Court Opinion

ID: 4638204
Source: CourtListenerOpinion
Date Created: 2020-11-30 19:02:13.027058+00
Date Added: 2024-06-11T07:59:08.402928
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
                                         )
CITY OF WARREN GENERAL                   )
EMPLOYEES’ RETIREMENT SYSTEM, )
individually and on behalf of all others )
similarly situated,                      )
                                         )
                    Plaintiff,           )
                                         )
       v.                                )   C.A. No. 2019-0740-PAF
                                         )
TALBOTT ROCHE and WILLIAM Y.             )
TAUSCHER,                                )
                                         )
                    Defendants.          )
                                         )

                        MEMORANDUM OPINION
                       Date Submitted: August 10, 2020
                       Date Decided: November 30, 2020

Joel Friedlander, Jeffrey M. Gorris, Christopher P. Quinn, FRIEDLANDER &
GORRIS, P.A., Wilmington, Delaware; R. Bruce McNew, COOCH AND
TAYLOR, P.A., Wilmington, Delaware; A. Rick Atwood, Jr., Randall J. Baron,
ROBBINS GELLER RUDMAN & DOWD LLP, San Diego, California;
Christopher H. Lyons, ROBBINS GELLER RUDMAN & DOWD LLP, Nashville,
Tennessee; Attorneys for Plaintiff.

Berton W. Ashman, Jr., Kevin R. Shannon, Callan R. Jackson, POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; William Savitt, Anitha
Reddy, Adam M. Gogolak, Zachary M. David, WACHTELL, LIPTON, ROSEN &
KATZ LLP, New York, New York; Attorneys for Defendants.

FIORAVANTI, Vice Chancellor
      This case concerns the acquisition of Blackhawk Network Holdings, Inc.

(“Blackhawk” or the “Company”) by two private equity firms, Silver Lake Partners,

L.P. (collectively, with its affiliates, “Silver Lake”) and P2 Capital Partners

(collectively, with its affiliates, “P2”). Plaintiff alleges that two Blackhawk officers,

CEO and President, Talbott Roche, and Executive Chairman, William Y. Tauscher,

feared for their employment at Blackhawk because of pressure from an activist

stockholder, Jana Partners LLC (“Jana”). Plaintiff alleges that Roche and Tauscher

manipulated Blackhawk’s Board of Directors (the “Board”) into selling Blackhawk

to Silver Lake and P2 in 2018 (the “Buyout”) both to secure their own employment

and to obtain equity in Blackhawk after the Buyout. The complaint also alleges that

the proxy statement disseminated to Blackhawk’s stockholders seeking their

approval of the transaction was materially deficient.

      Defendants have moved to dismiss the complaint in its entirety under Court

of Chancery Rule 12(b)(6) for failure to state a claim upon which relief can be

granted. The complaint does not contest that ten of Blackhawk’s twelve directors—

all of whom approved the merger agreement (the “Merger Agreement”) along with

Roche and Tauscher—were disinterested and independent. The complaint does not

contain well-pleaded allegations that Roche and Tauscher manipulated the board’s

deliberative process or otherwise misled the rest of the board into approving the

transaction. The allegations that Roche and Tauscher were threatened by Jana lack

                                           2
potency because Jana made no threat and because Jana sold its stock before Silver

Lake and P2 proposed the Buyout. There are no well-pleaded allegations that Roche

and Tauscher were motivated by the prospect of post-closing employment. The

complaint thus does not state a claim that Roche and Tauscher breached their

fiduciary duties by deceiving the rest of the Board into approving the transaction.

      The complaint alleges that Roche and Tauscher were involved in preparing

the proxy statement recommending the Buyout and are liable for materially

misleading disclosures and omissions therein.         The Court concludes that the

Complaint states a claim that Roche breached her fiduciary duty of care as to

disclosures concerning the management projections of potential earnings from

acquisitions and the effect of the Merger Agreement’s go-shop provision. Because

disclosure claims against Roche for breach of fiduciary duty survive, the motion to

dismiss is granted in part and denied in part.

I.    BACKGROUND
      The facts recited in this opinion are drawn from the Verified Complaint (Dkt.

1) (the “Complaint” or “Compl.”) and documents integral thereto, including

documents produced in response to Plaintiff’s demand under 8 Del. C. § 220. 1

1
  The parties agreed that the documents produced to the Plaintiff in response to the 220
demand are incorporated by reference in the Complaint. Defs.’ Opening Br. 5 n.1. In
addition, the Complaint incorporates by reference the proxy statement recommending that
the Company’s stockholders approve the Buyout (the “Proxy”). The Proxy is attached as
Exhibit 1 to the Transmittal Affidavit of Callan R. Jackson (“Jackson Aff.”).
                                           3
          A.        The Company, Roche, and Tauscher

          Blackhawk sells prepaid gift cards and reward cards. The Company operates

three business segments: (1) U.S. Retail, which principally sells gift cards through

U.S. retailers; (2) Incentives & Rewards, which provides prepaid products to

businesses to support employee rewards and customer loyalty programs; and (3)

International, which sells prepaid gift cards through retailers and directly to

businesses outside of the U.S.2

          Roche co-founded Blackhawk in 2001 as a division of Safeway, Inc.

(“Safeway”), a publicly traded supermarket company. 3             Blackhawk was

incorporated as a Delaware corporation in 2006. 4       In April 2013, Blackhawk

completed an initial public offering of common stock.5 After its initial public

offering, Safeway remained Blackhawk’s controlling stockholder. 6

          Tauscher served as the CEO of Blackhawk between 2013 and 2016.7

Tauscher then became the Company’s Executive Chairman (an executive officer

position at the Company) and Head of International and Corporate Development.8

2
    Compl. ¶ 76.
3
    Id. ¶¶ 8, 12.
4
    Id. ¶ 12.
5
    Id.
6
    Id.
7
    Compl. ¶ 9.
8
    Id.
                                           4
In February 2016, Roche succeeded Tauscher as CEO and became a director of the

Company. After the Buyout, Roche continued to serve as Blackhawk’s President

and CEO. The Complaint alleges that Tauscher continued to serve as the Executive

Chairman of the Company after the Buyout. 9

           B.    Jana Persuades Safeway to Spin Off Blackhawk.

           In September 2013, not long after the Blackhawk IPO, Jana, a prominent

activist investor,10 disclosed that it had accumulated 6.2% of Safeway’s common

stock. Jana also disclosed that it had discussed with Safeway’s management the

prospect of Safeway transferring its stake in Blackhawk to Safeway’s stockholders.11

Seven months later, Safeway spun off Blackhawk by distributing its remaining

Blackhawk shares to Safeway’s stockholders. 12          After the spin-off, no single

stockholder owned more than 9% of the total voting power of Blackhawk’s common

stock. 13 P2 was one of the Company’s largest stockholders after the spin-off, and

held more than 5% of the total voting power of the common stock. 14

9
 See id. ¶ 111 (“As of the filing of the Complaint, Roche remains CEO and President of
Blackhawk, and Tauscher remains Executive Chairman.”). As discussed below,
Defendants dispute this allegation.
10
     Jana waged approximately 75 activist campaigns between 2001 and 2017. Id. ¶ 38.
11
     Id. ¶ 13.
12
     Id. ¶ 14.
13
     Id. ¶ 15.
14
     Id.
                                            5
           C.    Jana and Blackhawk Enter into a Cooperation Agreement.

           After Safeway spun off Blackhawk, Jana and Blackhawk entered into a

Cooperation Agreement, dated March 16, 2017. 15 Pursuant to the Cooperation

Agreement, Blackhawk expanded the Board from eleven to thirteen members and

filled the two new seats with Jana’s designees. 16          The agreement committed

Blackhawk to include the two Jana designee directors in the Company’s slate of

director nominees for its 2017 annual meeting of stockholders. The Cooperation

Agreement also required Blackhawk to form a “Cost Savings Committee” to review

opportunities to increase cost savings.17       In exchange for the benefits of the

Cooperation Agreement, Jana agreed to standstill provisions. 18             One of the

provisions prevented Jana from participating in a proxy solicitation regarding

Blackhawk until the expiration of the Cooperation Agreement prior to the

Company’s 2018 annual stockholder meeting.19

           In conjunction with the Cooperation Agreement, Tauscher “notified the

Company of his intent to resign from his international and corporate development

15
     Id. ¶ 39.
16
     Id.
17
     Id.
18
     Id.
19
   Compl. ¶ 42. See also Blackhawk Current Report (Form 8-K) (Mar. 20, 2017). The
Court can take judicial notice of this public filing. Fortis Advisors LLC v. Allergan W.C.
Hldg., Inc., 2019 WL 5588876, at *4 (Del. Ch. Oct. 30, 2019) (citing Wal-Mart Stores, Inc.
v. AIG Life Ins. Co., 860 A.2d 312, 320 n.28 (Del. 2004)).
                                            6
responsibilities,” but that he would remain the Company’s Executive Chairman and

the Chairman of the Board. 20 Tauscher remained Executive Chairman throughout

the Buyout process. 21 Blackhawk’s CFO, Jerry Ulrich, also notified the Company

that he would retire by the end of 2017.22

           D.     Silver Lake and P2 Explore an Investment in the Company and the
                  Company Retains a Financial Advisor.

