which facts to disclose against those to withhold as immaterial. Next, they assert that case law does not support plaintiff's claim relating to the no-shop and lock-up clauses under the facts of this case. Finally, the individual defendants contend that the claim relating to Connell's conduct as an officer is barred pursuant to Supreme Court Rule 8 because it was not raised in the Court of Chancery. [34] On the merits, they assert that plaintiff has failed to segregate any of Connell's actions as an officer that fall within the exceptions to Section 102(b)(7). Plaintiff's claims are not supported by the record or Delaware law. The individual defendants did not violate the duty of loyalty under the facts of this case. [35] Plaintiff's intentional violation argument is unsupported by the record. [36] As to plaintiff's third claim, though the granting of no-shop and lock-up rights can under certain circumstances implicate the duty of loyalty, without any additional, supportive factual basis for his claim, sufficient at least to create a genuine issue of material fact, plaintiff's reliance on Mills and Unocal is unpersuasive. Even assuming that plaintiff's final argument is not procedurally barred, it lacks merit because plaintiff has failed to highlight any specific actions Connell undertook as an officer (as distinct from actions as a director) that fall within the two pertinent exceptions to Section 102(b)(7). See R. Franklin Balotti & Jesse A. Finkelstein, Delaware Law of Corp. & Business Org. § 4.19, at 4-335 (Supp.1992) (where a defendant is a director and officer, only those actions taken solely in the defendant's capacity as an officer are outside the purview of Section 102(b)(7)). [37]