Opinion ID: 2763005
Heading Depth: 2
Heading Rank: 1

Heading: The Competing Contentions of the Parties

Text: This expedited case has come before us without a formal opinion from the Court of Chancery making detailed fact findings under the standards that govern a preliminary 8 QVC, 637 A.2d at 39. 9 See, e.g., In re El Paso S’holders Litig., 41 A.3d 432, 449-51 (Del. Ch. 2012); NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 31 (Del. Ch. 2009). 10 See, e.g., El Paso, 41 A.3d at 432 (refusing to enjoin a merger that “would violate accepted standards for the issuance of affirmative injunctions and attempt to force [the buyer] to consummate a different deal than it bargained for”); In Re Toys “R” Us, Inc. S’holders Litig., 877 A.2d 975, 1021 (Del. Ch. 2005). 4 injunction. We therefore are required to craft our own factual recitation in the first instance as to most aspects of the process. Our recitation will reflect this reality and our reluctance to make initial findings of fact on issues that were not fully developed below and that did not motivate the Court of Chancery to issue an injunction. To frame our discussion of the facts, it is useful to set forth the basic contending positions of the parties. The plaintiffs argue that C&J‟s board entered into a change of control transaction without recognizing that it was doing so. With the mindset that it was acquiring an asset, the board never conducted an active market check to see if there were other buyers for C&J. The plaintiffs argue that the C&J board, despite having five independent members, was overly influenced by the CEO, chairman, and founder, Joshua Comstock, who was allegedly looking to acquire Nabors CPS to secure a new employment package for himself, and was therefore willing to cause C&J to pay more than it should. Furthermore, the plaintiffs point out that C&J‟s banker, Citigroup Global Markets, Inc. (“Citi”), had worked with Nabors previously and was suggested by Anthony Petrello, Nabors‟ CEO and board chairman, because Petrello wanted to employ C&J‟s preferred banker, Goldman Sachs, as his advisor on the deal. The plaintiffs contend that Citi acted as a banker for a preferred deal between two companies that it regarded as clients, rather than as an advisor solely focused on C&J‟s best interests. The plaintiffs further argue that Comstock failed to keep the board adequately informed, did not take advantage of Nabors CPS‟ declining performance over the course of the negotiations, and had the board approve a poorly priced deal in order to secure a lavish pay package for himself. Most fundamentally, the plaintiffs argue that the board 5 failed to fulfill its fiduciary duties under Revlon in approving a transaction where Nabors would end up with majority voting control of C&J. Rather than engage in an active market check, the board signed up its favorite deal with the inadequate protections of a passive market check and certain bye-law provisions, which the plaintiffs characterize as protections for Comstock and his managers, not for C&J stockholders. Accordingly, the plaintiffs characterize the injunction below as a modest one that requires the board to conduct the shopping process it should have done in the first place. The defendants counter that this is a highly favorable, strategic transaction that was approved by a board whose disinterestedness was not questioned by the Court of Chancery. Although the board authorized Comstock to lead the negotiations, the defendants stress that Comstock owned a 10% stake in C&J, and had no incentive to do anything to harm the value of those shares. Nor, say the defendants, did Comstock have any self-interested, non-business-related reason to favor the Nabors deal over any of the others that C&J had considered, even if he wanted a better compensation package. As important, the defendants argue that the entire board was apprised of the process throughout and approved the deal because it was beneficial to stockholders. They highlight the frequent communication between Comstock and the independent directors, especially Adrianna Ma, whose employer, General Atlantic, is a private equity firm that owned 10% of C&J‟s stock.11 The defendants argue that Revlon does not apply, but even 11 The plaintiffs attempt to cast aspersions on Ma‟s independence because Comstock supposedly “co-opted her” with a “potential consultancy deal” on the deal. Comstock mentions the possibility of engaging Ma and her team to provide diligence services in an email dated March 12, 2014. App. to Opening Br. at 2387. But Ma did not react to the possibility of working on the 6 if it did, the board satisfied its requirement to “act[] reasonably . . . to secure the transaction offering the best value reasonably possible.”12 They state that the Court of Chancery misapplied the standard for a preliminary injunction and also misinterpreted Revlon when it granted one and required the C&J board to shop the deal. With those contentions in mind, we summarize the most relevant facts from the record below and the briefing by the parties.