           After the IPO, a key element of the Company’s strategy was growth through

acquisitions. From November 2013 through August 2017, Blackhawk bought 16

businesses—foreign and domestic—for an aggregate price of more than $1.1

billion.23 In a February 2017 analyst call, Roche said, “We believe acquisitions can

fuel our growth, even as growth rates slow in our traditional U.S. retail business.”24

Roche said that management viewed “acquisitions along with the buildout of our

digital capabilities and platforms as the best allocation of our free cash flow and

available borrowings.” 25

           In early 2017, Silver Lake and P2 considered a minority investment in the

20
     Compl. ¶ 40.
21
     Id. ¶ 109.
22
     Id. ¶ 40.
23
     Id. ¶ 16.
24
     Id. ¶ 27.
25
     Id.
                                             7
Company, with proceeds to fund future acquisitions.26 Blackhawk’s management

met with Silver Lake and P2 to discuss the potential investment. 27 In May 2017, the

Company executed confidentiality agreements with Silver Lake and P2 to facilitate

their discussions. 28 In July 2017, Silver Lake and P2 proposed an investment. The

Company permitted Silver Lake and P2 to conduct due diligence, but the Company

took no action on the proposal.29

           Around August 2017, the Company retained the investment banking firm

Sandler O’Neill & Partners, L.P. (“Sandler”) as its financial advisor to advise on

acquisitions and to assist with considering funding sources for the Company’s

acquisition strategy, including the potential investment from Silver Lake and P2.30

           Plaintiff alleges that Sandler had conflicts of interest in considering any

transaction between Blackhawk and Silver Lake. In particular, the co-founder of

Sandler served on the board of directors of the Nasdaq with the co-founder of Silver

Lake for ten years. 31 Sandler also served as the lead joint bookrunner for a Silver

Lake portfolio company in its initial public offering to cash out Silver Lake’s pre-

26
     Id. ¶ 43.
27
     Id.
28
     Id.
29
     Id. ¶¶ 44–45.
30
     Id. ¶¶ 46–47.
31
     Id. ¶ 114.
                                            8
IPO shares in 2015. 32 Beyond these business relationships, Plaintiff alleges that one

of the Silver Lake Managing Partners responsible for the Buyout, Michael Bingle,

has golfed with James J. Dunne, III, the head of Sandler and representative of the

Company, including as recently as January 2019.33 Plaintiff further alleges that one

of the attorneys representing Blackhawk in connection with the Buyout golfed with

Bingle and Dunne in September 2017. 34 Plaintiff alleges that the lead lawyer

representing the Company, Silver Lake Managing Partner Greg Mondre, and Dunn

are all members of two exclusive golf clubs.35

           E.    The Board Considers Financing for the Company’s Acquisitions,
                 and Jana Sells Its Stock.
           On October 9, 2017, Sandler made a presentation to the Board regarding the

potential acquisition of a company named Stored Value Solutions and identified

potential sources of financing for future acquisitions (the “October 9

Presentation”).36 The October 9 Presentation reviewed the Company’s post-IPO

acquisition history37 and stated that management had prepared a model for a 2018–

2020 budget assuming “aggregate M&A ‘spending’ of $1.1 billion over three years

32
     Id.
33
     Id.
34
     Id.
35
     Id.
36
     Id. ¶¶ 48–49.
37
     Id. ¶ 49.
                                            9
to be funded by the Company’s free cash flow and debt financing.” The Board,

however, requested a budget reflecting a “more aggressive M&A strategy.”38

Accordingly, “[m]anagement also prepared an expanded model with $1.5 billion

allocated to acquisitions; the incremental $400 million to be funded by issuing

common stock as debt capacity limits were reached.” 39 The October 9 Presentation

analyzed the budgets prepared by management and possible sources of funding for

future acquisitions. Based on its analysis, Sandler determined that there was a “full

range of options to finance an aggressive M&A strategy,” and concluded that,

regardless of the “funding approach,” the “expanded M&A strategy delivers

significant value to shareholders.”40

           Plaintiff alleges that the expanded M&A strategy prepared by management

and discussed by Sandler was uncertain because “the question remained whether an

acquisition strategy could be pursued if Jana (and potentially other activists) agitated

against it.”41       According to Plaintiff, in October 2017, Roche and Tauscher

“understood that engineering a sale of Blackhawk to a private equity firm could

allow them to profit personally from the pursuit of an acquisition strategy,” without

38
     Id.
39
     Id.
40
     Id. ¶¶ 50–55.
41
     Id. ¶ 54.
                                          10
interference by activist investors like Jana.42 However, by the time Sandler made

the October 9 Presentation, Jana’s influence on the Company had waned. According

to undisputed public filings submitted by Defendants that are subject to judicial

notice, 43 Jana had sold its entire stake in Blackhawk no later than September 30,

2017. Further, on October 6, 2017, one of Jana’s two director designees resigned

from Blackhawk’s board. 44 Other than Jana, the Complaint does not identify any

activist investor that exerted or attempted to exert influence on Blackhawk.

          F.     Blackhawk Announces Negative Guidance.
          On October 11, 2017, Blackhawk announced that it was lowering previously

disclosed revenue guidance and that it expected the Company’s adjusted EBITDA

for 4Q 2017 and fiscal year 2017 to be “below the midpoint” of previously disclosed

guidance. 45     Roche attributed the revised guidance to “increasing competitive

pressures” that would “result in lower growth in our U.S. retail physical channels

going forward.”46 The day after the announcement, the Company’s stock price

dropped from $44.20 per share to $35.15 per share.47

42
     Id. ¶ 55.
43
     See Jana, Form 13F Information Table (Nov. 14, 2017) (Jackson Aff. Ex. 4).
44
     Jackson Aff. Ex. 5.
45
     Compl. ¶ 58.
46
     Id.; see also Blackhawk, Current Report (Form 8-K) (Oct. 11, 2017).
47
     Compl. ¶ 59.
                                             11
           G.    Silver Lake and P2 Submit Their First Indication of Interest.

           Within a week of the Company’s announcement of lowered earnings

guidance, Silver Lake and P2 contacted Roche to express their interest in taking the

Company private. On October 20, 2017, Silver Lake and P2 jointly submitted a

written indication of interest to pay $47 to $49 per share for the Company (the “First

Indication of Interest”). 48 Silver Lake and P2 addressed the First Indication of

Interest to Roche and Tauscher.49 The First Indication of Interest stated that Silver

Lake and P2 had “utmost respect and admiration for Blackhawk’s leadership,” that

Silver Lake would be “a supportive investor” and “value-added partner,” and that

the capital structure resulting from any buyout would “permit management to pursue

an aggressive, growth-oriented business plan.” 50 The First Indication of Interest

suggested that Silver Lake and P2 were “uniquely well-positioned to complete this

transaction efficiently” because they had already begun due diligence work with the

Company.51 The First Indication of Interest further noted that any transaction could

include a “customary post-signing ‘go-shop’ process allowing the Board to fulfill its

duties.”52 The Company’s management permitted Silver Lake and P2 to conduct

48
     Id. ¶ 60.
49
     Id.
50
     Id.
51
     Id. ¶ 61.
52
     Id. ¶ 62.
                                          12
further due diligence.53 In late October and early November, Blackhawk’s senior

management team, along with Sandler, met with Silver Lake and P2 to discuss the

First Indication of Interest. 54

           H.    The November 6, 2017 Board Meeting

           On November 6, 2017, the Board met to discuss the First Indication of

Interest.55 Management reported that Silver Lake and P2 were conducting due

diligence.56 According to Blackhawk’s management, the parties had “deferred any

further discussion regarding transaction price” until additional due diligence had

been completed.57 Sandler advised the Board that it “could always reject [the]

proposal if it was not satisfied with the terms of the potential transaction.”58 Roche

and Tauscher told the Board that management had not been active in due diligence

with the Company’s potential acquisition of Stored Value Solutions because

“management’s current focus was on the potential transaction with Silver Lake and

P2.”59

           In its November 6, 2017 Board presentation (the “November 6

53
     Id. ¶ 63.
54
     Id.
55
     Id. ¶ 64.
56
     Id.
57
     Id.
58
     Id.
59
     Id. ¶ 65.
                                         13
Presentation”), 60 Sandler summarized Silver Lake’s background, the terms of the

First Indication of Interest, and the status of due diligence.61 The November 6

Presentation compared two sets of management forecasts for 2017-2020—one

prepared in July 2017 (the “July Forecast”) and one prepared in November 2017 (the

“November Forecast”).         The July Forecast and the November Forecast both

projected future EBITDA from acquisitions, in addition to other earnings metrics.

The November Forecast assumed that the Company would spend $700 million in

acquisitions from 2018 through 2020.62 As compared to the July Forecast, the

November Forecast generally projected lower revenue, adjusted EBITDA, and

earnings per share, but higher EBITDA from acquisitions.63

           I.   The November 21, 2017 Board Meeting
           On November 21, 2017, Blackhawk’s management provided the Board with

a status update on the discussions with Silver Lake and P2. Roche told the Board

that the Company was undertaking a “bottoms-up” financial analysis to create a 2018

budget.64 Roche said that “the Company’s expected performance in 2018 was likely

to be lower than the range that had previously been provided to the Board as

60
     The November 6 Presentation is attached as Exhibit A to the Complaint.
61
     Compl. Ex. A at HAWK0000061–62.
62
     Id. at HAWK0000068.
63
     Id.
64
     Compl. ¶ 71.
                                             14
projected in the 5-year plan.”65 Although not stated in the November 21, 2017 Board

minutes, the Proxy discloses that Roche anticipated that the Company’s performance

in 2018 would be lower than previously expected because of “challenges in [the

Company’s] U.S. retail sector that would limit organic growth.” 66 Roche reported

that due diligence was “largely complete,” and “Silver Lake and [P2] had been

provided with a 5-year financial model that did not yet reflect the bottoms-up 2018

analysis that was currently underway,” but that “management . . . provided Silver

Lake and P2 . . . with a general overview of potential factors affecting the Company’s

future performance.”67

         At the November 21 meeting, Sandler presented a “preliminary valuation

analysis . . . based on preliminary information provided by the Company” (the

“November 21 Presentation”).68 The November 21 Presentation contained a table

of implied EBITDA multiples based on illustrative ranges of the Company’s

adjusted EBITDA for 2018 and potential prices for the Company ranging from $45

to $51 per share.69           For purposes of this presentation, Sandler considered

