Court Opinion

ID: 4377566
Source: CourtListenerOpinion
Date Created: 2019-03-15 17:02:24.391519+00
Date Added: 2024-06-11T14:49:26.412048
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE PILGRIM’S PRIDE CORPORATION              )     Consol. C.A. No.
DERIVATIVE LITIGATION                          )     2018-0058-JTL

                            MEMORANDUM OPINION

                         Date Submitted: December 21, 2018
                           Date Decided: March 15, 2019

Kurt M. Heyman, Melissa N. Donimirski, HEYMAN ENERIO GATTUSO & HIRZEL
LLP, Wilmington, Delaware; Jason M. Leviton, Joel A. Fleming, BLOCK & LEVITON
LLP, Boston, Massachusetts; Mark Lebovitch, Edward G. Timlin, David MacIsaac,
BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, New York, New York;
Counsel for Plaintiffs.

Kevin G. Abrams, Michael A. Barlow, Andrew J. Peach, ABRAMS & BAYLISS LLP,
Wilmington, Delaware; Michael B. Carlinsky, Adam M. Abensohn, QUINN EMANUEL
URQUHART & SULLIVAN, LLP, New York, New York; Counsel for Defendants JBS,
S.A., JBS USA Holding Lux S.à r.l., William Lovette, Andre Nogueira De Souza, Gilberto
Tomazoni, Tarek Farahat, and Denilson Molina.

Kevin R. Shannon, Christopher N. Kelly, Jaclyn C. Levy, POTTER ANDERSON &
CORROON LLP, Wilmington, Delaware; Counsel for Nominal Defendant Pilgrim’s Pride
Corporation.

LASTER, V.C.
       The plaintiffs are minority stockholders in nominal defendant Pilgrim’s Pride

Corporation (the “Company”), which is a Delaware corporation. They sued the Company’s

controlling stockholder, JBS S.A. (“Parent”), which is an entity organized under Brazilian

law.1 They also sued five individuals whom Parent elected to the Company’s board of

directors (respectively, the “Director Defendants” and the “Board”). All five Director

Defendants are executive officers of Parent or serve as executive officers of its controlled

subsidiaries. One of the Director Defendants serves as the Company’s CEO.

       The plaintiffs challenge a transaction in which the Company paid $1.3 billion to buy

one of Parent’s other subsidiaries: Moy Park, Ltd. (the “Acquisition”). The complaint

alleges that Parent needed to raise cash quickly after its controlling stockholder agreed to

pay a $3.2 billion fine to the Brazilian government. Because Parent controlled the Company

and Moy Park, the plaintiffs assert that the governing standard of review for the Acquisition

is entire fairness. The plaintiffs contend that as a self-dealing fiduciary, Parent is obviously

interested in the Acquisition and must prove that it is entirely fair. Plaintiffs further allege

that because of their affiliations with Parent, all five of the Director Defendants lack

independence and likewise must prove that the Acquisition is entirely fair.

       1
        Parent controls the Company through defendant JBS USA Holding Lux S.à r.l., a
wholly owned subsidiary of Parent that is organized under the laws of Luxembourg. For
purposes of this decision, there is no meaningful distinction between Parent and the
intermediate holding company. The two entities have raised identical arguments, and the
reasoning in this decision applies equally to both. For simplicity, this decision refers only
to Parent.
       The complaint alleges that the Company did not engage in true arm’s-length

bargaining with Parent. Among other things, the Company permitted its management team

and its financial advisor to lead the negotiations, despite their lack of independence from

Parent. As part of the pseudo-negotiations, the Company responded “in a constructive

manner” when Parent breached its exclusivity agreement with the Company. As a result of

a defective process, the Company ultimately agreed to pay what was effectively the same

price that Parent demanded in its opening ask, even though that price was higher than what

the Company’s internal analyses supported and what strategic bidders were willing to pay.

Based on these allegations, the plaintiffs contend that the complaint supports a reasonable

inference that the defendants will not be able to prove that the Acquisition was entirely fair.

       Parent moved to dismiss the complaint for lack of personal jurisdiction, noting that

the complaint does not allege that Parent has any ties to the State of Delaware other than

its status as the controller of the Company. But on the same day that the Acquisition was

approved, the Board voted unanimously to adopt a forum-selection bylaw, with the

Director Defendants whom Parent controlled constituting a five-member majority of the

nine-member Board. The bylaw made the Delaware courts the exclusive forum for breach

of fiduciary litigation involving the Company. This decision holds that on the facts alleged,

Parent implicitly consented to personal jurisdiction in this court for purposes of claims

falling within the forum-selection bylaw.

       The Director Defendants also moved to dismiss the complaint, contending that it

failed to allege any actionable involvement in the Acquisition. The Board formed a

committee of independent directors (the “Committee”) to consider the Acquisition, and the

                                              2
Board delegated to the Committee the exclusive authority to negotiate its terms and

determine whether the Company would proceed. The Committee retained its own financial

advisor and legal counsel, negotiated with Parent, and approved the Acquisition. The

Director Defendants maintain that they approved the Acquisition solely to ensure that it

did not violate a covenant in the Company’s bond indenture.

       Two Director Defendants—William Lovette and Andre Nogueira De Souza—

participated in the negotiation and approval of the Acquisition to a far greater degree,

rendering them potentially liable for the allegedly unfair transaction. As to the other three

Director Defendants, although their approval of the board resolution is a slim reed, it

constitutes sufficient involvement by conflicted fiduciaries in the effectuation of a self-

dealing transaction to warrant denying their efforts to obtain dismissal at the pleading stage.

                         I.       FACTUAL BACKGROUND

       The facts are drawn from the plaintiffs’ complaint and the documents it incorporates

by reference, including documents that the plaintiffs obtained using Section 220 of the

Delaware General Corporation Law (the “DGCL”), 8 Del. C. § 220. Despite relying on

these documents, the plaintiffs did not attach them as exhibits to their complaint. The

defendants have supplied some of the omitted documents, which the court can consider.

See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013) (“[A] plaintiff may not

reference certain documents outside the complaint and at the same time prevent the court

from considering those documents’ actual terms.” (alteration in original) (internal

quotation marks omitted)). Citations in the form “Ex. — at — ” refer to these documents,

which the defendants attached to their initial briefs as exhibits. See Dkts. 23, 41. At this

                                              3
stage of the proceedings, the complaint’s allegations are assumed to be true. The plaintiffs

also receive the benefit of all reasonable inferences, including inferences drawn from

documents.

A.       The Company, Parent, and Moy Park

         The Company sells chicken in the United States. Its stock trades on Nasdaq under

the symbol “PPC.”

         Parent is one the largest meat processors in the world. At the time of the Acquisition,

Parent controlled the Company through its ownership of 78% of the Company’s common

stock. Parent also controlled the Company through its right to designate a majority of the

Board.

         Under the Company’s certificate of incorporation, the Board consists of nine seats.

Six seats are designated for “JBS Directors,” whom this decision calls “Parent Directors.”

Three seats are designated for “Equity Directors.”2 A nominating committee populated by

Parent Directors nominates directors for the Parent Director seats, and a nominating

committee populated by Equity Directors does the same for the Equity Director seats.3

        See Ex. 15 § 5.3. The allocation of seats depends on the level of Parent’s ownership
         2

of the Company’s common stock. The current allocation applies so long as Parent
beneficially owns at least 50% and not less than 80% of the shares. See id. § 5.2(b).
         3
         See id. § 5.4. The original Equity Directors were designated by a committee of
equity holders appointed as part of a Chapter 11 bankruptcy proceeding. See Dkt. 59 Ex. 5
Ex. A §§ 1.55, 9.2 (In re Pilgrim’s Pride Corp., C.A. No. 08-45664, Debtors’ Amended
Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (As Modified)
(Bankr. N.D. Tex. 2009)).

                                                4
Parent has the right to veto the nomination of an Equity Director, but only if Parent

“reasonably determines that such person (i) is unethical or lacks integrity or (ii) is a

competitor or is affiliated with a competitor of the Corporation.” Ex. 15 § 5.4(a).

       Parent can vote its shares as it pleases for the Parent Directors, meaning that Parent

can determine who serves in those positions. See Ex. 3 § 3.04(b). For the Equity Directors,

by contrast, Parent must vote its shares “in the same proportion as the shares held by the

Minority Investors are voted for or against, not voted, or abstained.” Id. § 3.04(a). As a

practical matter, the Company’s minority stockholders determine who serves as an Equity

Director.

