Opinion ID: 1927508
Heading Depth: 1
Heading Rank: 5

Heading: Direct Liability of Bank of Boston Substantial Role

Text: Plaintiff claims that Bank of Boston's substantial role in the preparation and distribution of Bancorp's proxy statement renders it liable for the disclosure violations. Assuming arguendo that Bank of Boston participated substantially in the process, plaintiff cannot state a claim against Bank of Boston apart from aiding and abetting. [19] Plaintiff relies on Shell Petroleum, Inc. v. Smith, Del.Supr., 606 A.2d 112 (1992), for the proposition that a substantial role alone suffices to find Bank of Boston liable for the disclosure violation. SPNV Holdings (Holdings), the parent of Shell Partners, Inc. (Shell), was the 94.6% stockholder of Shell when Holdings decided to effect a squeezeout merger of the minority. Id. at 113. Holdings argued that it should not be held liable for the disclosure violations contained in a proxy statement issued by Shell. Plaintiff points to the following statements by this Court in response to Holdings' argument: Holdings' liability was not premised solely upon its fiduciary duty as a majority shareholder, rather Holdings' liability was based on the substantial role it played in the preparation and distribution of the disclosure materials.       Based upon the significant role played by Holdings in the preparation and distribution of the disclosure materials, we find the decision of the Court of Chancery finding Holdings liable for the error ... to be manifestly correct. Id. at 116. Shell Petroleum does not support the imposition of liability on an unaffiliated third party simply because that third party participates substantially in the preparation of disclosure materials. Holdings was a majority stockholder attempting to squeeze out the minority stockholders of Shell. As such, it directly owed fiduciary duties to these stockholders. Holdings' substantial role merely served to rebut its assertion that it should not be held responsible for errors in the disclosure materials of its subsidiary, Shell. Imposing liability on persons or entities solely because of their substantial role in the preparation of misleading proxy statements, in the absence of elements such as scienter, would sweep other actors within its ambit. Lawyers and accountants, in particular, play a substantial role in the preparation of proxy statements and could face exposure to liability for work performed on behalf of Delaware corporations if the broad sweep of a substantial role concept contended by plaintiff were to prevail. An interpretation of Shell Petroleum which requires a fiduciary relationship  such as Holdings' duty to Shell's minority stockholders  appropriately limits the conceptual reach of this doctrine and the range of potential defendants.