65
     Id.; see also Jackson Aff. Ex. 10.
66
     Compl. ¶ 71; Proxy 30.
67
     Jackson Aff. Ex. 10.
68
     Compl. ¶ 71; Jackson Aff. Ex. 11.
69
  Jackson Aff. Ex. 11 at 10 & 12. The November 21 Presentation is dated November 17,
2017, but is alleged to have been presented at the November 21 meeting.
                                            15
management projections of the Company’s 2018 adjusted EBITDA of $240 to $280

million, without acquisitions, and further assumed that adjusted EBITDA would

grow by $20 million with acquisitions.70

          The November 21 Presentation also contained a short list of “Key Dates” for

a potential transaction with Silver Lake and P2. Sandler identified “February 9, 2018

– March 11, 2018,” the “period during which [Blackhawk] shareholders can make

proposals for annual meeting” as one of the “Key Dates.”71

          J.     The December 4, 2017 Board Meeting
          At a December 4, 2017, Board meeting, Sandler presented an update on the

transaction process and an updated discounted cash flow analysis (the “December 4

Presentation”). 72 The discounted cash flow analysis used a management forecast of

$260 million in 2018 adjusted EBITDA, excluding acquisitions.73 The December 4

Presentation also contained financial forecasts for 2018 adjusted EBITDA for each

of the Company’s business segments. 74

          Plaintiff alleges that a comparison between the segment analyses in the

December 4 Presentation and the November Forecast contained in the November 6

70
     Compl. ¶¶ 71–72; Jackson Aff. Ex. 11 at 13, 17.
71
     Jackson Aff. Ex. 11 at 22.
72
     Jackson Aff. Ex. 12.
73
     Id. at 4.
74
     Id. at 5.
                                             16
Presentation reveals that Roche’s statement to the Board on November 21 that

“challenges in [the Company’s] U.S. retail sector . . . would limit organic growth”

was false.75 Specifically, Plaintiff alleges that, between November 6 and December

4, the “2018 Adjusted EBITDA forecast for the U.S. Retail segment was essentially

unchanged” because the December 4 Presentation only reflected a 1.0% decrease in

the forecast earnings from U.S. retail, and so Roche’s statement at the November 21

meeting must have been false.76

           K.    Silver Lake and P2 Send a Second Indication of Interest.
           On December 11, 2017, Silver Lake and P2 sent Tauscher and Roche a second

indication of interest to acquire the Company for $44 to $45 per share (the “Second

Indication of Interest”). 77 The Second Indication of Interest stated that Silver Lake

and P2 were “100% supportive of the management team,” and “very enthusiastic

about the opportunity to partner with you and the Blackhawk team to grow and

maximize the value of the business.” 78 The Second Indication of Interest said that

Silver Lake’s and P2’s “plan” was to “support management in pursuing . . .

opportunities in a private setting,” and that Silver Lake had “significant experience

75
     Proxy 30.
76
     Compl. ¶ 76.
77
     Id. ¶ 77.
78
     Id.
                                           17
partnering with management of market leading technology companies.”79

           L.    The December 13 Board Meeting
           On December 13, 2017, the Board met to consider the Second Indication of

Interest.80 Roche “discussed the likelihood of challenges in pursuing the Company’s

long-term strategy of growing organically as well as by acquisition.” 81 Roche noted

that the Company faced limitations in the retail sector and difficulties in pursuing an

acquisitive strategy as a public company, including because there was “pressure on

the Company to return capital to shareholders, and the Company’s high liquidity

needs to fund acquisitions.” 82 Roche thus advocated accepting the proposal.83

           Sandler’s December 13, 2017 Board presentation discussed Blackhawk’s

value and the difficulties the Company faced in achieving organic growth (the

“December 13 Presentation”).84        The presentation summarized the Company’s

“Current Situation,” including that Sandler had assisted the Company in August and

September 2017 in “[u]sing the strength of a $42 – $45 stock price to pursue

financing options to execute a robust acquisition strategy of $700 million to $1.5

79
     Id.
80
     Id. ¶ 79.
81
     Jackson Aff. Ex. 14.
82
     Id.
83
     Compl. ¶ 79.
84
     Jackson Aff. Ex. 15.
                                          18
billion over several years.”85 According to Sandler, because of “headwinds facing

organic growth, [the Company’s] strategy requires it to be an active acquirer to

achieve its growth objectives.” 86 Sandler also noted that, “[i]n November, through

[the Company’s] diligence process . . . and in conversations with investors,

challenges relating to [the Company’s] ability to pursue its M&A strategy effectively

surfaced.”87 One of the listed challenges was that Blackhawk’s stockholders had

become “more vocal in demanding a return of capital through stock buybacks.”88

Sandler observed that the Company’s stockholders were “unsupportive of pursuing

[an] M&A strategy” and were “impatient with reinvestment in the business.”89

Sandler advised that “it appears that the greatest value to current [Company]

shareholders may be recognized by pursuing a take private transaction.” 90

           The Board unanimously determined to pursue a potential transaction with

Silver Lake and P2, and directed management to begin negotiating a transaction on

the terms described in the Second Indication of Interest.91

85
     Id. at 3.
86
     Id. at 5.
87
     Id. at 4.
88
     Id.
89
     Id. at 5.
90
     Id. at 6.
91
     Jackson Aff. Ex. 14 at 3; Compl. ¶ 81.
                                              19
           M.    Thoma Bravo Expresses Interest in Acquiring Blackhawk.

           On January 4, 2018, Thoma Bravo, LP (“Thoma Bravo,” referred to as “Party

A” in the Proxy) emailed Roche to express interest in discussing a potential

acquisition of Blackhawk. 92 Roche responded that she was “focused on year-end

matters but that she would follow up[.]” 93 In reality, Blackhawk’s management was

focused on the potential transaction with Silver Lake and P2. 94 On January 8, 2018,

Blackhawk’s management returned a revised version of the Merger Agreement to

Silver Lake and P2. 95         According to Plaintiff, the revisions “almost entirely

accepted” Silver Lake/P2’s proposed deal protection measures, which Plaintiff

characterizes as “extreme.” 96

           N.    The Board Approves the Buyout.
           At a January 11, 2018 Board meeting,97 Roche reported on Thoma Bravo’s

expression of interest. 98 The Board decided not to engage Thoma Bravo before entry

into a merger agreement with Silver Lake and P2 because Thoma Bravo “would

likely need to do significant diligence in order to finalize a potential transaction,”

92
     Id. ¶ 82; Defs.’ Opening Br. 18.
93
     Compl. ¶ 82.
94
     Id. ¶ 83.
95
     Id.
96
     Id.
97
     Id. ¶ 84.
98
     Id. ¶ 86.
                                            20
and engagement with Thoma Bravo “could result in the loss of the potential

transaction” with Silver Lake and P2. 99 The Board reasoned that “the ‘go-shop’

provisions of the draft merger agreement would permit the Company to solicit an

acquisition proposal from [Thoma Bravo] after signing a definitive merger

agreement.”100

            Sandler’s January 11 Board presentation (the “January 11 Presentation”)101

discussed decreased expectations for the Company’s value. First, Sandler noted that,

based on the Company’s lowered guidance for the third quarter of 2017, the

Company’s stock had decreased from $44 per share to approximately $35 per

share. 102        Further, Sandler explained that management expected to project the

Company’s 2018 adjusted EBITDA in the range of $240–250 million, which was

below the median consensus estimate of $270 million. 103 Sandler also observed that

there had been a “turnover in shareholders,” and, as a result, “activists have been

buying shares and requesting time with management” and that “shareholders have

become more vocal in demanding a return of capital through share buybacks.”104

99
     Id.
100
      Id.
101
      Jackson Aff. Ex. 17.
102
      Id. at 3.
103
      Id. at 4.
104
      Id.
                                            21
Sandler indicated that, to achieve the value implied by an acquisition by Silver Lake

and P2 for $44–$45 per share, the Company would need to achieve management’s

2018 projections for 2018 and then “grow [a]djusted EBITDA at a compound annual

rate of 10–18% per year for the 3 years ending 2021.”105

          During the following three days, the Company and Silver Lake/P2 negotiated

the per-share purchase price. The process concluded with Silver Lake and P2

increasing the proposed purchase price from $44–$45 per share to $45.25.106

          On January 14, 2018, the Board met to review the final terms of the

transaction.107 Roche provided “management’s recommendation that the Board

approve the proposed merger.” 108         Sandler provided a final overview of the

transaction terms and the value of the Company based on management’s projected

2018 adjusted EBITDA of $240–$250 million, excluding acquisitions (the “January

14 Presentation”). 109

          The Board unanimously approved entry into the Merger Agreement at the

purchase price of $45.25 per share. 110 At that time, Blackhawk’s Board consisted of

105
      Id. at 5.
106
      Compl. ¶ 88.
107
      Id. ¶ 89; Jackson Aff. Ex. 19.
108
      Compl. ¶ 89.
109
      Compl. ¶ 90; Jackson Aff. Ex. 18.
110
      Compl. ¶¶ 89–91; Jackson Aff. Ex. 19.
                                              22
twelve members: Tauscher, Roche, Anil Aggarwal, Richard H. Bard, Thomas

Barnds, Steven A. Burd, Robert L. Edwards, Mohan Gyani, Paul Hazen, Robert B.

Henske, Arun Sarin, and Jane J. Thompson. 111 Of the twelve directors on the Board,

only Tauscher and Roche were employees of Blackhawk.