       At the time of the events giving rise to this litigation, the Equity Directors were

David Bell, Michael Cooper, and Charles Macaluso. Each appears for pleading purposes

to be an independent, outside director. Four of the Parent Directors served as executive

officers of Parent or its subsidiaries—defendants Andre Nogueira De Souza, Tarek Farahat,

Denilson Molina, and Gilberto Tomazoni. A fifth Parent Director was William Lovette, the

Company’s CEO and President. The final Parent Director was Wallim Cruz de

Vasconcellos, Jr., who has no alleged affiliation with Parent or the Company other than his

service as a Parent Director.

       Moy Park sells chicken in the United Kingdom. Before the Acquisition, it was a

wholly owned subsidiary of Parent. Parent purchased Moy Park in 2015 for approximately

$1.5 billion.

                                             5
B.      Parent Needs To Raise Cash.

        The Batista family controls Parent through a holding company. In May 2017, the

holding company agreed to pay a fine of $3.2 billion (R$10.3 billion) to the Brazilian

government in response to a wide-ranging investigation into the bribery of government

officials. Parent needed to raise cash quickly to help its controlling stockholder pay the

fine.

        In June 2017, Parent announced that Moy Park was for sale. Wesley Mendonça

Batista, who was serving as Parent’s CEO and who himself had pled guilty to a bribery

charge and agreed to pay a substantial fine, contacted Nogueira. Batista told Nogueira that

Parent would be interested in selling Moy Park to the Company for £1.01 billion ($1.3

billion). Nogueira shared the overture with Lovette, who engaged in further discussions

with Parent about the proposal.

C.      The Initial Meeting With The Equity Directors

        On June 28, 2017, Lovette met with the Equity Directors. Other attendees included

bankers from Barclays Capital, Inc., who were acting as the Company’s financial advisor

despite having a longstanding relationship with Parent, and lawyers from Paul, Weiss,

Rifkind, Wharton & Garrison LLP. Vasconcellos, one of the Parent Directors, also

attended.

        Lovette pitched the Equity Directors on having the Company acquire Moy Park for

£1.01 billion ($1.3 billion). He described the acquisition as a “compelling opportunity”

with “a strong strategic rationale.” Ex. 1 at 2. He argued that even though Moy Park’s

                                            6
facilities already implemented “best practices,” his management team could “increase[e]

efficiencies in operations and headcount.” Id.

       Barclays had already prepared a presentation that valued Moy Park at between £700

million and £1.415 billion. In arriving at this range, Barclays projected generous growth in

Moy Park’s revenue and EBITDA, even though Moy Park’s revenue had been flat over the

previous three years. Barclays also assumed £41.6 million in post-Acquisition synergies.

       Barclays presented four financing alternatives for purchasing Moy Park. In each

case, Barclays assumed a purchase price of £1.05 billion. Ex. 4 at 16.

D.     The Committee

       On July 3, 2017, the Board formed a special committee consisting of the Equity

Directors (the “Committee”). The Board delegated to the Committee its “exclusive power

and full authority . . . to take all actions it considers necessary, appropriate or desirable in

connection with evaluating, reviewing, negotiating and implementing the [Acquisition]

and any alternative thereto.” Ex. 2 at ‘012. The Board also resolved to “not approve or

recommend the [Acquisition] unless the [Acquisition] was approved by the . . .

Committee.” Id.

       The Committee retained Evercore as its financial advisor. Evercore informed

Barclays that the Committee and its advisors expected to lead the negotiations with Parent,

rather than having Company management and Barclays take the lead. Notwithstanding the

Committee’s instruction, Company management and Barclays continued to take the lead

in the negotiations with Parent.

                                               7
       The Committee retained Paul Weiss as its legal counsel. Recall that Paul Weiss had

attended Lovette’s meeting with the Equity Directors on July 28, 2017, six days before the

formation of the Committee that ultimately became Paul Weiss’s client. At the pleading

stage, this sequence supports a reasonable inference that management had some degree of

involvement in the selection of the Committee’s counsel.

E.     Evercore’s Initial Valuation

       On July 6, 2017, Evercore provided the Committee with its initial reactions to

Barclays’ valuation analyses. Evercore told the Committee that it planned to work with

Barclays to conduct due diligence but would perform its own valuation work. Evercore

also informed the Committee that it would analyze any efficiencies that the Company could

achieve on a stand-alone basis, independent of the Acquisition, as distinct from synergies

that could only be generated as a result of the Acquisition.

       On July 18, 2017, Evercore provided the Committee with its preliminary valuation

analysis. In its presentation, Evercore relied on management’s projections and synergy

estimates, which yielded results nearly identical to Barclays’ calculations. Evercore

expressed 80% confidence in the Company’s ability to realize the synergies. Without

synergies, Evercore valued Moy Park in the range of £700 million to £1.038 billion ($905

million to $1.132 billion). The complaint does not describe Evercore’s with-synergies

valuation, and neither side provided copies of the underlying materials.

       Evercore told the Committee that Parent hoped to sell Moy Park within three weeks

and that other suitors had executed non-disclosure agreements. The Committee discussed

whether Parent “might be willing to accept a lower price from the Company . . . than from

                                             8
third parties” because Parent “would retain Moy Park’s earnings in such a transaction.” Ex.

5 at 4.

          After Evercore’s presentation, Lovette and Sandri joined the meeting. Lovette

endorsed the deal and expressed confidence in the estimated synergies. Lovette then

disclosed the conversation he had with Nogueira in June 2017 about Parent’s interest in the

Company. Lovette did not disclose Nogueira’s earlier conversation with Batista.

F.        The Committee Offers £925 Million.

          On July 27, 2017, the Committee met with Barclays and members of Company

management. Barclays presented an updated valuation of Moy Park. Sandri updated the

Committee on “exchanges between Parent and the Company.” Ex. 7 at 1–2.

          After excusing Barclays and the members of management, Evercore presented an

updated valuation. It closely resembled the firm’s analysis from July 18, 2017, except this

time Evercore did not provide an analysis of Moy Park’s value without synergies. Evercore

reported that nine strategic bidders had signed non-disclosure agreements. The Committee

decided to submit an indication of interest “at a cash-free, debt-free value of £925 million.”

Ex. 7 at 4.

          On July 31, 2017, news outlets reported that multiple parties were interested in

acquiring Moy Park. Later that day, the Committee directed Evercore to submit the

Company’s indication of interest and to ask for exclusivity.

G.        Parent Counters at £1.05 Billion.

          On August 4, 2017, Russ Colaco, Parent’s Chief Financial Officer, asked the

Company to pay £1.05 billion for Moy Park. He also conveyed that Parent wanted to sign

                                              9
and close the deal simultaneously before August 15. To give the Committee the first chance

at the deal, he proposed to delay seeking third-party bids until August 17.

       When the Committee met later that day, Barclays and Evercore reported that

financing a simultaneous sign-and-close structure would be more expensive than a

traditional deal. The Committee discussed making a counteroffer in a range of £925 to

£950 million, but deferred making a decision on a specific figure.

       On August 5, 2017, the Committee met with Barclays and members of Company

management. They advised the Committee that a simultaneous signing and closing would

result in $15 million of additional financing costs compared to the alternative. The

Committee decided to counter at “£955 million for a transaction with a bifurcated signing

and closing that include[d] a customary marketing period” or “£940 million for a

transaction with a simultaneous signing and closing.” Compl. ¶ 72 (alteration in original).

       That afternoon, Parent responded that it had received another offer at approximately

the same valuation. Parent declined to commit to exclusivity.

H.     The Company Bids £975 Million.

       During the following week, Parent’s counsel informed Paul Weiss about Batista’s

original conversation with Nogueira. This was the first time that Paul Weiss learned about

the conversation. Parent’s counsel told Paul Weiss that Batista’s references to pricing were

not intended as a formal offer.

       In a separate call, Colaco told Barclays that Parent had received a bid of £1.05

billion and that they expected that amount to increase to £1.1 billion. Colaco subsequently

told Barclays that Plukon Food Group was the high bidder. With Plukon’s offer in hand,

                                            10
Parent made a revised demand: “a purchase price of £1 billion (~$1.3 billion at current

exchange rates)” and a “maximum 30 days to get a deal done.” Ex. 8 at 2.

      On August 9, 2017, the Committee met with Company management and Barclays.

Barclays summarized the bidding landscape: “1 clear leader [Plukon],” three bidders

“around the value the Company proposed,” and other bidders below the Company’s offer.

Id. at 3. Everyone regarded Plukon’s bid as credible.

