Opinion ID: 1989267
Heading Depth: 1
Heading Rank: 4

Heading: Plaintiffs Have Pleaded Facts Sufficient to State Breach of Fiduciary Duty Claims

Text: We begin by examining the initial conclusion of the Court of Chancery that the plaintiffs alleged facts sufficient to permit an inference that five of the seven FSC directors were interested because of conflicts of interest in the MEC transaction. This Court reviews de novo the decision of the Court of Chancery on a motion to dismiss. [16] Like the Court of Chancery, we assume for purposes of the motion the truth of all well-pleaded allegations, according the plaintiffs the benefit of all reasonable inferences that can be drawn from the complaint. [17] The Court of Chancery correctly held that the plaintiffs have pleaded facts sufficient to infer that three of the FSC directors, Moffett, Adkerson, and Rankin, were interested in the MEC transaction because they served on the boards of the directors of both MOXY and FSC. [18] We also agree that the facts set forth in the complaint allege that two additional directors, Wohleber and Latiolais, had disabling conflicts of interest. Latiolais and Wohleber allegedly received substantial income from other entities within the interlocking directorates of Freeport-McMoRan companies and arguably had an interest in appeasing the MOXY and FSC insiders who also served with Latiolais and Wohleber on the boards of other Freeport companies. [19] Although the allegations regarding their lack of independence may ultimately not be factually sustainable, the plaintiffs are entitled at the pleading stage to the inference that Wohleber's and Latiolais' positions would affect the vote of a reasonable person in the same position because these insiders proposed the MEC transaction. [20] The trial court also correctly concluded that the plaintiffs are entitled to the inference that they may have a cognizable disclosure claim relating to the stock repurchase program. Plaintiffs allege that the FSC directors initiated the buyback plan because the directors believed the market undervalued the FSC stock. Only months later, the directors recommended the consideration offered in the MEC merger, which consideration was based partly on the market capitalization of FSC. [21] The defendants point out that the joint proxy statement incorporated into the complaint discloses the repurchase program, including the fact that the stock buyback would not terminate until after completion of the MEC transaction. As the trial court noted, however, an FSC stockholder would find material not only the existence of the repurchase program, but also the directors' possible conflicting views on the market value of FSC stock represented by the stock buyback and the merger. [22] Defendants maintain that the stock repurchase program was not motivated by a belief that the market undervalued FSC stock but rather was a capital budgeting decision to plow excess cash back into the company. The plaintiffs and the defendants have advanced arguments that require the court to infer the reasons behind implementing the buyback program. Discovery may flesh out these facts, but the plaintiffs are entitled to the benefit of all reasonable inferences from the complaint. [23] We agree with the trial court that the disclosure claim survives the Chancery Rule 12(b)(6) motion to dismiss.