            O.    The Company Issues the Proxy, and the Buyout Closes.

            On March 2, 2018, the Company disseminated the Proxy to its stockholders.112

The Proxy disclosed the terms of the go-shop provision and the results of the go-

shop process.113 The Proxy also attached a copy of the Merger Agreement. In

describing the go-shop provision, the Proxy stated:

            Right to Receive Higher Offers. The Blackhawk board of directors
            considered the Company’s rights under the merger agreement to solicit
            higher offers during the go-shop period and to consider and negotiate
            certain higher offers thereafter, including:

            the Company’s right to solicit offers with respect to acquisition
            proposals during a 25-day go-shop period and to terminate the merger
            agreement to enter into an agreement with respect to a superior proposal
            during the go-shop period, subject to Parent’s right to receive payment
            of a termination fee.114

The Proxy stated (and Plaintiff does not dispute) that Thoma Bravo contacted

Blackhawk shortly after the announcement of the merger to express interest in

111
      Id.
112
      Compl. ¶ 116.
113
      Compl. ¶¶ 116, 131–33; see also Proxy 33 (discussing results of go-shop process).
114
      Id. ¶ 132; Proxy 35.
                                              23
pursuing a transaction during the go-shop period.115 Thoma Bravo and the Company

engaged in due diligence during the go-shop period, but Thoma Bravo did not submit

a bid before the go-shop period expired. 116         According to the Proxy, Sandler

contacted eight strategic entities and five financial sponsors during the go-shop that

Sandler believed might be interested in acquiring the Company, but no one other

than Thoma Bravo expressed any interest in pursuing a transaction during the go-

shop period.117

            The Proxy contained four sets of financial projections prepared by

management.          The Proxy defined the first set of projections as the “Initial

Projections”:

            Blackhawk’s management prepared non-public, unaudited financial
            forecasts with respect to Blackhawk’s business, as a standalone
            company, for fiscal years 2017 through 2020, which are referred to as
            the “Initial Projections.” The Initial Projections were based on the
            information contained in Blackhawk’s financial model, which was
            prepared by Blackhawk’s management during the Summer of 2017
            from financial models used in connection with its annual internal
            planning processes, and were provided to Sandler O’Neill, the Sponsors
            and the Blackhawk board of directors in late October and early
            November 2017.118

With respect to the Initial Projections, the Proxy disclosed projected adjusted

115
      Id. at 33.
116
      Id.
117
      Id.
118
      Id. at 38.
                                             24
EBITDA of $233 million for 2017, $275 million for 2018, $330 million for 2019,

and $402 million for 2020, without acquisitions.119 The Proxy also disclosed

adjusted operating revenue, adjusted net income, and adjusted earnings per share for

2017 through 2020, without acquisitions. The Initial Projections correspond to the

projections presented to the Board on November 6, 2017.

            The Proxy defined the second set of projections as the “November Estimate

Range.”120 The November Estimate Range refers to the projections in the November

21 Presentation, projecting $240–$280 million in adjusted EBITDA for 2018,

without acquisitions. 121 The Proxy defined the third set of projections as the

“Preliminary 2018 Plan.” 122 The Preliminary 2018 Plan refers to the estimate

provided to the Board on December 4, 2017 that the Company would earn $260

million in adjusted EBITDA, without acquisitions. 123 The Proxy defined the fourth

set of projections as the “Revised Projections.”124 The Revised Projections refer to

the Company’s projection that it would earn $240–$250 million in adjusted

EBITDA, without acquisitions, as used in the January 11 Presentation and the

119
      Id.
120
      Id. at 38–39.
121
      Id.
122
      Id.
123
      Id.
124
      Id.
                                            25
January 14 Presentation.125

            On March 20, 2018, the Company filed a Proxy supplement (the “Proxy

Supplement”). The Proxy originally noted that, after the Buyout, there would be a

“new equity incentive plan for certain employees of Blackhawk,” and that “the terms

of such equity incentive plan or any other post-closing compensation or benefits

arrangements have not been agreed to otherwise determined as of the date” of the

Proxy.126 The Proxy Supplement stated: “[b]etween October 18, 2017 when [Silver

Lake and P2] expressed interest in an acquisition of the Company and the execution

of the merger agreement on January 15, 2018, there were no discussions between

[Silver Lake and P2] and the Blackhawk executive officers regarding any terms

pursuant to which the Blackhawk executive officers might be retained after the

closing.”127 The Proxy Supplement stated that “none of the Blackhawk executive

officers entered into any agreements with respect to post-closing employment”

during the same period. 128

            On March 30, 2018, Blackhawk’s stockholders approved the Merger

Agreement. Ultimately, 99.6% of voting shares voted in favor of the merger.129 The

125
      Id.
126
      Id. at 52; Compl. ¶ 112.
127
      Jackson Aff. Ex. 21.
128
      Id.
129
      Jackson Aff. Ex. 22.
                                         26
Buyout closed on June 15, 2018. 130

II.      PROCEDURAL HISTORY
         On March 27, 2018, Plaintiff served on Blackhawk a demand to inspect books

and records pursuant to 8 Del. C. § 220. On May 11, 2018, Plaintiff filed an action

in this Court to compel inspection. See City of Warren Gen. Empls.’ Ret. Sys. v.

Blackhawk Network Holdings, Inc., C.A. No. 2018-0339-TMR (Del. Ch.). The

parties resolved the books and records litigation, with the Company producing books

and records in response to the demand. Plaintiff later utilized those books and

records in drafting the Complaint in this action, which was filed on September 13,

2019.

         Defendants moved to dismiss the Complaint in its entirety on January 8, 2020

under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief. 131 On

August 10, 2020, the Court heard oral argument on the motion.

III.     ANALYSIS
         On a motion to dismiss for failure to state a claim under Court of Chancery

Rule 12(b)(6):

         (i) all well-pleaded factual allegations are accepted as true; (ii) even
         vague allegations are well-pleaded if they give the opposing party
         notice of the claim; (iii) the Court must draw all reasonable inferences
         in favor of the non-moving party; and ([iv]) dismissal is inappropriate

130
      Jackson Aff. Ex. 23.
131
      Dkt. 20.
                                           27
        unless the plaintiff would not be entitled to recover under any
        reasonably conceivable set of circumstances susceptible to proof.

Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (internal citations and

quotation marks omitted); accord Central Mortg. Co. v. Morgan Stanley Mortg.

Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011).

        “[A] trial court is required to accept only those ‘reasonable inferences that

logically flow from the face of the complaint’ and ‘is not required to accept every

strained interpretation of the allegations proposed by the plaintiff.’” In re Gen.

Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (quoting Malpiede

v. Townson, 780 A.2d 1075, 1083 (Del. 2001)). “Moreover, a claim may be

dismissed if allegations in the complaint or in the exhibits incorporated into the

complaint effectively negate the claim as a matter of law.” Malpiede, 780 A.2d at

1083.

        Directors of a Delaware corporation owe the fiduciary duties of care and

loyalty. Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). Under Revlon, Inc. v.

MacAndrews & Forbes Holdings, Inc., “[i]n the sale of control context, the directors

must focus on one primary objective—to secure the transaction offering the best

value reasonably available for the stockholders—and they must exercise their

fiduciary duties to further that end.” Paramount Commc’ns Inc. v. QVC Network

Inc., 637 A.2d 34, 44 (Del. 1994) (citing Revlon, 506 A.2d at 182). Revlon tests

directors’ conduct for reasonableness: “directors are generally free to select the path
                                          28
to value maximization, so long as they choose a reasonable route to get there.” In

re Dollar Thrifty S’holder Litig., 14. A.3d 573, 595–96 (Del. Ch. Sept. 8, 2010).

“[T]here is no single blueprint that a board must follow to fulfill its duties.” Barkan

v. Amsted Indus., Inc., 567 A.2d 1279, 1286 (Del. 1989).

      In this action, Plaintiff does not assert any claim against any member of the

Board in their capacities as directors. Rather, the Complaint contains a single count

alleging Roche and Tauscher breached their fiduciary duties in their capacities as

officers of Blackhawk. 132 Plaintiff advances two theories in support of its claim.

First, Plaintiff alleges that Roche and Tauscher manipulated the Board to favor the

Buyout at the expense of the Company and its stockholders in order to maintain their

employment and earn equity in the post-Buyout entity. Second, Plaintiff alleges that

Roche and Tauscher breached their fiduciary duties by misleading Blackhawk’s

stockholders through a materially misleading Proxy. This Opinion addresses each

claim in turn.

132
   Compl. ¶ 141 (“Roche and Tauscher, acting as officers, have violated their fiduciary
duties owed to the public stockholders of Blackhawk.”). Under Delaware law, officers of
a corporation owe the same fiduciary duties as directors. Gantler v. Stephens, 965 A.2d
695, 708–09 (Del. 2009).
                                          29
      A.     The Complaint Does Not State a Claim that Roche and Tauscher
             Breached Their Fiduciary Duties by Misleading or Manipulating
             the Board.

      The Buyout was a sale of control of the Company, and as a result, the Revlon

standard of review would ordinarily apply to a challenge to the Board’s action in

approving the Buyout. Paramount, 637 A.2d at 48. The Court of Chancery has held

that the “paradigmatic . . . good Revlon claim” is “when a supine board under the

sway of an overweening CEO bent on a certain direction, tilts the sales process for

reasons inimical to the stockholders’ desire for the best price.”133 The Complaint in

this case, however, does not directly challenge any board action, but rather the

actions of Roche and Tauscher as officers. 134 Plaintiff’s legal theory is grounded in

a line of recognized “iconic cases . . . that are premised on independent board

members not receiving critical information from conflicted fiduciaries” and where

133
   In re Toys “R” Us, Inc. S’holder Litig., 877 A.2d 975, 1002 (Del. Ch. 2005); see also
In re Mindbody, Inc., 2020 WL 5870084, at *12 (Del. Ch. Oct. 2, 2020) (discussing the
same).
134
    The Complaint thus offers no occasion to directly evaluate the reasonableness of the
Board’s transaction process under the heightened scrutiny standard imposed by Revlon.
See, e.g., In re Mindbody, Inc., 2020 WL 5870084, at *32 n.287 (“It is an open issue of
Delaware law as to whether Revlon applies to an officer’s actions.”); In re Baker Hughes
Inc. Merger Litig., 2020 WL 6281427, at *15 n.149 (Del. Ch. Oct. 27, 2020) (assuming
that a “breach of an officer’s duty of care should be assessed under the traditional gross
negligence standard with respect to actions taken in the context of a sale of control
transaction because it is the members of the board of directors—not the officers—who are
responsible for the type of decisions that are the focus of enhanced scrutiny review under
Revlon and its progeny.”). As discussed further below, the Board’s process is nevertheless
relevant to the extent it concerns whether Roche and Tauscher breached their fiduciary
duties as officers.
                                           30
“impartial board members did not oversee conflicted members sufficiently.” Kahn

v. Stern, 2018 WL 1341719, at *1 n.4 (Del. 2018) (TABLE). The progenitor case

in this area is Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261, 1279 (Del.