      At these valuations, the Committee questioned whether the Company should pursue

the Acquisition. The members asked whether the deal “would be accretive at values

between £955 million and £1 billion.” Id. They also expressed concern about “the

appropriate multiple to apply to [Moy Park]’s earnings.” Id. at 4. Finally, they noted that

management had described Moy Park as a “‘nice to have’ asset,” not a necessity. Id.

      At this point, Lovette spoke up to explain “why he was excited about the Potential

Transaction.” Id. He identified the following reasons for moving forward:

     “the Company has had difficulty deploying capital in a manner that creates growth”;

     “the Company’s existing leverage ratio of .9x is suboptimal”;

     “finding an acquisition target as attractive as Moy Park is difficult”;

     “Moy Park would interest a new group of investors in the Company”;

     “the Potential Transaction would allow the Company to enter a completely new but
      related market”;

     “the Potential Transaction would allow the Company to grow into a business in
      which it has sought growth (prepared foods)”;

     “Moy Park ‘checks all the boxes’ for what the Company has described to the public
      that it looks for in an acquisition target”; and

                                            11
      “the acquisition of Moy Park would allow the North American business to learn
       from Moy Park’s innovations and consumer insights.”

Id. at 4–5. After making these points, Lovette reiterated that

       (i) he is very excited about the opportunity to acquire Moy Park, (ii) if the
       Potential Transaction did not materialize he would view it as a missed
       opportunity and (iii) there are few opportunities to deploy capital in a manner
       that would grow the business as he believes Moy Park would.

Id. at 5. Finally, Lovette observed that “the Potential Transaction would make the Company

the only global ‘pure play’ chicken company.” Id.

       After Lovette’s remarks, the Committee regarded the Acquisition more favorably.

The members concluded “that the calculated synergies can justify a higher price than the

Company’s current offer of £955 million and the uncalculated synergies described by its

advisors and management offer potential additional value.” Id.

       Barclays and management then left the meeting. With only the Equity Directors

present, Evercore stated that it could easily issue a fairness opinion at a price above £1

billion. The Committee decided to counter at £975 million, just £30 million (3%) less than

what Batista originally suggested as a price in his discussion with Nogueira.

I.     The First Agreement On Price

       On August 12, 2017, Parent accepted the Committee’s counteroffer, but conditioned

its acceptance on a simultaneous signing and closing and the execution of definitive

transaction documents within one week. At noon on that day, the Committee directed Paul

Weiss to counter at £975 million with a bifurcated signing and closing or £970 million with

a simultaneous signing and closing. Internally, the Committee regarded the price difference

as immaterial and something that “should not stand in the way if [Parent] balked.” Compl.

                                             12
¶ 75 (internal quotation marks omitted). The Committee directed Paul Weiss to ask for

more time to execute the agreement and “a ‘rolling’ exclusivity period that would start with

. . . seven days . . . but only be terminable on two business days’ notice.” Id. (alterations in

original) (internal quotation marks omitted).

       After receiving the Company’s counteroffer, Colaco called both Lovette and

Evercore. In each call, Colaco demanded £975 million with a simultaneous signing and

closing. In addition, Parent’s counsel called Paul Weiss to underscore Colaco’s demand.

Parent’s counsel relayed “that [Parent] would allow the Company sufficient time to

negotiate with its lenders, which could take 2-3 weeks.” Id.

       At 4:00 pm, Evercore met with the Committee and opined that paying £975 million

to Parent for Moy Park was fair to the Company’s minority stockholders. The Committee

approved the price.

       Based on the resulting agreement on price, Parent agreed to negotiate exclusively

with the Company through August 27, 2017. The plaintiffs criticize the Committee for

offering £975 million, arguing that the Company had “extraordinary leverage” because it

was the only bidder who could execute on the schedule that Parent wanted. Id. ¶ 76. The

plaintiffs argue that an arm’s-length negotiator would have used its leverage and insisted

on a much a lower price.

J.     Parent Breaches Exclusivity And Re-trades The Deal.

       To fund the Acquisition, the Company needed debt financing. Rather than exploring

multiple sources, the Committee only considered a proposal from Barclays. That proposal

contemplated a bridge loan commitment of $1.2 billion with $800 million funded at

                                              13
closing. The loan would mature after seven years. Barclays would receive fees of $39

million.

       On August 19, 2017, news outlets reported that a Chinese conglomerate was the

frontrunner to clinch Moy Park. On August 21, the Committee met with Lovette and

Sandri. Lovette told the Committee that they were negotiating with Barclays over its

financing fees. No one discussed the news reports or considered whether Parent had

breached its exclusivity agreement.

       On August 25, 2017, Parent told Evercore that it had “received an unsolicited offer

from a credible third party to acquire Moy Park for £1.125 billion.” Id. ¶ 79 (internal

quotation marks omitted). Parent conceded that it had breached its exclusivity obligation,

but provided the following explanation: “[A] third-party bidder had made an unsolicited

call to a [Parent] senior executive who was not a fully integrated member of the [Parent]

deal team and who, apparently, was not aware of [the] exclusivity agreement that had been

entered into between [Parent] and the Company.” Ex. 10 at 3.

       Parent now demanded a price of £1 billion. To soften the blow, Parent offered to

provide the Company with financing on better terms than Barclays. Parent’s proposal

offered a lower interest rate than Barclays’ proposal, but its bridge loan would mature after

two years rather than seven years. Parent later reduced the maturity to one year.

K.     The Second Agreement On Price

       On August 27, 2017, the Committee met with its advisors and members of Company

management. Paul Weiss advised that the difference in the bridge loan maturities between

Parent’s proposal (one year) and Barclays’ proposal (seven years) was immaterial because

                                             14
the bridge loan would be replaced with bond financing soon after closing. If the bonds

issued within sixty days, then the lower interest rate on Parent’s proposal would enable the

Company to save $25 million in interest compared to Barclays’ proposal. If the bonds

issued between sixty and 180 days after closing, then the savings would increase to $30–

40 million. But if the bridge loan was not refinanced, then Barclays’ loan was preferable.

       The Committee picked Parent’s financing proposal, reasoning that the estimated

benefit of $25–26 million would offset Parent’s demand for a purchase price of £1 billion,

which was $32.5 million higher than the previously agreed price of £975 billion. The

Committee decided to ask Parent to provide the Company with another $11 million in value

through credits under a services agreement or through adjustments in the exchange rate.

       The Committee also discussed Parent’s breach of its exclusivity commitment.

Lovette recommended that the Committee address the issue “in a constructive manner,”

and the Committee agreed. Ex. 10 at 4.

       The Committee authorized an offer of £1 billion using Parent’s financing. Parent

accepted the economic terms, including the concept of $11 million in incremental savings

under a shared services agreement.

L.     The Committee Formally Approves The Acquisition.

       During a meeting of the Committee on September 5, 2017, Evercore gave a formal

presentation addressing the fairness of the Acquisition. Evercore reported that the purchase

price fell at the high end of its comparable companies analysis, but at the low end of its

comparable transactions and discounted cash-flow analyses. The complaint alleges that

Evercore misrepresented its analyses and that the valuation only fell at the low end of the

                                            15
discounted cash flow analysis that included synergies. At the end of its presentation,

Evercore delivered its fairness opinion orally. Evercore did not address the terms of

Parent’s financing package.

       Barclays then presented its own analysis of the Acquisition. At the conclusion of its

presentation, Barclays opined that Parent’s financing package “was generally better than

[what] the Company could achieve from a third party arm’s-length financing.” Ex. 11 at 4.

Evercore “noted that [it] fully agreed with the Barclays assessment.” Id. The Committee

never independently investigated any options for arm’s-length, third-party financing.

       The Committee asked if management still supported the transaction. Lovette

responded, “management was very happy with the deal.” Id. at 5.

       After excusing management and Barclays, the Committee consulted with Paul

Weiss, who reported that Barclays would be the lead arranger for the take-out bond

financing. Paul Weiss believed that this meant that the refinancing would occur earlier than

expected, reducing the benefit conferred by the lower interest rate from $25 million to $18–

20 million. The Committee regarded this change as immaterial.

       The Committee concluded by approving a set of resolutions that counsel had

prepared. They included determinations that the Acquisition and the terms of Parent’s

financing were on an arm’s-length basis. Because Macaluso would be travelling the

following week, the Committee appointed Bell and Cooper to a subcommittee “to approve

any non-material changes to the terms of the transaction that may arise prior to finalization

of the definitive agreements.” Id. at 6.

                                             16
M.     The Board And The Committee Approve The Acquisition.

       On September 6, 2017, the Board approved the Acquisition. The Board did so to

satisfy a requirement under a provision in a bond indenture (the “Indenture”) which

required Board approval of any transaction with an affiliate “in excess of $100.0 million.”

