Opinion ID: 1497598
Heading Depth: 1
Heading Rank: 19

Heading: Disclosure to Directors

Text: Cinerama contends that the non-disclosure to the directors of the Sullivan fee's origination at Bear Stearns (MAF's investment banker) and Sullivan's meetings with Perelman constituted a breach of fiduciary duty. When it considered the non-disclosure of those same two matters to the shareholders, the Court of Chancery found: first, that the original source of Sullivan's fee was immaterial under the standard this Court articulated in Rosenblatt v. Getty Oil Co., Del. Supr., 493 A.2d 929 (1985); and, second, that the record did not support Cinerama's contention that Sullivan was Perelman's inside man. These rulings were affirmed in Cede II. They are now the law of the case. On remand, the Court of Chancery concluded that if those facts did not require disclosure to the stockholders under Rosenblatt, they should not be deemed material under an analogy to Section 144(a)(1) either. The Court of Chancery reiterated that the material facts regarding Sullivan's interest (the fee's existence and contingency on the MAF deal) were disclosed and a majority of the non-interested directors approved the transaction in good faith. Cinerama, 663 A.2d at 1154. We agree. The duty of disclosure is based on a materiality standard. See Stroud v. Grace, Del.Supr., 606 A.2d 75, 84 (1992). With respect to Ryan's assumed interest, which was not disclosed, the Court of Chancery held that it is clear under the language of the statute, that the alleged hope of better employment opportunities does not constitute the kind of interest covered by Section 144. Cinerama, 663 A.2d at 1154. In other words, Ryan's inchoate hope of improved job circumstances was not the type of self-dealing transaction contemplated by Section 144. We agree. Just as Ryan's undisclosed assumed interest was not material under an analogy to Section 144(a)(2), it was not material under an analogy to Section 144(a)(1). See Cede II, 636 A.2d at 956; Stroud v. Grace, 606 A.2d at 84; Smith v. Van Gorkom, Del.Supr., 488 A.2d 858, 890 (1985).