1989), in which the Delaware Supreme Court held that an officer may breach her

fiduciary duty during a sale process where the officer has engaged in “illicit

manipulation of a board’s deliberative processes” in pursuit of the officer’s own self-

interest.

         To state a claim for breach of the fiduciary duty under this theory, Plaintiff

must plead that Roche and Tauscher “were interested in the transaction, lacked

independence, or acted in bad faith.” 135 In particular, to prevail on a Macmillan

claim and rebut the business judgment rule, Plaintiff must “allege that [the officers

were] acting out of self-interest and [the officers] deceived the rest of the board into

approving the transaction.” 136 Plaintiff contends its “Complaint pleads detailed facts

‘that support a rational inference of bad faith’ on the part of Roche and Tauscher.”137

This Opinion first addresses Plaintiff’s argument that Roche and Tauscher were self-

interested before addressing Plaintiff’s contentions that the Board was supine and

that Roche and Tauscher deceived the Board into approving the Buyout.

135
      Morrison v. Berry, 2019 WL 7369431, at *13 (Del. Ch. Dec. 31, 2019).
136
   City of Miami Gen. Emps. and Sanitation Emps. Ret. Trust v. Comstock, 2016 WL
4464156, at *19 (Del. Ch. Aug. 24, 2016), aff’d, 158 A.3d 885 (Del. 2017) (TABLE).
137
      Pl.’s Ans. Br. 3 (quoting Stern, 2018 WL 1341719, at *1).
                                             31
                 1.    The Complaint Does Not Adequately Allege that Roche and
                       Tauscher Were Tainted by Self-Interest in the Buyout.

         Plaintiff contends that Defendants were self-interested because activist

stockholders threatened their employment with Blackhawk.              Plaintiff further

contends that Defendants sought to secure post-closing employment with

Blackhawk to earn part of a “typical management equity pool following a private

equity buyout” and then profit from the Company’s acquisition strategy.138

                       a.     Activist Pressure Did Not Threaten Roche and
                              Tauscher’s Jobs.
         The Complaint lacks any allegation that Jana or any other activist stockholder

communicated any threat to remove Roche or Tauscher from their employment with

the Company.          Plaintiff instead argues that the Court should infer that Jana

threatened Roche’s and Tauscher’s employment from the Company’s announcement

of the Cooperation Agreement on the same date that Tauscher announced that he

would limit his executive responsibilities and Blackhawk’s CFO announced that he

was going to retire.139 This allegation does not support a reasonable inference that

Roche and Tauscher feared for their jobs.

         As an initial matter, even assuming that Tauscher’s announcement coinciding

with the announcement of the Cooperation Agreement was Jana’s doing, it is not

138
      See Pl.’s Ans. Br. 52–62.
139
      Id. at 54–55.
                                           32
reasonable to infer that Roche was similarly threatened. Plaintiff argues that Roche

was the “logical next target” because a Wall Street Journal article reported that in

early 2017 activists were “a perennial nuisance for chief executives” and that they

“helped push out the leaders of three high-profile S&P 500 companies.”140 The news

article cannot substitute for well-pleaded allegations. No activists announced any

campaign targeting Blackhawk’s management. It is not reasonably conceivable that

Roche felt threatened for her job at Blackhawk because a Wall Street Journal article

attributed to certain activist investors the demise of three CEOs at companies other

than Blackhawk. Indeed, the Complaint does not even allege that any of the activist

stockholders mentioned in the article held any Blackhawk stock.

      Plaintiff’s allegations based on Jana’s potential threat to Roche and

Tauscher’s positions are not reasonable. First, there is no allegation that Jana made

a statement that could be construed as a threat to Roche or Tauscher’s positions.

Plaintiff’s attempt to leverage the timing of the announcements concerning Tauscher

and Blackhawk’s CFO that coincide with the Cooperation Agreement also lack any

persuasive force. That inference relies on the existence of Jana as a continuing threat

to Roche and Tauscher. But the facts do not support that inference because Jana had

already sold its Blackhawk stock by the time Silver Lake and P2 submitted the First

140
   Compl. ¶ 110 n.4 (quoting David Benoit, “Activist Investors Have a New Bloodlust:
CEOs,” Wall St. J. (May 16, 2017) (available at https://www.wsj.com/articles/activist-
investors-have-a-new-bloodlust-ceos-1494936001); see also Pl.’s Ans. Br. 54–55 (same).
                                          33
Indication of Interest. Silver Lake and P2 submitted the First Indication of Interest

on October 20, 2017, and Jana disclosed that it had sold all of its stock in the

Company no later than September 30, 2017.141 Thus, even drawing all reasonable

inferences in favor of Plaintiff, Jana was no longer in a position to exert pressure on

the Company or management after it sold its shares and is not alleged to have done

so.142

         After Defendants pointed in their Opening Brief that Jana sold its Blackhawk

stock by no later than September 30, 2017, Plaintiff brushed it off as “irrelevant.”143

In its Answering Brief, Plaintiff argued that Sandler’s presentations support an

inference that Roche and Tauscher feared that other, unidentified activists sought to

remove them. According to Plaintiff, Roche and Tauscher feared for their jobs

141
   Plaintiff does not contest that Jana sold its shares by the time of the Buyout. Pl.’s Ans.
Br. 55.
142
   It is notable that the Complaint does not mention that Jana sold its stock in the Company
before Silver Lake and P2 proposed the Buyout. The Complaint focused on Jana to the
exclusion of other stockholders. Compl. ¶ 1 (“This case is about a CEO’s and an Executive
Chairman’s response to activist pressure.”); id. ¶ 3 (“In 2017, Blackhawk was under activist
pressure. Famed activist hedge fund Jana Partners LLC (“Jana”) had gained two seats on
the Company’s board of directors (the “Board”) in a settlement of a potential proxy fight.
Jana had forced Tauscher’s ouster from his job leading Blackhawk’s international and
corporate development efforts and had also forced the ouster of Blackhawk’s CFO. Jana
was also demanding stock buybacks in lieu of acquisitions and reinvestment in the
Company’s business.”).
143
   Pl.’s Ans. Br. 55 (arguing that “Jana’s sale of shares is irrelevant” because Sandler
reported on other activists and “[t]he identity of the specific activist . . . Roche and Tauscher
feared at the end of the process is irrelevant to this motion.”). Plaintiff neither alleges nor
argues that the remaining director appointed by Jana, Robert Henske, sought to replace
Roche or Tauscher or expressed dissatisfaction with their performance.
                                               34
because Sandler listed the “period during which [Blackhawk] shareholders can make

proposals for [the] annual meeting” as a “Key Date” in the November 21

Presentation and because Sandler reported in the January 11 Presentation that

unnamed activists had purchased shares and “request[ed] time with management.”144

         Plaintiff analogizes the Complaint to In re Xura, Inc. S’holder Litig., 2018

WL 6498677 (Del. Ch. Dec. 10, 2018), which involved an activist stockholder’s

threat to replace an officer. The analogy highlights what is missing from the

Complaint. In Xura, the CEO “knew that both the Board and stockholder activists

were displeased with his performance and likely would remove him from office if a

sale of the Company did not occur.” Id. at *13. In Xura, “[m]ajor stockholders . . .

openly questioned” the CEO’s performance. Id. at *8. These threats were concrete:

in Xura, the stockholder plaintiff had declared that it “intended to launch a proxy

contest” and “made clear to both [the CEO] and the Board its view that Xura should

find a new CEO.” Id. The Chairman of Xura “privately advised [the CEO] that the

Board was considering major changes if there was no deal, including changes at . . .

the highest rank of management.” Id. Plaintiff’s allegations here are not remotely

comparable. 145 Because there are no well-pleaded allegations that Roche and

144
      Compl. ¶¶ 73, 87.
145
  Nor is this case similar to In re Answers Corp. S’holder Litig., 2012 WL 1253072 (Del.
Ch. Apr. 11, 2012), where the company’s 30% stockholder “informed the Board that if [the
company] could not be sold in the near future, then [the company’s] entire management

                                          35
Tauscher were in danger of losing their employment at Blackhawk, it is not

reasonably conceivable that they sought to avoid any threat by engineering the

Buyout. See Wayne Cty. Emps.’ Ret. Sys. v. Corti, 2009 WL 2219260, at *11–13

(Del. Ch. July 24, 2009) (“That Kotick and Kelly did not have to pursue the

transaction with Vivendi in order to retain their positions as managers significantly

alleviates the concern that Kotick and Kelly were acting out of an impermissible

‘entrenchment’ motive”), aff’d, 996 A.2d 795 (Del. 2010); Comstock, 2016 WL

4464156, at *20 (dismissing a Macmillan claim in part because “there is no

allegation that [the CEO’s] position was in danger”). 146

                    b.     Plaintiff Has Not Adequately Pleaded Defendants
                           Were Disloyal Because They Sought Post-Closing
                           Employment.
      Plaintiff contends that Roche and Tauscher had a conflict of interest because

they were motivated by the prospect of continued employment at Blackhawk after

team, including [the CEO], would be replaced” and the CEO discussed the prospect of
keeping his position at the company after the buyout with the acquirer. Id. at **2, 7.
146
    Plaintiff contends that Corti and Comstock are distinguishable because they involved
strategic acquirers rather than a management-sponsored buyout. Pl.’s Ans. Br. 59–60. But
the Buyout is not a management-sponsored buyout. “[A]n MBO is a transaction ‘where,
when it is negotiated, senior management was a participant in the transaction as an
acquirer.” In re Appraisal of Solera Hldgs., Inc., 2018 WL 3625644, at *23 (Del. Ch. July
30, 2018). Neither Roche nor Tauscher are alleged to be affiliated with Silver Lake and
P2. See Corti, 2009 WL 2219260, at *13 (“There is much less cause for concern where
managers will continue their employment with the combined post-transaction entity, than
when the conflicted managers are bidders in an auction for control of the company, and are
thereby seeking to transfer control of the company to themselves personally.”).
                                           36
the Buyout. There are no allegations that any employment offers were extended or

that employment discussions were had prior to closing the transaction. Instead, the