Ex. 14 § 4.13(a)(2). To satisfy the Indenture, the Board certified that “the terms of the

transactions . . . are not less favorable in any material respect to the [Company] than those

that could reasonably be obtained in arm’s-length dealings with any person that is not an

Affiliate (as defined in the Indenture).” Compl. ¶ 89.

       Two days later, on September 8, 2017, the Committee approved the agreements

governing the Acquisition.

       On the same day, the Board adopted a bylaw that selected the Delaware Court of

Chancery as “the sole and exclusive forum for” disputes related to the internal affairs of

the Company. Id. ¶ 90 (the “Forum-Selection Bylaw”).

N.     This Litigation

       On January 24, 2018, the plaintiffs filed this action. The complaint named as

defendants Parent, all of the members of the Board, and certain members of the Batista

family. Between March 14 and July 3, the plaintiffs voluntarily dismissed the Equity

Directors, Vasconcellos, and the members of the Batista family.

       Parent moved to dismiss the complaint for lack of personal jurisdiction. The

Director Defendants moved to dismiss the complaint on the grounds that it did not allege

that they had engaged in actionable conduct.

                                             17
       The defendants assumed for purposes of their motions to dismiss that entire fairness

provided the operative standard of review. But the complaint and the related briefing

highlighted the Board’s governance structure, including the ability of the minority

stockholders to elect the Equity Directors. This structure would qualify the Equity

Directors as enhanced-independence directors, as that term was defined in a provocative

article by Lucian Bebchuk and Assaf Hamdani titled Independent Directors and

Controlling Shareholders, 165 U. Pa. L. Rev. 1271 (2017). As Bebchuk and Hamdani

explain, Delaware’s hierarchy of standards of review uses entire fairness to review a self-

dealing transaction involving a controller. Although parties can obtain a shift in the burden

of proof on entire fairness by either conditioning the transaction on approval by a majority

of the minority stockholders or the involvement and approval of an effective special

committee, there is currently only one structural means of lowering the standard of review

to the business judgment rule: the MFW framework in which the controller conditions the

completion of transaction up front on both special committee approval and a majority of

the minority vote. See Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014).

       Bebchuk and Hamdani observe that while the MFW framework works well for

major transactions like squeeze-out mergers, its significant requirements undermine its

utility for other types of interested transactions involving a controller. They note that

Delaware courts historically have not endorsed using the business judgment rule for

interested transactions involving a controller because of concern about the controller’s

ability to influence the selection, election, and removal of otherwise independent directors.

They suggest that these concerns are mitigated when minority stockholders have the power

                                             18
to nominate, elect, and remove director representatives, whom they describe as enhanced-

independence directors. They recommend that a transaction approved by a duly

empowered committee whose members consist of enhanced independence directors should

receive more deferential review.

       Based on my knowledge of Bebchuk and Hamdani’s article, I raised sua sponte

whether their proposed legal framework should apply to this case, and I requested

supplemental briefing from the parties on that issue. In their supplemental brief, the

defendants argued that dismissal is warranted because the business judgment rule should

provide the operative standard of review. In their supplemental brief, the plaintiffs

identified a series of questions of first impression that this court would have to confront,

as well as areas of tension between the enhanced-independence approach and other areas

of Delaware law. They argued that the enhanced-independence framework should be

considered only in a case where the defendants specifically rely on it and provide the court

will full briefing on the subject.

       Having reviewed the allegations and arguments, I agree that the current record does

not provide an adequate basis for assessing the many questions of first impression raised

by the enhanced-independence approach.4 This decision therefore does not consider that

approach any further.

       4
        For example, an insightful paper responds to Bebchuk and Hamdani by arguing
that a meaningful analysis of independence must examine not only a controller’s power to
punish uncooperative directors through removal, but also the controller’s ability to reward
cooperative directors through patronage. See Da Lin, Beyond Beholden, 44 J. Corp. L.
(forthcoming 2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3335195. The

                                            19
                              II.   LEGAL ANALYSIS

       The defendants have moved to dismiss the complaint on different grounds. Parent

contends that this court cannot exercise personal jurisdiction over it. The Director

Defendants contend that as to them, the complaint fails to state a claim upon which relief

article supports its arguments with empirical analysis of controller patronage networks and
examples in which controllers appear to have rewarded cooperative directors. The article
recommends that Delaware law should not approach the question of control or its
implications in a binary and monolithic fashion, but rather should take into account how
different types of controllers vary in their ability and inclination to exert influence and
provide patronage. Under the author’s approach and based on her work, an enhanced-
independence framework, standing alone, would not automatically be sufficient to warrant
a deferential standard of review.

       On a doctrinal level, another open question is whether a judicial willingness to
deploy a more deferential standard of review for transactions approved by enhanced-
independence directors warrants moving all the way to the business judgment rule, or
whether it would mean relaxing the standard to enhanced scrutiny. The latter standard
would recognize the structural difficulties that outside directors face when making
decisions that affect a controller. The intermediate standard is sufficiently deferential to
enable courts to dismiss weak complaints, while at the same time permitting meaningful
complaints to move forward.

       The plaintiffs observe that by drawing distinctions based on how a director is
nominated and elected, the enhanced-independence approach runs contrary to Aronson and
its progeny, which have refused to take those factors into account. See Aronson v. Lewis,
473 A.2d 805, 816 (Del. 1984) (subsequent history omitted). I agree with this assessment,
but I also believe that a more nuanced and realistic approach to independence should
consider mechanisms for nomination, election, and removal, not as binary determiners of
independence, but as part of a holistic analysis akin to what the Delaware Supreme Court
has recently applied when addressing demand futility. See Sandys v. Pincus, 152 A.3d 124,
129–34 (Del. 2016); Del. Cty. Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 1020–24 (Del.
2015). In my view, moving away from the bright-line rule that refuses to consider
mechanisms for nomination, election, and removal is a feature, not a bug.

                                            20
can be granted because they did not participate in the negotiation or approval of the

Acquisition in an actionable way. This decision rejects these arguments.

A.     Personal Jurisdiction

       “When a defendant moves to dismiss a complaint pursuant to Court of Chancery

Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the court's exercise of

jurisdiction over the defendant.” Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007). “In

ruling on a Rule 12(b)(2) motion, the court may consider the pleadings, affidavits, and any

discovery of record.” Id. “If . . . no evidentiary hearing has been held, plaintiffs need only

make a prima facie showing of personal jurisdiction and ‘the record is construed in the

light most favorable to the plaintiff.’” Id. (footnote omitted) (quoting Cornerstone Techs.,

LLC v. Conrad, 2003 WL 1787959, at *3 (Del. Ch. Mar. 31, 2003) (Strine, V.C.)).

       A defendant can agree to a court’s exercise of personal jurisdiction. As the Supreme

Court of the United States has recognized, “the personal jurisdiction requirement is a

waivable right [and] there are a ‘variety of legal arrangements’ by which a litigant may

give ‘express or implied consent to the personal jurisdiction of the court.’”5 The Delaware

       5
          Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985) (citations
omitted); accord Genuine Parts Co. v. Cepec, 137 A.3d 123, 130 (Del. 2016); Nat’l Indus.
Gp. (Hldg.) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373, 381 (Del. 2013); see Sternberg v.
O’Neil, 550 A.2d 1105, 1109 n.4 (Del. 1988) (“A party may submit to a given court’s
jurisdiction by contractual consent.”), abrogated on other grounds by Genuine Parts, 137
A.3d at 123; see also Ins. Corp. of Ir., Ltd. v. Compagnie de Bauxites de Guinee, 456 U.S.
694, 703 (1982) (“Because the requirement of personal jurisdiction represents first of all
an individual right, it can, like other such rights, be waived.”); Nat’l Equip. Rental, Ltd. v.
Szukhent, 375 U.S. 311, 316 (1965) (“[P]arties to a contract may agree in advance to submit
to the jurisdiction of a given court . . . .”); Petrowski v. Hawkeye-Sec. Ins. Co., 350 U.S.
21
Supreme Court has expressed similar sentiments: “Where the parties to the forum selection

clause have consented freely and knowingly to the court’s exercise of jurisdiction, the

clause is sufficient to confer personal jurisdiction on a court.”6

       Consent to personal jurisdiction is often express, but it can also be implied. Outside

of Delaware, the majority rule holds that when parties agree to litigate in a particular forum,

they consent implicitly to the existence of personal jurisdiction in that forum.7 In reaching

