Opinion ID: 2068918
Heading Depth: 1
Heading Rank: 3

Heading: The Court of Chancery's Reliance on the Prospectus

Text: After determining when the alleged wrongs occurred for purposes of 8 Del.C. § 327, the Court of Chancery used the Prospectus to establish that Partners was not a contemporaneous stockholder. This Court recently discussed the extent to which a trial court may consider documents outside the pleadings when ruling on the sufficiency of a complaint. In re Santa Fe Pacific Corp. Litigation, Del.Supr., 669 A.2d 59 (1995). Generally, matters outside the pleadings should not be considered in ruling on a motion to dismiss. Id. at 68. However, in particular instances and for carefully limited purposes, the trial court may consider documents referred to in the complaint. Id. at 69. For example, where there is a corporate claim based upon inadequate or misleading disclosures, a court may refer to the allegedly deficient corporate document to determine what was disclosed. Id. at 70. A trial court may also consider documents referred to in the pleadings, to establish formal, uncontested matters. Ibid. Partners argues that the Court of Chancery ignored Santa Fe by using the Prospectus to establish a hotly contested fact  that the Private Placement Agreement was executed before the Prospectus was issued. The problem with this argument is that it is founded on an inaccurate premise. The trial court made no findings about the date on which an agreement was signed. The court ruled that the wrongs alleged in the Amended Complaint occurred at the time the decision was made to sell the directors stock at $18.60 per share in the Private Placement. The Court of Chancery deduced that the wrongful decision must have been made prior to the date on which the Prospectus was issued, since the fact that there would be a Private Placement and the terms thereof were disclosed in the Prospectus. This is the sort of uncontestable fact that may be considered at the pleading stage even if not admitted by the plaintiff.