Court Opinion

ID: 2766196
Source: CourtListenerOpinion
Date Created: 2015-01-02 16:02:07.077563+00
Date Added: 2024-06-11T11:26:21.310177
License: Public Domain

COURT OF CHANCERY
                                               OF THE
                                      STATE OF DELAWARE

ANDRE G. BOUCHARD                                                     New Castle County Courthouse
      CHANCELLOR                                                      500 N. King Street, Suite 11400
                                                                     Wilmington, Delaware 19801-3734

                               Date Submitted: December 31, 2014
                                 Date Decided: January 2, 2015

  Seth D. Rigrodsky, Esquire                            William M. Lafferty, Esquire
  Brian D. Long, Esquire                                John P. DiTomo, Esquire
  Gina M. Serra, Esquire                                Lauren K. Neal, Esquire
  Rigrodsky & Long, P.A.                                Morris, Nichols, Arsht & Tunnell LLP
  2 Righter Parkway, Suite 120                          1201 North King Street
  Wilmington, DE 19803                                  Wilmington, DE 19899

  Peter B. Andrews, Esquire                             Gregory P. Williams, Esquire
  Craig J. Springer, Esquire                            A. Jacob Werrett, Esquire
  Andrews & Springer LLC                                J. Scott Pritchard, Esquire
  3801 Kennett Pike                                     Richards, Layton & Finger, P.A.
  Building C, Suite 305                                 One Rodney Square
  Wilmington, DE 19807                                  920 North King Street
                                                        Wilmington, DE 19801

          RE:      In re Family Dollar Stores, Inc. Stockholder Litigation
                   Consolidated C.A. No. 9985-CB

  Dear Counsel:

          On December 24, 2014, Plaintiffs filed an application for certification of an

  interlocutory appeal from the memorandum opinion I issued on December 19, 2014,

  denying Plaintiffs‟ motion to preliminarily enjoin the stockholder vote on the proposed

  merger between Family Dollar Stores, Inc. (“Family”) and Dollar Tree, Inc. (“Tree”).1

  1
   In re Family Dollar Stores, Inc. S’holder Litig., 2014 WL 7246436 (Del. Ch. Dec. 19,
  2014) (hereafter, the “Opinion”).
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 2 of 8

         As discussed in the Opinion, Dollar General, Inc. (“General”) emerged as a

competing bidder for Family after it had entered a merger agreement with Tree. This

prompted Plaintiffs to seek to preliminarily enjoin the stockholder vote on the proposed

merger, which originally was scheduled for December 23, 2014, “[1] until the Board has

properly engaged with [General] and made a good faith effort to achieve a value-

maximizing transaction, and [2] until corrective disclosures have been made.”2             On

December 23, 2014, the stockholder meeting was adjourned until January 22, 2015.

According to Family‟s public filings, the proposed merger cannot be consummated until

February 2015.

         For the reasons explained below, I deny Plaintiffs‟ application for failure to satisfy

the requirements of Supreme Court Rule 42(b) for pursuing an interlocutory appeal.

I.       LEGAL STANDARD

         “Applications for certification of an interlocutory appeal require the exercise of

the trial court‟s discretion and are granted only in extraordinary or exceptional cases.”3

Under Supreme Court Rule 42, “[n]o interlocutory appeal will be certified by the trial

2
    Opinion at *11 (quoting Pls.‟ Op. Br. 2).
3
  In re Cogent, Inc. S’holder Litig., 2010 WL 4146179, at *1 (Del. Ch. Oct. 15, 2010)
(citing Ryan v. Gifford, 2008 WL 43699, at *4 (Del. Ch. Jan. 2, 2008); In re Pure Res.,
Inc. S’holders Litig., 2002 WL 31357847, at *1 (Del. Ch. Oct. 9, 2002)).
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 3 of 8

court or accepted by [the Supreme] Court unless the order of the trial court [1] determines

a substantial issue, [2] establishes a legal right and [3] meets 1 or more of the . . . criteria”

listed in Rule 42 subparts (b)(i)-(v).4 Supreme Court Rule 42(b)(i) incorporates by

reference “the criteria applicable to proceedings for certification of questions of law set

forth in Rule 41.”5 Among the criteria in Supreme Court Rule 41 for certification of

questions of law are that “[t]he question of law is of first instance in this State” or that