495, 495–96 (1956) (holding that stipulation to personal jurisdiction in particular forum is
valid waiver of individual right).
       6
         Carlyle, 67 A.3d 373, 381 (Del. 2013); accord Burger King, 471 U.S. at 472 n.14
(“Where such forum-selection provisions have been obtained through ‘freely negotiated’
agreements and are not ‘unreasonable and unjust,’ their enforcement does not offend due
process.” (citation omitted)); Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1228
(Del. 2018) (“Where a party commits to the jurisdiction of a particular court or forum by
contract, such as through a forum selection clause, a ‘minimum contacts’ analysis is not
required as it should clearly anticipate being required to litigate in that forum.” (footnote
omitted)); Genuine Parts, 137 A.3d at 148 (“[A] party to a non-adhesion contract can
subject itself to personal jurisdiction via a forum-selection clause.”); see R. Franklin Balotti
& Jesse A. Finkelstein, DELAWARE LAW OF CORPORATIONS AND BUSINESS
ORGANIZATIONS § 13.4[A] (3d ed. 2019) (“Consent to personal jurisdiction is considered
a waiver of any objection on due process grounds and an analysis under minimum contacts
is unnecessary.” (internal quotation marks omitted)); see also 4 Charles Alan Wright et al.,
FEDERAL PRACTICE & PROCEDURE § 1067.3 (4th ed. 2018) (“[P]ersonal jurisdiction can
be based on the defendant’s consent to have the case adjudicated in the forum, or the
defendant’s waiver of the personal jurisdiction defense. Conduct that has been held to
constitute consent or a constructive waiver often includes . . . entering into an agreement
with a forum-selection clause . . . .” (footnotes omitted)).
       7
         See, e.g., BouMatic, LLC v. Idento Operations, BV, 759 F.3d 790, 793 (7th Cir.
2014) (“According to [the defendant], if it agreed orally to anything (which it denies) it
specified Wisconsin as a forum but did not agree to personal jurisdiction. That makes no
sense. A forum-selection clause can work only if both parties are amenable to suit in the
chosen forum; to agree to a forum thus is to agree to personal jurisdiction in that forum.”);
St. Paul Fire & Marine Ins. Co. v. Courtney Enters., Inc., 270 F.3d 621, 623, 624 (8th Cir.
2001) (holding that defendant consented to personal jurisdiction when it agreed to the

                                              22
following clause: “All matters in dispute between [Courtney] and SPRS in relation to this
Agreement, and whether arising during or after the period of this Agreement, shall be
referred for arbitration in the following manner: . . . The matter shall be determined by
arbitration conducted in the City of St. Paul, State of Minnesota . . . . The arbitrator(s) shall
apply the substantive law of the State of Minnesota as the proper law of this Agreement”
(alterations in original) (internal quotation marks omitted)); Kevlin Servs., Inc. v. Lexington
State Bank, 46 F.3d 13, 14–15 (5th Cir. 1995) (holding that defendant consented to personal
jurisdiction when it agreed to the following clause: “This contract shall be interpreted and
construed in accordance with the laws of the State of Texas. The legal venue of this contract
and any disputes arising from it shall be settled in Dallas County, Texas” (internal quotation
marks omitted)); Weber Aircraft, L.L.C. v. Krishnamurthy, 2013 WL 1898280, at *4 (E.D.
Tex. Apr. 12, 2013) (holding that defendant consented to personal jurisdiction when it
agreed to the following clause: “The parties agree that this Agreement is to be governed by
and construed under the laws of the State of Texas without conflicts of law provisions. The
parties further agree that all disputes shall be resolved exclusively in state or federal court
in Dallas County, Texas” (internal quotation marks omitted)); Incline Energy, LLC v.
Penna Gp., LLC, 787 F. Supp. 2d 1140, 1144 (D. Nev. 2011), (“[A] defendant waives
objection to personal jurisdiction and venue when he agrees to a contractual forum
selection clause.”), disagreed with on other grounds, Del Webb Communities, Inc. v.
Partington, 652 F.3d 1145 (9th Cir. 2011); Koninklijke Philips Elecs. v. Dig. Works, Inc.,
358 F. Supp. 2d 328, 333 (S.D.N.Y. 2005) (“While it is true that a choice-of-law provision
is not, on its own, sufficient to convey personal jurisdiction over a defendant, the same
cannot be said of a forum selection clause.”); Smith Cookie Co. v. Archway Cookies, 2003
WL 23960710, at *3 (D. Or. Apr. 23, 2003) (holding that defendant consented to
jurisdiction when it agreed to the following clause: “the exclusive venue and jurisdiction
for any future litigation initiated by either party at any time prior to [February 28, 2003] . .
. will ile [sic] with the United States District Court for the District of Oregon” (alterations
in original) (internal quotation marks omitted)); Inso Corp. v. Dekotec Handelsges, mbH,
999 F. Supp. 165, 166–67 (D. Mass. 1998) (holding that defendant consented to personal
jurisdiction when it agreed to the following clause: “This Agreement shall be deemed a
contract made and performed in Massachusetts, shall be construed and governed by the
laws of Massachusetts and shall bind the parties, their successors and permitted assigns.
The parties stipulate that the proper forum, venue and court for any legal action arising
from or in connection with this Agreement shall be the state courts of the Commonwealth
of Massachusetts for Suffolk County or the United States District Court for the District of
Massachusetts. The licensee agrees that it will not commence any action against [the
plaintiff] except in such courts” (internal quotation marks omitted)); Hanson Eng’rs Inc. v.
UNECO, Inc., 64 F. Supp. 2d 797, 798 (C.D. Ill. 1997) (holding that defendant consented
to personal jurisdiction when it agreed to the following clause: “[I]f the parties cannot agree
upon an amicable settlement, then all disputes and differences are to be submitted to the
United States District Court of that District, [sic] where plaintiff is located” (internal

                                               23
this conclusion, some decisions have cited an observation by the Supreme Court of the

United States that “stipulat[ing] in advance to submit . . . controversies for resolution within

a particular jurisdiction” is sufficient to establish consent to personal jurisdiction in that

forum.8

quotation marks omitted)); MCNIC Oil & Gas Co. v. IBEX Res. Co., 23 F. Supp. 2d 729,
732 (E.D. Mich. 1998) (recognizing personal jurisdiction where forum selection clause
“provide[d] that Michigan law will govern said agreements and that all litigation related to
the agreements will be brought in a court located in Michigan”); Nat’l Union Fire Ins. Co.
of Pittsburgh v. Worley, 690 N.Y.S.2d 57, 59 (N.Y. App. Div. 1999) (explaining that “by
agreeing to the forum selection clause in the indemnity agreement, defendant specifically
consented to personal jurisdiction over her in the courts of New York and thereby waived
any basis to dispute New York's jurisdiction” where forum selection clause read “any
action or proceeding of any kind against the undersigned arising out of or by reason of this
Indemnification and Pledge Agreement may be brought in any state or federal court of
competent jurisdiction in and of the County and State of New York, in addition to any other
court in which such action might properly be brought” (internal quotation marks omitted));
LexisNexis, Div. of RELX, Inc. v. Moreau-Davila, 95 N.E.3d 674, 677–78 (Ohio Ct. App.
2017) (holding that defendant consented to personal jurisdiction when it agreed to the
following clause: “Claims and controversies involving the following will not be subject to
arbitration and the parties agree to exclusive jurisdiction in federal or state courts located
in Montgomery County, Ohio” (internal quotation marks omitted)), appeal denied, 87
N.E.3d 1273 (Ohio 2017); Vak v. Net Matrix Sols., Inc., 442 S.W.3d 553, 556 (Tex. App.
2014) (holding that defendant consented to personal jurisdiction when it agreed to the
following clause: “This Agreement shall be governed by and construed under the laws of
the state of Texas. The parties agree that this Agreement is made in Harris County, Texas,
and that exclusive venue for all litigation arising under or in connection with this
Agreement shall be in the courts of Harris County, Texas” (internal quotation marks
omitted)).
       8
         Burger King, 471 U.S. at 472 n.14, 482; see 1 Ved P. Nanda et al., LITIGATION OF
INTERNATIONAL DISPUTES IN U.S. COURTS § 7:8 (2018); e.g., Kysar v. Lambert, 887 P.2d
431, 434, 441 (Wash. Ct. App. 1995) (holding that defendant consented to personal
jurisdiction when it agreed to the following clause: “The terms and conditions of the order
documents applicable to this transaction shall be interpreted under the case and statutory
law of the State of Washington. In the event any action is brought to enforce such terms
and conditions, venue shall lie exclusively in Clark County, Washington” (internal
quotation marks omitted)), review denied, 894 P.2d 564 (Wash. 1995) (TABLE); see also

                                              24
       In two decisions, Delaware courts have applied principles of implied consent to hold

that when parties specify an exclusive forum for disputes, they implicitly agree to the

existence of personal jurisdiction in that forum. In the first decision, an Indonesian

company entered into a joint venture agreement with two other companies. See Res.