Complaint seizes on complimentary statements in the indications of interest that

Silver Lake and P2 were “100% supportive of the management team,” “very

enthusiastic about the opportunity to partner with you,” and a reference to prior

discussions of a “capital structure . . . for Blackhawk [that] would permit

management to pursue an aggressive, growth-oriented business plan.”147 Plaintiff

also alights on the Proxy’s disclosure that there would be a “new equity incentive

plan” for “certain employees of Blackhawk” after the Buyout.148 Plaintiff seeks to

buttress these allegations by quoting a law review article’s observation that

management can reap “generational wealth” from a private equity buyout because,

according to Plaintiff, the “typical management equity pool following a private

equity buyout is 10% to 15% of total equity.” 149

         The Complaint’s allegations are insufficient, and the law review article

quotation cannot make up for their inadequacy. The Complaint does not allege that

Roche and Tauscher knew at any time before entry into the Merger Agreement that

147
      Compl. ¶¶ 60, 130.
148
      Proxy 52.
149
  See Compl. ¶¶ 55–57; Pl.’s Ans. Br. 16, 26, 57 (citing Guhan Subramanian & Annie
Zhao, Go-Shops Revisited, 133 HARV. L. REV. 1215 (2020)).
                                         37
they would continue their employment in any capacity at Blackhawk after closing.150

Likewise, there are no allegations that Roche and Tauscher entered into employment

agreements or discussed terms of employment with Silver Lake and P2 during the

Buyout process. There are no allegations that Roche or Tauscher otherwise acted to

secure post-close employment during the Buyout process. The Proxy’s disclosure

that there would be a “new equity incentive plan” for “certain employees” does not

support a reasonable inference that Roche and Tauscher knew that they would

participate in the equity plan, let alone to what degree. 151 Nor are there any

allegations that Roche or Tauscher had any discussions with Silver Lake or P2 about

post-closing employment prior to execution of the Merger Agreement.152 Even if

150
    It is undisputed that Roche continued to serve as the Company’s CEO and President
after closing. Compl. ¶ 111. There is, however, a disputed question of fact as to whether
Tauscher was employed by Blackhawk after closing. In their briefing, Defendants disputed
that Tauscher held any “executive position” at Blackhawk after the Buyout and asserted
that Plaintiff had not pleaded as much. See Defs.’ Opening Br. 2–3. The Complaint,
however, pleads that Tauscher “remain[ed] Executive Chairman” after closing. Compl.
¶ 111. In its Answering Brief, Plaintiff states the basis for this allegation is a reference to
Tauscher’s then-current profile on the social media site LinkedIn. Pl.’s Ans. Br. 56 n.12.
As the Court must, this Opinion takes as true the well-pleaded allegation that Tauscher
remained as the Company’s Executive Chairman after the Buyout.
151
   Contra City of Ft. Myers Emps.’ Pension Fund v. Haley, 235 A.3d 702, 705 (Del. 2020)
(concluding complaint alleged that the company’s CEO and lead negotiator was materially
interested in the merger when he was presented with a compensation proposal during price
renegotiations that would provide him with a more than five-fold increase in equity
compensation).
152
   According to the Proxy Supplement, the Second Indication of Interest “did not discuss
retention of Blackhawk’s executive officers after the closing of the potential transaction.”
Jackson Aff. Ex. 21. It further states that between the time that Silver Lake/P2

                                              38
Roche and Tauscher thought they would be employed post-closing, there is no

allegation or reasonable inference that they knew or believed that any equity

incentive plan would be superior to their prospects with Blackhawk as a standalone

entity. In this regard, Plaintiff’s assertion that Roche and Tauscher stood to receive

“generational wealth” is entirely speculative: there is nothing in the Complaint

supporting a reasonable inference that Roche and Tauscher knew that any post-

closing employment would be materially better than the employment terms that

Roche and Tauscher already enjoyed.153

       The foundation for Plaintiff’s argument that Roche and Tauscher were self-

interested is built on the alleged management-friendly language in the indications of

interest. For this, Plaintiff again relies on Xura. But Xura was vastly different. In

Xura, the Court held that stockholders were not fully informed by the Proxy in part

because a prospective buyer “made clear its intention to work with management

communicated their Initial Indication of Interest in October 2017 and the execution of the
Merger Agreement “there were no discussions between [Silver Lake/P2] and the
Blackhawk executive officers regarding any terms pursuant to which the Blackhawk
executive officers might be retained after the closing of the potential transaction, and none
of the Blackhawk executive officers entered into any agreements with respect to post-
closing employment.” Id.
153
   See In re Alloy, Inc. S’holder Litig., 2011 WL 4863716, at *9 (Del. Ch. Oct. 13, 2011)
(“allegations of pecuniary self-interest must allow the Court to infer that the interest was
of a sufficiently material importance, in the context of the [fiduciary]’s economic
circumstances, as to have made it improbable that the [fiduciary] could perform her
fiduciary duties without being influenced by her overriding personal interest.”) (internal
quotation marks omitted).
                                             39
(including [the CEO]) after consummation of the Transaction in all of its offer letters

to the Company.” Xura, 2018 WL 6498677, at *12. As in Xura, the indications of

interest submitted by Silver Lake and P2 promised cooperation with the future

management team, implying a wish to hire the Company’s managers after the

Buyout. Compare id. at *2 (offer letter indicating the buyer was “impressed by the

senior leadership team” and was “excited about the prospect of partnering with

them”), with Compl. ¶ 60 (indication of interest stating that Silver Lake would serve

as a “value-added partner to the Company” and that, “as we have discussed before,

the capital structure we envision for Blackhawk … would permit management to

pursue an aggressive, growth-oriented business plan”).

      As before, Xura is distinguishable because the Complaint does not allege

misbehavior comparable to the panoply of culpable conduct alleged in Xura. Among

other things, the Xura CEO was engaged in unauthorized discussions with the

acquirer, which included potential future acquisitions. Xura, 2018 WL 6498677, at

*6. The plaintiff in Xura also alleged that the company’s CEO deliberately injured

his own company’s ability to bargain with a bidder to save his own job. As one

example, the Court observed that it was “remarkable to see evidence that a CEO

undermined the authority and questioned the competency of his CFO in direct

communications with a potential acquirer at the peak of negotiations during a sale

process. Yet, that is what the pled evidence reveals here.” Id. at *13 n.129. As

                                          40
another example, the conflicted CEO advised the prospective buyer at what price it

should bid. Id. at *5–6 (“With a gentle nudge, [the CEO] told [the acquirer] that the

offer price should be $28 per share . . . . [the CEO] did not inform anyone at Xura .

. . about his meeting with [the acquirer] either before or after it occurred.”).

         Cast against this backdrop, the offer letters by the acquirer in Xura took on an

import beyond what is reasonably attributable to the indications of interest by Silver

Lake and P2 in the context of the Complaint. There are no allegations of: (1) a

specific threat to Roche or Tauscher; (2) that Roche and Tauscher feared for their

jobs, or (3) that they conspired with Silver Lake and P2 to corrupt the transaction

process. Instead, the Complaint bears more similarity to Comstock, where the

allegations “failed to demonstrate the type of deceitful conduct necessary to trigger

entire fairness under a Macmillan theory” and there was “no allegation that [the

CEO’s] position was in danger or that his new employment terms were materially

different than his existing terms.” Comstock, 2016 WL 4464156, at *19–22. As in

Comstock, at the time of the Proxy, Roche and Tauscher held significant amounts of

stock—510,205 shares and 1,093,0637 shares, respectively 154—that aligned their

interest with the Company’s stockholders. See id. at *20; see also Chen v. Howard-

Anderson, 87 A.3d 648, 670–71 (Del. Ch. 2014) (discussing the alignment of

154
      Proxy 82.
                                            41
interests between fiduciaries and stockholders where fiduciaries own material

amounts of common stock). For those reasons, the Complaint does not adequately

allege that Roche and Tauscher were self-interested during the Buyout process.155

              2.     The Complaint Does Not Adequately Allege that Roche and
                     Tauscher Manipulated or Deceived the Board into
                     Approving the Buyout.

       Plaintiff alleges Roche and Tauscher breached their fiduciary duties as

officers by preventing the Board from properly exercising its business judgment.

This Court recently addressed a similarly targeted claim against corporate officers

in In re Baker Hughes, Inc. Merger Litig., 2020 WL 6281427 (Del. Ch. Oct. 27,

2020). There, as here, the “key issue” was whether the Complaint pleaded facts “to

support a reasonably conceivable claim that [the officers] tainted the decisionmaking

of [the] concededly independent and disinterested directors[.]” Id. at *19. Here,

even assuming the Complaint contained sufficient allegations that Roche and

Tauscher suffered from a material conflict of interest (and it does not), the Complaint

fails to allege that Roche and Tauscher breached their fiduciary duty of loyalty by

manipulating or deceiving the Board into approving the Buyout.