“[t]he decisions of the trial courts are conflicting upon the question of law.”6

II.      ANALYSIS

         Plaintiffs assert three arguments for why the Opinion meets the criteria set forth in

Rule 42(b)(i)-(v).        For the reasons explained below, I conclude that each of these

arguments is without merit. Thus, I deny Plaintiffs‟ application for failure to satisfy any

of the criteria in Rule 42(b)(i)-(v) without deciding whether the Opinion determines a

substantial issue and/or establishes a legal right.

         First, Plaintiffs argue that the Opinion decides an original question of law, to wit,

“whether a particularly restrictive interpretation of a fiduciary-out provision excuses a

board from their Revlon duties, such that the board may reject a financially superior offer

based on antitrust concerns, without fully informing themselves of those antitrust

4
    Supr. Ct. R. 42(b).
5
    Supr. Ct. R. 42(b)(i).
6
    Supr. Ct. R. 41(b)(i)-(ii).
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 4 of 8

concerns and without negotiating terms that might diminish or eliminate those

concerns.”7 I disagree. The Opinion did not decide an original question of law in my

view. Rather, as members of this Court have done for nearly 30 years since Revlon8 was

decided, the Opinion simply applied well-established legal principles emanating from

Revlon to a particular set of facts.

         In particular, I concluded in the Opinion “that the Board‟s decision not to engage

in discussions with General in response to its Revised Offer was a reasonable exercise of

judgment consistent with the directors‟ obligations under Revlon to maximize value for

Family‟s stockholders.”9 I reached this conclusion “taking into account the framework of

the fiduciary out provision in the Merger Agreement,”10 and based on numerous other

facts of record, including facts demonstrating that (1) the Board was motivated to

maximize Family‟s value,11 (2) the Board had been specifically advised that General‟s

7
    Appl. for Certification of Interlocutory Appeal 12-13.
8
    Revlon, Inc. v. MacAndrews & Forbes Hldgs., Inc., 506 A.2d 173 (Del. 1986).
9
    Opinion at *13.
10
  Id. at *16. Notably, Plaintiffs do not contend that the fiduciary out provision in the
merger agreement was not customary, do not advance an alternative reading of that
provision from the one set forth in the Opinion, and do not identify any legal authority
suggesting that I misinterpreted the provision.
11
     Id. at *12-13.
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 5 of 8

$80 offer had only an approximately 40% chance of obtaining antitrust approval,12 (3) the

Board, after receiving advice from its financial and legal advisors, reasonably determined

that the level of divestitures General had proposed in connection with its $80 offer was so

far below the level necessary to sufficiently address the antitrust risk of a Family/General

combination that it was not prudent or appropriate to open negotiations with General,13

and (4) the Board was adequately informed in assessing the antitrust risks associated with

General‟s $80 offer even though General‟s pricing information was not available to it.14

          Second, Plaintiffs argue that “[t]he Opinion . . . directly conflicts with the Court‟s

opinion in Koehler v. NetSpend Holdings Inc.,[15] by holding that the directors need to

only be adequately informed rather than fully informed when deciding to reject a

financially superior offer from a third-party.”16 In my view, this argument is one of

semantics as there is no genuine conflict between the Opinion and NetSpend in their

respective analyses of a Delaware director‟s obligation to be informed when making a

decision in the context of fulfilling one‟s obligations under Revlon.