Ventures, Inc. v. Res. Mgmt. Int’l, Inc., 42 F. Supp. 2d 423 (D. Del. 1999). The agreement

contained a forum selection clause that stated: “[I]n the event of litigation, the case shall

be tried by the appropriate courts in the State of Delaware.” Id. at 432 (internal quotation

marks omitted). When the plaintiffs filed suit, the Indonesian company argued that the

clause could not establish personal jurisdiction because it “contain[ed] no reference to

Nw. Nat’l Ins. Co. v. Donovan, 916 F.2d 372, 374, 376 (7th Cir. 1990) (Posner, J.)
(explaining that forum selection clause that read “Venue, at the Company’s option for
litigation and/or arbitration, shall be in the County designated on the front page under the
description of the Company’s address” actually meant: “In the event of litigation or
arbitration, the undersigned consents to suit, at Northwestern’s option, in Milwaukee
County” (internal quotation marks omitted)).

        That said, the better practice is for parties to specify that they consent to personal
jurisdiction or waive any jurisdictional defenses. See, e.g., 1 Nanda et al., supra, §7:8
(2018) (“Forum selection clauses should, in an abundance of caution, specifically note that
the parties waive personal jurisdiction defenses to actions filed in the contracted forum.”).
The additional language is particularly advisable for agreements governed by California
law, where decisions have declined to construe contractual provisions waiving venue
objections as consenting to the exercise of personal jurisdiction. See, e.g., Glob. Packaging,
Inc. v. Superior Court, 127 Cal. Rptr. 3d 813, 815, 820 (Cal. Ct. App. 2011). But see Frey
& Horgan Corp. v. Superior Court, 55 P.2d 203, 203 (Cal. 1936) (holding that a clause
designating California as the exclusive forum for arbitrated disputes constituted consent to
jurisdiction in California); Berard Constr. Co. v. Mun. Court, 122 Cal. Rptr. 825, 832 (Cal.
Ct. App. 1975) (relying on Frey), superseded on other grounds by statute, Cal. Civ. Code
§ 1717, as recognized in In re Marriage of Perow & Uzelac, 2019 WL 395735 (Cal. Ct.
App. Jan. 31, 2019).

                                             25
jurisdiction.” Id. The United States District Court for the District of Delaware disagreed,

explaining:

       Since the parties have asserted that the purpose of the clause was to provide
       a forum in the event of litigation, then the parties must have also intended the
       clause to be an agreement as to personal jurisdiction so that any lawsuit could
       be maintained in the Delaware forum. Any other interpretation would render
       the clause senseless because no litigation could proceed without a court
       having personal jurisdiction over the parties.

Id. The court recognized that when the parties involved in crafting an exclusive-forum

provision agree to a particular forum, they consent implicitly to the existence of personal

jurisdiction in that forum.

       In the second decision, an entity formed under the laws of Puerto Rico (Duke)

subcontracted with a Delaware corporation (Alstom) regarding a construction project in

Puerto Rico. Alstom Power Inc. v. Duke/Fluor Daniel Carribbean S.E., 2005 WL 407206

(Del. Super. Jan. 31, 2005). The contract stated: “[T]his Contract shall be subject to the

law and jurisdiction of the State of Delaware, unless expressly designated otherwise within

this Contract.” Id. at *1 (internal quotation marks omitted). When Alstom sued Duke in

Delaware, Duke claimed that the Delaware courts lacked jurisdiction. Duke argued that it

had agreed only to bring suit in Delaware, not to be sued in Delaware. The Delaware

Superior Court disagreed: By agreeing to the forum-selection provision, Duke had

consented implicitly to be sued in Delaware. Id. at *2–3.

       In this case, the plaintiffs argue that Parent consented to the exercise of jurisdiction

by Delaware courts when its representatives on the Board adopted the Forum-Selection

Bylaw. The plaintiffs do not identify any other basis for asserting jurisdiction over Parent,

                                              26
so this decision only considers the bylaw theory. But see Boilermakers Local 154 Ret. Fund

v. Chevron Corp., 73 A.3d 934, 960 & n.133 (Del. Ch. 2013) (Strine, C.) (explaining that

there are “multiple tools that exist to allow the courts of the state of incorporation to hold

parties accountable to stockholders claiming that their rights were violated,” including

theories of aiding and abetting or conspiracy).

       The Forum-Selection Bylaw selects the Delaware Court of Chancery as the

exclusive forum for particular types of litigation. The language of the bylaw states:

       Unless the Corporation consents in writing to the selection of an alternative
       forum, and to the fullest extent permitted by law, the sole and exclusive
       forum for

             (i) any derivative action or proceeding brought on behalf of the
       Corporation,

             (ii) any action asserting a claim of breach of a fiduciary duty owed by
       any current or former director, officer, other employee or stockholder of the
       Corporation to the Corporation or the Corporation’s stockholders,

               (iii) any action asserting a claim arising pursuant to any provision of
       the Delaware General Corporation Law, the Certificate of Incorporation or
       these Bylaws or as to which the Delaware General Corporation Law confers
       jurisdiction on the Court of Chancery of the State of Delaware, or

              (iv) any action asserting a claim governed by the internal affairs
       doctrine

       shall be the Court of Chancery of the State of Delaware and any state
       appellate court therefrom within the State of Delaware (or, if the Court of
       Chancery of the State of Delaware declines to accept jurisdiction over a
       particular matter, any state or federal court within the State of Delaware).

       Any person or entity purchasing or otherwise acquiring or holding any
       interest in shares of capital stock of the Corporation shall be deemed to have
       notice of and consented to the provisions of this [bylaw].

                                             27
Ex. 18 at 38 (formatting added). Its obvious purpose is to channel litigation falling within

its scope into the Delaware courts.

       Parent correctly observes that the Forum-Selection Bylaw does not contain an

explicit reference to personal jurisdiction. Parent interprets the Forum-Selection Bylaw as

only binding stockholders who wish to be plaintiffs for purposes of determining where they

can file lawsuits. Parent contends that nothing in the Forum-Selection Bylaw waived its

own right to dispute the existence of personal jurisdiction in Delaware.

       Parent’s arguments focus on the dimension of explicit consent. They do not address

the concept of implicit consent.

       In this case, the facts alleged in the complaint support a finding of implicit consent.

The Board adopted the Forum-Selection Bylaw on the same day that the Committee gave

its final approval for the Acquisition. It is reasonable to infer that the Board adopted the

Forum-Selection Bylaw intending that it would apply to any Delaware law claims that a

stockholder plaintiff might bring challenging the Acquisition. The Forum-Selection Bylaw

selects the Delaware Court of Chancery as the sole and exclusive forum for “any action

asserting a claim of breach of fiduciary duty owed by any . . . stockholder of the

Corporation to the Corporation or the Corporation’s stockholders.” Id. Parent, as the

controlling stockholder and counterparty in the Acquisition, was the obvious stockholder

defendant in any action asserting a claim for breach of fiduciary action. Through its power

to select the Parent Directors, Parent designated six of the nine members of the Board. Five

of those six were executive officers of Parent or its controlled subsidiaries. Parent also

                                             28
controlled a super-majority of the Company’s voting power. If it did not like the Forum-

Selection Bylaw, it could amend it using that authority. Chevron, 73 A.3d at 954.

       In my view, under these facts, Parent consented implicitly to the existence of

personal jurisdiction in Delaware when its representatives on the Board participated in the

vote to adopt the Forum-Selection Bylaw. This is a case governed by Delaware law in

which the State of Delaware has a substantial interest. As the Board necessarily recognized

when it adopted the Forum-Selection Bylaw, a case of this nature should be heard in a

Delaware court. That includes the dimension of this case that relates to Parent’s

involvement as the self-interested controller.

       Parent argues in response that the Forum-Selection Bylaw cannot be construed to

address anything other than forum selection because one of the covered categories of

litigation encompasses “any action asserting a claim . . . as to which the Delaware General

Corporation Law confers jurisdiction on the Court of Chancery.” Ex. 18 at 38. This is an

obvious reference to subject matter jurisdiction, not personal jurisdiction. Consistent with

that interpretation, the bylaw contemplates the possibility of jurisdiction in “any state or

federal court within the State of Delaware” if the Court of Chancery “declines to accept

jurisdiction over a particular matter.” Id. The language in the Forum-Selection Bylaw

addresses subject-matter jurisdiction over types of cases, not personal jurisdiction over

particular litigants.