155
    In Xura, the plaintiff had the benefit of additional discovery from a related appraisal
action. In the event that Plaintiff later obtains information indicating that Roche and
Tauscher engaged in deceitful conduct only absent from the Complaint for lack of
discovery, the Court is not precluded from revisiting this issue. See In re Dell Techs. Inc.
Class V S’holders Litig., 2020 WL 3096748, at *43 (Del. Ch. June 11, 2020); In re
Mindbody, Inc., 2020 WL 5870084, at *34 n.309.
                                            42
                       a.    The Complaint Does Not Contain Well-Pleaded
                             Allegations Supporting a Reasonable Inference that
                             the Board Was Supine.

         Plaintiff argues that this case represents the paradigmatic “good Revlon claim

. . . when a supine board under the sway of an overweening CEO bent on a certain

direction, tilts the sales process for reasons inimical to the stockholders’ desire for

the best price.”156 For example, in Macmillan, the board of directors was “torpid, if

not supine” because it “plac[ed] the entire process in the hands of [the company’s

chairman and CEO], through [the CEO’s] own chosen financial advisors, with little

or no board oversight.” Macmillan, 559 A.2d at 1280; see also Xura, 2018 WL

6498677, at *4 (discussing allegations of an inert special committee formed to

evaluate and negotiate a transaction with a bidder, including an allegation that one

of its members “did not even realize that the Special Committee existed or that he

was a member of the committee until he learned about it at his deposition”); Stern,

2018 WL 1341719, at *1 n.4 (noting that a variant of Macmillan claim exists where

“impartial board members did not oversee conflicted members sufficiently”).

         Defendants dispute the relevance of the Board’s conduct because no director

is alleged to have breached his or her fiduciary duty as a director. In Defendants’

terms, Plaintiff “must plead a breach of duty by Roche or Tauscher to state a

fiduciary-breach claim against Roche or Tauscher.”             Defs.’ Reply Br. 20–23.

156
      Pl.’s Ans. Br. 46 (quoting Toys “R” Us, 877 A.2d at 1002).
                                             43
Defendants are correct, but it is nevertheless important to address the Board’s

involvement in the Buyout process to determine whether the Complaint pleads facts

that could support a reasonable inference that Roche and Tauscher took advantage

of an inattentive or ineffective Board.

         The Complaint does not so plead. The Complaint does not allege that any of

the ten outside directors on the Board was dominated by Roche or Tauscher, suffered

from any conflict of interest, or acted in bad faith. In its Answering Brief, Plaintiff

argues that it has not “concede[d] that any Blackhawk directors were impartial or

acted in good faith in approving this process,” 157 but because the Complaint contains

no allegations to the contrary, the only reasonable inference is that these ten

members of the Board were independent and disinterested.158 The uncontested

independence and disinterestedness of the Board is not alone dispositive of

Plaintiff’s claim against Roche and Tauscher.159 Setting aside the omission of

157
      Pl.’s Ans. Br. 52.
158
   See Baker Hughes Inc., 2020 WL 6281427, at *6 (noting that “Plaintiffs tacitly concede
the independence and disinterestedness of twelve of the thirteen members of the Board and
that they cannot allege a non-exculpated claim against the members of the Board” by
amending their pleadings to omit claims against outside directors).
159
   Stern, 2018 WL 1341719, at *1 (“To the extent, however, that the Court of Chancery's
decision suggests that it is an invariable requirement that a plaintiff plead facts suggesting
that a majority of the board committed a non-exculpated breach of its fiduciary duties in
cases where Revlon duties are applicable, but the transaction has closed and the plaintiff
seeks post-closing damages, we disagree with that statement.”).
                                             44
allegations against the ten outside directors, however, the overall narrative presented

by the Complaint contradicts Plaintiff’s pejorative labeling of the Board as supine.

          The Complaint alleges that, on the eve of the Buyout process, the Board

instructed Blackhawk’s management to revise its budget that allocated $1.1 billion

over three years for acquisitions and requested a three-year budget “that includes a

more aggressive M&A strategy as a means of accelerating the growth of the

Company and in shareholder value.”160 The Complaint alleges that, after receiving

the First Indication of Interest on October 20, 2017, the Board met six times to

consider Silver Lake and P2’s proposal before the execution of the Merger

Agreement. In 2017, the Board met on November 6, November 21, December 4,

and December 13. 161 In 2018, the Board met on January 11 and January 14, before

the Merger Agreement was executed on January 15, 2018.162 The Complaint further

alleges that, during these meetings, the Board considered management projections

and analyses from Sandler regarding the value of the Buyout as compared to the

value of the Company as a standalone entity. In short, the Complaint alleges that

the Board met, engaged with management and advisors, and deliberated during

regular intervals during the Buyout process.

160
      Compl. ¶ 49.
161
      Id. ¶¶ 64, 71, 74, 79.
162
      Id. ¶¶ 84, 89, 91.
                                          45
         In its Answering Brief, Plaintiff essentially asserts that there were windows

of inattention by the Board during the Buyout process that permitted Roche and

Tauscher to act without Board supervision. 163 As an example, in its Answering

Brief, Plaintiff argues that Roche and Tauscher were “engaged in unchaperoned

discussions with Silver Lake and P2 for months before Silver Lake/P2 submitted a

bid” regarding the Company’s capital structure. 164 The Complaint alleges that the

discussions were “about a potential minority private investment in the Company’s

equity”—not the Buyout—and that the “Board discussed the potential [minority]

investment by Silver Lake/P2 at its meeting on July 17, 2017.”165 Plaintiff insinuates

that Roche and Tauscher intentionally depressed Blackhawk’s stock price by issuing

revised guidance, but the revised guidance proved accurate and there is no well-

pleaded allegation that Roche and Tauscher knew that they would personally benefit

by issuing more pessimistic earnings guidance.166               Plaintiff faults Roche and

163
  Pl.’s Ans. Br. 46–51 (citing Compl. ¶¶ 43, 44, 60, 63–64, 67–76, 81, 82, 83, 85, 86, 90,
93–99, 100–05, 113–14 and 116).
164
      Pl.’s Ans. Br. 46.
165
   Compl. ¶¶ 43–45, 60. Cf. Macmillan, 559 A.2d at 1281 (observing that management
met with a potential acquirer to discuss a management-sponsored buyout without board
approval, and then the board allowed conflicted management to select the company’s
financial and legal advisers).
166
     This case is unlike In re Mindbody, Inc. S’holders Litig., 2020 WL 5870084, at *20
(Del. Ch. Oct. 2, 2020), where the Court concluded that it was reasonably conceivable that
the CEO provided earnings guidance for reasons unrelated to business expectations when
it later turned out that the actual quarterly results beat not only the lowered guidance target,

                                              46
Tauscher for permitting Silver Lake and P2 to conduct further due diligence after

they received the First Indication of Interest, but the Complaint alleges that the Board

had already allowed “Silver Lake/P2 to continue doing due diligence on the

Company” to facilitate a potential minority investment, and that management

reported the status of due diligence to the Board at its November 6, 2017 meeting.167

            In fact, Plaintiff’s assertions of Board inattention are belied by allegations that

Roche reported to the Board and that the Board approved management’s decisions.

For example, Plaintiff contends that Roche and Tauscher ignored Thoma Bravo’s

email outreach.168         But within one week of Roche’s receiving the email, the

Complaint alleges that the Roche “reported on the outreach” by Thoma Bravo at the

following Board meeting.169 The Complaint alleges that the Board “determined not

to engage” because, in part, engaging with Thoma Bravo “could result in the loss of

the potential [Buyout]” and the go-shop would “permit the Company to solicit an

acquisition proposal from [Thoma Bravo]” after entry into the Merger Agreement.170

but also the prior estimates. In this case, Blackhawk’s actual earnings figure for 2017 was
consistent with the low point of the earnings guidance announced in October 2017.
Compare Jackson Aff. Ex. 20 (Blackhawk Form 8-K, dated February 27, 2018, announcing
Blackhawk’s 2017 adjusted EBITDA to be $224.9 million), with Jackson Aff. Ex. 7
(Blackhawk Form 8-K, dated October 11, 2017, reporting guidance for Blackhawk’s 2017
adjusted EBITDA to be $225–250 million).
167
      Compl. ¶¶ 45, 64.
168
      Pl.’s Ans. Br. 48.
169
      Compl. ¶ 86.
170
      Id.
                                                47
The Complaint thus alleges that the Board, not Roche or Tauscher, decided not to

engage with Thoma Bravo prior to entry into the Merger Agreement. Plaintiff

similarly alleges that the go-shop provision prohibited the Board from changing its

recommendation or terminating the deal, but that, too, was a Board decision made

after the Board’s legal advisor discussed the terms of the go-shop provision and the

draft Merger Agreement.171 And Plaintiff alleges that Roche and Tauscher acted

improperly by agreeing to “defer[] . . . discussions regarding transaction price” until

after Silver Lake and P2 completed due diligence, but Roche and Tauscher reported

that decision to the Board in short order. 172 These allegations do not support a

reasonable inference of a board “exhibiting indolent or apathetic inertia or

passivity,”173 or otherwise having been manipulated by Roche and Tauscher during

the Buyout process.

171
    See Proxy 32; Jackson Aff. Ex. 19. Plaintiff alleges that the go-shop provision in the
Merger Agreement achieved the opposite effect of a typical go-shop provision by
precluding the Board from accepting proposals solicited during the go-shop period. As
discussed in further detail below, this allegation supports a claim that Roche breached her
fiduciary duty of care by issuing a misleading Proxy that characterized the go-shop as
permitting the Company to “terminate the merger agreement to enter into an agreement
with respect to a superior proposal during the go-shop period.” Proxy 35. The allegedly
malfunctioning go-shop provision, however, does not support a claim that Roche and
Tauscher breached their fiduciary duty as officers because there is no well-pleaded
allegation that Roche and Tauscher approved the go-shop in order to advance their own
self-interest or that they deceived the Board as to the contents of the Merger Agreement.
172
      Compl. ¶ 64.
173
      Merriam-Webster’s Collegiate Dictionary 1184 (10th ed. 1997) (defining “supine”).
                                            48
                     b.     The Complaint Does Not Contain Well-Pleaded
                            Allegations Supporting a Reasonable Inference that
                            Roche and Tauscher Deceived the Board.

