Opinion ID: 2266268
Heading Depth: 2
Heading Rank: 2

Heading: Disclosure Relating to the Timing of Patent Reinstatement

Text: In a related claim, Zirn contends that the Court of Chancery erred in holding that the misstatement of the VLI Board concerning the timing of possible patent reinstatement was immaterial. Zirn's claim arises from an obvious inconsistency between correspondence sent to VLI by patent counsel and the characterization of that information by the VLI Board. On November 3, 1987, patent counsel sent a letter to VLI indicating that no final PTO action is expected until approximately November 21, 1987. In the 14D-9, issued on November 10, 1987, however, the VLI Board indicated that [t]he Company is unable to estimate when this petition for reconsideration will be decided by the Patent and Trademark Office.... In light of the above correspondence from patent counsel, the Court of Chancery concluded that the VLI Board misstated the information in its possession concerning the projected time frame for PTO action on the reinstatement petition. The Chancellor held that there was no factual basis for this statement and one could conclude that the Schedule 14D-9 was misleading on this point. Zirn v. VLI Corp, Del.Ch., C.A. No. 9488, mem. op. at 18-19, 1995 WL 362616 (June 12, 1995). The Chancellor nevertheless held that this misstatement was not material and, therefore, not actionable. Zirn argues that the Chancellor misapplied the materiality standard in reaching this determination. This argument, however, is without merit. The trial court correctly concluded that the information pertaining to reinstatement, while relevant to the Board's decision to renegotiate the original merger agreement and to accept the lower price of $6.25 per share, was not material to the VLI stockholders' decision to tender to AHP. The Court of Chancery correctly stated that the original, $7.00 per share transaction was no longer available. Thus, the stockholders were not faced with a decision of whether to hold out for the higher offer. Instead, the VLI stockholders were deciding whether to accept a $6.25 per share offer. Since information pertaining to the timing of the reinstatement was not relevant to a determination of the adequacy of the $6.25 per share offer, this information was not material. The Court of Chancery was correct in so holding.