       In a similar argument, Parent cites the forum-selection bylaw that then-Chancellor

Strine construed in Chevron, which limited its coverage in all cases “to the court’s having

personal jurisdiction over the indispensable parties named as defendants.” Chevron, 73
29
A.3d at 942 (internal quotation marks omitted). Parent makes the obvious points that

personal jurisdiction and forum-selection are different things and that a bylaw can address

one but not the other. That is true, but it is also true that when a party agrees to a forum-

selection provision, the circumstances may imply that the party has consented to

jurisdiction. That is the situation in this case. If the language of the Forum-Selection Bylaw

had contained the caveat found in the Chevron bylaw, then that would have been a factor

counseling against implicit consent. But the Forum-Selection Bylaw in this case does not

contain that language.

       In further reliance on Chevron, Parent cites then-Chancellor Strine’s comment that

it was not unreasonable “to require a plaintiff to bring an internal affairs claim in the courts

of the state of incorporation against the numerous corporate defendants who will be

indisputably subject to the state’s personal jurisdiction, simply because a few other

defendants have to be sued elsewhere.” Id. at 960. Parent correctly infers from this

language that a forum-selection bylaw will not automatically confer jurisdiction on all

defendants in a case. That point is inarguable, but it is also irrelevant. Parent is not subject

to jurisdiction in this court because the Forum-Selection Bylaw encompasses all possible

defendants. Parent is subject to jurisdiction in this court because of the particular facts of

this case, which involve Parent controlling 78% of the Company’s voting power,

determining who serves in six of nine board seats, filling five of the six with officers of

Parent or its subsidiaries, and benefiting from an exclusive-forum provision that its

representatives adopted in conjunction with the Acquisition to channel all breach of

                                              30
fiduciary duty litigation into this court. Those facts support the existence of personal

jurisdiction over Parent under a theory of implicit consent.

       For similar reasons, Parent cannot defeat the assertion of jurisdiction by pointing to

Section 115 of the DGCL, 8 Del. C. § 115. That statute properly confirms that despite

authorizing the inclusion of forum-selection bylaws in the constitutive documents of a

corporation, those provisions operate “consistent with applicable jurisdictional

requirements.” Id. In this case, Parent’s control over the Company at the board and

stockholder levels, together with the actions taken by Parent’s representatives on the Board,

satisfy applicable requirements of personal jurisdiction through the mechanism of implicit

consent.

       More broadly, Parent argues that a forum-selection bylaw cannot confer jurisdiction

over a stockholder as a defendant. In the principal authority on which Parent relies, I

expressed doubts that a comparable forum-selection bylaw could confer jurisdiction in this

court over stockholder defendants who had no other ties to Delaware other than their

ownership of shares in a Delaware corporation. See Edgen Gp. Inc. v. Genoud, C.A. No.

9055-VCL, at 31–32, 34–35 (Del. Ch. Nov. 5, 2013) (TRANSCRIPT). Longstanding

Delaware precedent holds that purchasing or owning shares of stock in a Delaware

corporation, standing alone, is not enough to enable a Delaware court to exercise personal

jurisdiction over a non-consenting party, even in cases of sole ownership.9 It is not clear to

       9
        See Papendick v. Bosch, 410 A.2d 148, 151–52 (discussing Shaffer v. Heitner, 433
U.S. 186 (1977)); Fisk Ventures, LLC v. Segal, 2008 WL 1961156, at *7 & n.20 (Del. Ch.
May 7, 2008) (“Mere ownership of a Delaware company does not constitute a sufficient

                                             31
me that buying or continuing to hold shares in a Delaware corporation with an exclusive-

forum provision would constitute a sufficient degree of consent to imbue this court with

the power to exercise personal jurisdiction over a stockholder who has no other ties to

Delaware and did not otherwise participate in the adoption of the forum-selection clause.

A number of scholars have questioned the sufficiency of bylaw-based consent to litigate

disputes in Delaware.10 And while this jurisdiction has followed a different course when

considering a plaintiff’s choice of forum,11 it seems to me that the critics’ arguments

basis for personal jurisdiction.”); Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 975
(Del. Ch. 2000) (“[O]wnership of a Delaware corporation is not, without more, a sufficient
contact on which to base personal jurisdiction.”); Abajian v. Kennedy, 1992 WL 8794, at
*10 (Del. Ch. Jan. 17, 1992) (Allen, C.) (“Merely purchasing stock in a Delaware
corporation does not supply the requisite contacts necessary for jurisdiction in a case of
this kind.” (citing Shaffer, 433 U.S. at 215)).
      10
           See, e.g., Helen Hershkoff & Marcel Kahan, Forum-Selection Provisions in
Corporate “Contracts”, 93 Wash. L. Rev. 265, 280–86 (2018); James D. Cox, How
Understanding the Nature of Corporate Norms Can Prevent Their Destruction by
Settlements, 66 Duke L.J. 501, 507 n.25 (2016); Ann M. Lipton, Manufactured Consent:
The Problem of Arbitration Clauses in Corporate Charters & Bylaws, 104 Geo. L.J. 583,
585–87, 603–626 (2016); Deborah A. DeMott, Forum-Selection Bylaws Refracted
Through an Agency Lens, 57 Ariz. L. Rev. 269, 279–282, 287–97 (2015); Lawrence A.
Hamermesh, Consent in Corporate Law, 70 Bus. Law. 161, 167–73 (2014); see also
Barbara Black, Arbitration of Investors’ Claims Against Issuers: An Idea Whose Time Has
Come?, 75 L. & Contemp. Probs. 107, 114 (2012) (“The countervailing argument, that
merely continuing to hold shares is not the manifestation of assent required under contract
law, is also supportable.”); cf. Faith Stevelman, Regulatory Competition, Choice of Forum,
and Delaware’s Stake in Corporate Law, 34 Del. J. Corp. L. 57, 132–33 (2009) (explaining
that “the argument based on consent” through the adoption of a bylaw by a majority of
stockholders “is surely less than compelling” and highlighting that “[t]he dubiousness of
consent would be infinitely compounded if the company had a controlling shareholder”).
      11
        See ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 560 (Del. 2014);
Chevron, 73 A.3d at 955–58.

                                            32
potentially carry greater weight for a defendant with no other ties to this forum other than

its ownership of shares.

       This case, however, provides no opportunity to opine on that interesting question.

To reiterate, this case involves the exercise of personal jurisdiction over a non-resident

controlling stockholder whose representatives on a Delaware corporation’s board of

directors comprised a majority of the directors who voted unanimously to adopt a forum-

selection provision in conjunction with an insider transaction and who selected the courts

of this state for precisely the type of litigation in which Parent would be the principal

defendant. In my view, under those circumstances, the controlling stockholder consented

implicitly to the existence of personal jurisdiction in this state.

       This holding is limited to the facts of this case. This decision does not address

whether a Delaware court could assert jurisdiction over a stockholder based solely on a

board-adopted forum-selection provision if the stockholder had no other ties to this state.

Nor does this decision address other factual permutations involving a controller. For

example, it does not consider whether a Delaware court could assert jurisdiction over a

controller based solely on a board-adopted forum-selection provision if the controller had

a less substantial presence on the corporation’s board, or if the controller only was alleged

to wield effective control rather than possessing hard, mathematical control. This decision

holds only that Parent consented to jurisdiction in Delaware on the facts of this case when

the Board adopted the Forum-Selection Bylaw.

                                               33
B.     The Claim For Breach Of Fiduciary Duty Against The Director Defendants

       The Director Defendants have moved to dismiss the claims against them pursuant

to Rule 12(b)(6) for failure to state a claim on which relief can be granted. Assuming for

the sake of argument that entire fairness applies and that the complaint generally states a

claim under that standard of review, they argue that the complaint does not sufficiently

allege that they engaged in culpable conduct.

       When considering a motion to dismiss for failure to state a claim, this court (i)

accepts as true all well-pleaded factual allegations in the complaint, (ii) credits vague

allegations if they give the opposing party notice of the claim, and (iii) draws all reasonable

inferences in favor of the plaintiffs. Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del.

2002). In applying this standard, “dismissal is inappropriate unless the plaintiff would not

be entitled to recover under any reasonably conceivable set of circumstances susceptible

of proof.” Id. (internal quotation marks omitted).

       The Directors Defendants accept for purposes of their motion to dismiss that entire

fairness is the operative standard of review. The Director Defendants do not meaningfully

dispute that it is reasonably conceivable that the complaint states a claim under the entire

fairness standard. They rather argue that they were not sufficiently involved in the

negotiation or approval of the Acquisition to face potential liability.

