Opinion ID: 1959481
Heading Depth: 1
Heading Rank: 10

Heading: Disclosure Claim

Text: In properly discharging their fiduciary responsibilities, directors of Delaware corporations must exercise due care, good faith and loyalty whenever they communicate with shareholders about the corporation's affairs. [70] When shareholder action is requested, directors are required to provide shareholders with all information that is material to the action being requested and to provide a balanced, truthful account of all matters disclosed in the communication with shareholders. [71] The materiality standard requires that directors disclose all facts which, under all the circumstances, ... would have assumed actual significance in the deliberations of the reasonable shareholder. [72] These disclosure standards are well established. Earlier this year, we decided another case involving alleged disclosure violations when minority shareholders were presented with the choice of either tendering their shares or being cashed out in a third-party merger transaction that had been pre-approved by the majority shareholder. [73] In Skeen, it was argued that the minority shareholders should have been given all of the financial data they would need if they were making an independent determination of fair value. We declined to establish a new disclosure standard where appraisal in an option. [74] We adhere to our holding in Skeen. McMullin's Amended Complaint alleges that the Chemical Directors breached their fiduciary duty by failing to disclose to the minority shareholders material information necessary to decide whether to accept the Lyondell tender offer or to seek appraisal under 8 Del. C. § 262. [75] The Court of Chancery summarized the plaintiff's allegations that the defendants breached their duty of disclosure by omitting from the 14D-9 the following information: indications of interest from other potential acquirers; the handling of these potential offers; the restrictions and constraints imposed by ARCO on the potential sale of Chemical; the information provided to Merrill Lynch and the valuation methodologies used by Merrill Lynch. In a similar context, the Court of Chancery has held the fact that the majority shareholder controls the outcome of the vote on the merger makes a more compelling case for the application of the recognized disclosure standards. [76] When a complaint alleges disclosure violations, courts are required to decide a mixed question of fact and law. [77] In the specific context of this case, an answer to the complaint, discovery and a trial may all be necessary to develop a complete factual record before deciding whether, as a matter of law, the Chemical Directors breached their duty to disclose all material facts to the minority shareholders. [78] The disclosure violations alleged in McMullin's Amended Complaint are, if true, sufficient to withstand a motion to dismiss.