Court Opinion

ID: 9685284
Source: CourtListenerOpinion
Date Created: 2023-08-24 14:28:48.864266+00
Date Added: 2024-06-11T18:18:04.115418
License: Public Domain

MARTIN J. MANSUR, Judge
(concurring specially).
I concur in the opinion and write separately on the issue of the standard this court *396must apply in determining if the respondents breached their duty of care under Delaware law.
Appellants argue that the respondent’s alleged breach of duty should have been considered under a standard of gross negligence, “that is, was respondent’s due diligence a gross deviation from the standard of conduct that a reasonable person would have observed.” Appellants believe that the following conduct creates genuine issues of material fact precluding summary judgment: (1) MEI’s counsel considered due diligence lacking and advised against the purchase; (2) respondents relied exclusively on Regis for operational due diligence; (3) MEI’s access to Glemby’s information and personnel was restricted; (4) Glemby deliberately withheld material information from MEI; (5) Regis was having financial difficulties that MEI failed to investigate properly; (6) Regis, not MEI, prepared the financial projections on which the acquisition was premised and MEI failed to verify the projections independently; (7) respondents failed to do background checks on Kunin and Finkelstein; (8) due diligence would have revealed that the “turn around” based on the profitability of Essa-nelle and Maxims was illusory; (9) respondents failed to determine if the proposed cuts in overhead of the merged companies would leave a viable company capable of generating cash; (10) financial projections regarding Re-gis were unrealistic; (11) respondents failed to fully investigate Regis’s overwhelming debt and the conflict of interest involving Regis, Kunin and Finkelstein.
The affidavits filed by MEI’s directors do not deny these allegations, but merely state that their behavior was consistent with past practices employed in acquisition of other business entities and that the directors approved the purchase knowing the risks involved.
If we applied the standard urged upon us by appellants, the allegations regarding respondents’ behavior may create genuine issues of material fact. But we are required to apply the Delaware standard, which requires proof that respondents acted with “reckless indifference” and “deliberate disregard.” See Allaun, 147 A. at 261.