                                              34
       A director can avoid liability for an interested transaction by totally abstaining from

any participation in the transaction.12 “Delaware law clearly prescribes that a director who

plays no role in the process of deciding whether to approve a challenged transaction cannot

be held liable on a claim that the board’s decision to approve that transaction was

wrongful.” In re Tri-Star Pictures, Inc., Litig., 1995 WL 106520, at *2 (Del. Ch. Mar. 9.

1995). But this is “not an invariable rule.”13

       12
           Weinberger v. UOP, Inc., 457 A.2d 701, 710–11 (Del. 1983) (“[I]ndividuals who
act in a dual capacity as directors of two corporations, one of whom is parent and the other
subsidiary, owe the same duty of good management to both corporations, and in the
absence of . . . the directors’ total abstention from any participation in the matter, this duty
is to be exercised in light of what is best for both companies.” (emphasis added)); see Propp
v. Sadacca, 175 A.2d 33, 39 (Del. Ch. 1961) (concluding that a conflicted director was not
legally responsible for unfair aspects of the transaction where he “abstained from voting in
good faith because he honestly believed that if he were to become involved in consideration
of [the transactions], his duties as a director would somehow come in conflict with his own
self interest” because it was not “the type of corporate act for which a director may clearly
be held liable . . . ”), aff’d in part and rev’d in part on other grounds sub nom. Bennett v.
Propp, 187 A.2d 405 (Del. 1962).
       13
          Valeant Pharms. Int’l v. Jerney, 921 A.2d 732, 753 (Del. Ch. 2007); see also Tri-
Star Pictures, 1995 WL 106520, at *3 (“[N]o per se rule unqualifiedly and categorically
relieves a director from liability solely because that director refrains from voting on the
challenged transaction.” (emphasis original)); In re Dairy Mart Convenience Stores, Inc.,
1999 WL 350473, at *1 n.2 (explaining that “mere abstinence from a vote does not, in the
ordinary course, shield or absolve directors from liability” because “[i]t would hardly seem
appropriate for directors, by their own choosing, to decide to abdicate [their affirmative
fiduciary] duties by not forming an opinion about a board decision”); Balotti & Finkelstein,
supra, § 4.16[A] (“Typically, directors who did not attend or participate in the board’s
deliberations on, or approval of, a transaction will not be held liable for the transaction.
But an absent director ‘who knowingly accepts a personal benefit flowing from a self-
interested transaction and refuses to return it upon demand, can be thought to have ratified
the action taken by the board in his absence and, thus, share in the full liability of his fellow
directors.’” (footnote omitted) (quoting Valeant, 921 A.2d at 753–54)).

                                                 35
       One might, for example, imagine a scenario in which certain members of the
       board of directors conspire with others to formulate a transaction that is later
       claimed to be wrongful. As part of the conspiracy, those directors then
       deliberately absent themselves from the directors’ meeting at which the
       proposal is to be voted upon, specifically to shield themselves from any
       exposure to liability. In such circumstances it is highly unlikely that those
       directors’ “nonvote” would be accorded exculpatory significance.

Tri-Star Pictures, 1995 WL 106520, at *3. “Similarly, an absent director . . . who

knowingly accepts a personal benefit flowing from a self-interested transaction and refuses

to return it upon demand, can be thought to have ratified the action taken by the board in

his absence and, thus, share in the full liability of his fellow directors.” Valeant, 921 A.2d

at 753–54; see also In re Oracle Corp. Deriv. Litig., 2018 WL 1381331, at *21 (Del. Ch.

Mar. 19, 2018). Or a court might hold a director liable, even if the director abstained from

the formal vote to approve the transaction, if the director was “closely involved with the

challenged [transaction] from the very beginning” and the transaction was rendered unfair

“based, in large part,” on the director's involvement. Gesoff v. IIC Indus., Inc., 902 A.2d
1130, 1166 n.202 (Del. Ch. 2006). More generally, this court may hold an absent director

liable if the director “play[ed] a role in the negotiation, structuring, or approval of the

proposal.”14

       14
         Valeant, 921 A.2d at 753; see In re Ebix, Inc. S’holder Litig., 2018 WL 3545046,
at *12 (Del. Ch. Jul. 17, 2018); Frederick Hsu Living Tr. v. ODN Hldg. Corp., 2017 WL
1437308, at *38 (Del. Ch. Apr. 14, 2017, revised Apr. 24, 2017); see also Cambridge Ret.
Sys. v. DeCarlo, C.A. No. 10879-CB, at 44–48 (Del. Ch. June 16, 2016) (TRANSCRIPT)
(explaining that plaintiffs alleged sufficient participation by a conflicted director where
complaint stated the director attended a meeting where the board of directors failed to fully
consider a decision and another meeting where the special committee approved an
apparently “prebaked” deal).

                                             36
       Given the factual nuances underlying this rule, it is no surprise that the leading cases

have not addressed the issue at the pleadings stage, but rather in post-trial rulings or on a

motion for summary judgment.15 This decision concludes that the complaint pleads

sufficient facts to implicate the Director Defendants in the negotiation, structuring, or

approval of the Acquisition.

       Nogueira did more than simply vote on the resolution to approve the transaction for

purposes of the Indenture. At the outset of the process, Nogueira participated in substantive

discussions with Batista over the pricing of the Acquisition, reaching alignment on a price

of $1.3 billion. Nogueira then conveyed the substance of the discussions to Lovette and

handed off the baton to him. The price that Nogueira initially discussed with Batista and

passed along to Lovette was adopted by Barclays for its initial presentation and ultimately

became the headline price for the transaction. It also appears that Nogueira may have tried

to keep his involvement secret, because the Committee did not learn about Nogueira’s

discussions with Batista until one month into the negotiations, when the Company’s outside

counsel disclosed the information to Paul Weiss. At the pleading stage, the allegations of

Nogueira’s involvement are sufficient to preclude dismissal.

       Lovette also did significantly more than just vote on the resolution to approve the

transaction for purposes of the Indenture. He received word about the transaction from

       15
         See Weinberger, 457 A.2d at 710–11 (post-trial); Emerald P’rs v. Berlin, 2001
WL 115340, at *19–20 (Del. Ch. Feb. 7, 2001) (post-trial), rev’d on other grounds, 787
A.2d 85 (Del. 2001); Tri-Star, 1995 WL 106520, at *1 (summary judgment); Citron v. E.I.
Du Pont de Nemours & Co., 584 A.2d 490, 492 (Del. Ch. 1990) (post-trial).

                                              37
Nogueira, then pitched the deal to the independent directors. For assistance, he retained

Barclays, a financial advisor with substantial ties to Parent. After the Board established the

Committee, Lovette routinely attended their meetings and consistently recommended

proceeding with the Acquisition. When the Committee considered not bidding further

against strategic acquirers as part of a multi-party process, Lovette advocated strongly in

favor of the Acquisition. When Parent breached its exclusivity agreement with the

Company, Lovette advised the Committee to address the matter “in a constructive manner.”

Ex. 10 at 4. During the back-and-forth with Parent over the deal terms, Parent frequently

dealt with Lovette. And when the Committee sought financing, Lovette negotiated the key

terms with Barclays. At the pleading stage, the allegations of Lovette’s involvement are

more than sufficient to preclude dismissal.

       The allegations against the other three Director Defendants—Farahat, Molina, and

Tomazoni—are comparably slim. The only action cited in the complaint is their

participation in the Board’s decision to approve the Acquisition for purposes of the

Indenture. In taking this action, the directors arguably violated an earlier Board resolution

in which the Board determined not to approve the transaction before the Committee.

       The complaint alleges, and it is reasonably conceivable, that if the Director

Defendants had not approved the resolution, then the covenant violation would have

resulted in harm to the Company. The plaintiffs argue that the Director Defendants

therefore had the ability to halt the Acquisition by refusing to approve the resolution. The

plaintiffs reason that because the Director Defendants did not stop a transaction that the

complaint pleads was unfair, they can be held liable as interested fiduciaries.

                                              38
       The allegations regarding the nature of the remaining Director Defendants’

involvement in the approval of the Acquisition support competing inferences. At the

pleading stage, it is not possible to select between competing inferences. The plaintiffs

receive the benefit of the doubt. It is reasonably conceivable that by approving the

resolution, the Director Defendants facilitated the Acquisition and participated in its

effectuation. They accordingly cannot obtain dismissal at the pleading stage.

                                 III.   CONCLUSION

       The motions to dismiss are denied. Within fourteen days, the parties shall submit a

schedule to bring this case to trial.

                                            39