12
     Id. at *16.
13
     Id. at *16-18.
14
     Id. at *18.
15
     2013 WL 2181518 (Del. Ch. May 21, 2013).
16
     Appl. for Certification of Interlocutory Appeal 13.
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 6 of 8

         In the Opinion, I quoted from the Supreme Court‟s decision in Paramount

Communications Inc. v. QVC Network Inc., to explain that the Family directors‟

obligations under Revlon placed “the burden [on them] to show that, when they made the

decision(s) at issue, they „were adequately informed and acted reasonably.‟” 17 Later in

the Opinion, when discussing that General‟s pricing information was confidential and

thus was not reasonably available to the Board when General surfaced as a competing

bidder, I further explained, quoting from the Supreme Court‟s decision in Aronson v.

Lewis, that “Family‟s directors were obligated to „inform themselves, prior to making a

business decision, of all material information reasonably available to them.‟”18

         In NetSpend, the Court explained that under the “middle-ground review” of

Revlon, “the directors have the burden of proving that they were fully informed and acted

reasonably.”19 In doing so, the Court cited QVC, which elaborates on the directors‟ duty

to be informed under Revlon in a manner similar to the Opinion, as follows:

         In particular, this Court has stressed the importance of the board being
         adequately informed in negotiating a sale of control: “The need for
         adequate information is central to the enlightened evaluation of a
         transaction that a board must make.” This requirement is consistent with
         the general principle that “directors have a duty to inform themselves, prior

17
  Opinion at *12 (quoting Paramount Commc’ns Inc. v. QVC Network Inc., 637 A.2d 34,
45 (Del. 1994)).
18
  Opinion at *18 (quoting Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984)(emphasis
added)).
19
     NetSpend, 2013 WL 2181518, at *11.
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 7 of 8

         to making a business decision, of all material information reasonably
         available to them.”20

Given NetSpend‟s explicit reliance on QVC, and the lack of any indication in the opinion

that the Court intended to draw a distinction between being “fully informed” and

“adequately informed,” I see no substantive difference between the legal standard

articulated in the Opinion and in NetSpend. More to the point, nothing in NetSpend,

supports the illogical notion implicit in Plaintiffs‟ certification argument here that a

board‟s duty to be informed in the context of a sale of control would require that the

board consider information (e.g., General‟s pricing data) that is not reasonably available

to it.

         Finally, relying on Supreme Court Rule 42(b)(iii), Plaintiffs argue that

interlocutory appellate review of the Opinion is appropriate because “it involves

substantial issues and such review by the Supreme Court would serve the considerations

of justice.”21 The criterion for interlocutory review in Rule 42(b)(iii) requires that:

         [1] An order of the trial court has reversed or set aside a prior decision of
         the court, a jury, or an administrative agency from which an appeal was
         taken to the trial court which had determined a substantial issue and
         established a legal right, and [2] a review of the interlocutory order may
         terminate the litigation, substantially reduce further litigation, or otherwise
         serve considerations of justice.22

20
     QVC, 637 A.2d at 44 (internal citations omitted).
21
     Appl. for Certification of Interlocutory Appeal 13.
22
     Supr. Ct. R. 42(b)(iii) (emphasis added).
In re Family Dollar Stores, Inc. Stockholder Litigation
Consolidated C.A. No. 9985-CB
January 2, 2015
Page 8 of 8

Plaintiffs do not (and cannot) argue that the Opinion “reversed or set aside a prior

decision of the court, a jury, or an administrative agency.”23 Accordingly, the first of the

two required elements of Rule 42(b)(iii) is not met here.24

                                           *****

           Because Plaintiffs‟ application fails to satisfy any of the requirements for

certification set forth in Rule 42(b)(i)-(v) for the reasons explained above, I deny

Plaintiffs‟ application for certification of an interlocutory appeal.

           IT IS SO ORDERED.

                                            Sincerely,

                                            /s/ Andre G. Bouchard

                                            Chancellor

AGB/gp

23
     Id.
24
   Archstone P’rs, L.P. v. Lichtenstein, 2009 WL 2031785, at *5 (Del. Ch. July 10, 2009)
(finding that Rule 42(b)(iii) was not met where “Plaintiffs . . . utterly and completely
fail[ed] to establish that the June 19 Order „reversed or set aside a prior decision of the
court, a jury, or an administrative agency‟”) (citation omitted).