         An officer may breach his or her duty by deceiving an independent board of

directors into favoring a bidder. Macmillan, 559 A.2d at 1279; Stern, 2018 WL

1341719, at *1 n.4; Comstock, 2016 WL 4464156, at *19. Plaintiff claims that the

outside directors were materially uninformed as to five issues: (1) the substance of

Defendants’ discussions with Silver Lake and P2 before the First Indication of

Interest; (2) the real reason that management was reducing the Company’s financial

projections; (3) “the fact that the Merger Agreement would preclude any solicited

topping bids, including from [Thoma Bravo]”; (4) the alleged conflicts of interests

faced by Roche, Tauscher, and the Board’s legal and financial advisors; and (5) “the

contents of the materially misleading Proxy.” 174 The Opinion discusses each in turn.

                            i.    Silver Lake/P2 Discussions
         It is not reasonably conceivable from the Complaint that Defendants deceived

the Board regarding the contents of their discussions with Silver Lake and P2 before

the First Indication of Interest. The Complaint alleges that the discussions between

Roche and Tauscher and Silver Lake and P2 before the First Indication of Interest

concerned “a potential minority private investment,” not the Buyout.175          The

174
   Pl.’s Ans. Br. 51 (citing Compl. ¶¶ 43–44, 60, 63, 67-76, 85, 86, 90, 92-115, 116 &
Jackson Aff. Ex. 19).
175
      Compl. ¶ 43.
                                          49
Complaint also alleges that the Board discussed that potential investment at the July

17, 2017 Board meeting, and permitted Silver Lake and P2 to continue conducting

due diligence on the Company.176 Plaintiff insinuates that a reference to a previously

discussed “capital structure” in the First Indication of Interest suggests that Roche

and Tauscher were acting improperly, but Plaintiff does not explain the significance

of this reference, or how its nondisclosure was material to the Buyout process.177

Plaintiff does not allege, for example, that Roche and Tauscher had discussed selling

the Company to Silver Lake and P2 when they were purportedly discussing a

potential minority investment. In the absence of such allegations, the reference to a

previously discussed capital structure is not sufficient to support a reasonable

inference that Roche or Tauscher deceived the Board.

                             ii.   Lowered Projections

          It is not a reasonably conceivable inference that Roche and Tauscher deceived

the Board through downwardly-adjusted management projections. Plaintiff argues

that comparing the segment analyses in the November 6 Presentation and the

December 4 Presentation reveals that Roche’s statement to the Board on November

21 that management expected lower-than-expected performance in 2018 because

“challenges in [the Company’s] U.S. retail sector would limit organic growth” was

176
      Id. ¶¶ 44–45.
177
      Id. ¶ 60.
                                            50
false. 178 Roche’s statement was not false. On December 4, 2017, management

projected 2018 EBITDA from the Company’s U.S. retail sector to be lower than

previously projected on November 6. Even though the decrease was not significant

and did not account for a majority of the change in the Company’s performance, the

projections are consistent with Roche’s disclosed statement that challenges in that

sector “would limit organic growth” and caused a decrease in management

projections. As important, Plaintiff does not dispute that the Board received each of

the projections and was capable of independently assessing whether Roche’s

narrative regarding the Company’s performance was accurate or requesting further

information regarding management projections.

                           iii.   The Go-Shop
         Plaintiff contends that, at the January 11, 2018 Board meeting, Roche and

Tauscher falsely persuaded the Board not to proceed with Thoma Bravo prior to

entry of the Merger Agreement because Thoma Bravo could be re-engaged during

the go-shop period. But the Complaint does not allege that Roche or Tauscher

discussed that provision at the January 11 Board meeting. The Proxy and the Board

minutes reflect that the Board’s legal and financial advisors—not Roche and

178
      Proxy 30.
                                         51
Tauscher—discussed the terms of the draft Merger Agreement with the Board. 179 In

addition, Plaintiff does not dispute that Thoma Bravo reiterated its interest in

acquiring the Company after the announcement of the Merger Agreement, as

disclosed in the Proxy. 180 The Complaint does not otherwise allege that Roche and

Tauscher deceived the Board regarding the operation of the go-shop provision or

sabotaged the process. 181

179
    Compl. ¶ 86; Proxy 32 (“On January 11, 2018, a special in-person meeting of the
Blackhawk board of directors was held, which representatives of Wachtell Lipton and
Sandler O’Neill attended. Representatives of Wachtell Lipton discussed the key terms of
the draft merger agreement, including closing conditions, termination provisions,
regulatory considerations and the structure of the go-shop period.”); Jackson Aff. Ex. 16
(“The Board, Wachtell Lipton and Sandler O’Neill then discussed the potential benefits
and risks of engaging with Party A at this time, including that Party A would likely need
to do significant diligence in order to finalize a potential transaction, that a transaction with
the Buyer Group could likely be finalized in the next several days, that engaging with Party
A could result in the loss of the potential transaction with the Buyer Group, and that the
“go-shop” provisions of the draft merger agreement would permit the Company to solicit
an acquisition proposal from Party A after signing a definitive merger agreement with the
Buyer Group. Following this discussion, the Board determined not to engage with Party A
at this time.”).
180
    Even assuming that the go-shop provision had been finalized in the draft Merger
Agreement by the January 11, 2018 Board meeting, the Board may not have been later
precluded from terminating the Merger Agreement in response to Thoma Bravo’s
overtures. As discussed further below, the structure of the go-shop may have precluded
the Board from terminating the Merger Agreement in response to a solicited proposal, but
Thoma Bravo solicited the Company both before and after the signing of the Merger
Agreement, not vice versa. See Compl. ¶ 82 (describing Thoma Bravo’s outreach pre-
Buyout); Proxy 33 (“Shortly following the public announcement of the merger agreement,
Party A contacted the Company to indicate that they were interested in engaging with the
Company during the go-shop period.”).
181
    Cf. Gantler, 965 A.2d at 709 (holding officer’s failure to respond to a bidder’s due
diligence requests, which later led to withdrawal of the bid, supported an inference that the
officer sabotaged the bid and, thus, stated a claim for breach of fiduciary duty).
                                               52
                               iv.   Conflicts

         Plaintiff claims that Roche and Tauscher did not disclose their purported

conflicts of interests to the Board, as well as the alleged conflicts of interests suffered

by the Company’s financial and legal advisors. As discussed above, there are no

well-pleaded allegations that Roche and Tauscher were conflicted. With respect to

the Company’s financial and legal advisors, even assuming their connections to

Silver Lake (golf-based and otherwise) were material, the Complaint does not allege

that Roche and Tauscher were aware that these conflicts of interest existed.

                               v.    The Proxy Disclosures
         Plaintiff contends that Roche and Tauscher caused the Company to issue a

misleading Proxy and misled the Board regarding the “contents of the materially

misleading Proxy.”182 But there is no well-pleaded allegation that Defendants misled

the Board regarding the Proxy. 183 In its Answering Brief, Plaintiff suggests that the

Board did not review the Proxy because, on January 14, 2018, the Board authorized

182
      Pl.’s Ans. Br. 48, 51.
183
    The only paragraph of the Complaint cited in Plaintiff’s Answering Brief to support this
assertion does not allege that Roche or Tauscher misled the Board regarding the Proxy.
Pl.’s Ans. Br. 51–52 (citing Compl. ¶ 116). See Compl. ¶ 116 (“Defendants caused
Blackhawk to file the Proxy with the SEC on March 2, 2018. As Roche stated in her cover
letter, the primary message of the Proxy was that “the [Board] unanimously recommends
that our stockholders vote ‘FOR’ the proposal to adopt the merger agreement.” In
advocating the Buyout, however, the Proxy was materially false and misleading in
significant respects.”).
                                            53
the executive officers of the Company to issue the Proxy.184 That does not mean that

Roche and Tauscher prevented the Board from reviewing the Proxy or misled the

Board regarding its contents.

      In summary, the Complaint lacks well-pleaded allegations that Roche and

Tauscher harbored any conflict of interest during the Buyout process. Even under

the assumption that Defendants had a conflict of interest, the Complaint does not

contain well-pleaded allegations that they manipulated or deceived the Board in

order to favor Silver Lake and P2. Thus, for the foregoing reasons, the Complaint

does not state a claim that Roche and Tauscher breached their fiduciary duties as

officers by favoring Silver Lake and P2 or misleading the Board into approving the

Buyout.

      B.     The Complaint States a Claim for Breach of the Duty of Care as to
             the Proxy Disclosures.
      The Complaint alleges that Defendants breached their fiduciary duty in their

capacity as officers by approving a materially misleading Proxy. “‘Under Delaware

law, when directors solicit stockholder action, they must disclose fully and fairly all

material information within the board’s control.’”         Baker Hughes, 2020 WL

6281427, at *12 (quoting In re Solera Hldgs., Inc. S’holder Litig., 2017 WL 57839,

at *9 (Del. Ch. Jan. 5, 2017)). Officers may breach their fiduciary duties to the extent

184
   Pl.’s Ans. Br. 48–49 (arguing that “[t]here is no evidence the Board even reviewed the
Proxy”) (citing Jackson Aff. Ex. 19 at HAWK0000152).
                                           54
they are involved in preparing a proxy statement that contains materially misleading

disclosures or omissions. In re Hansen Med., Inc. S’holders Litig., 2018 WL

3025525, at *11 (Del. Ch. June 18, 2018) (holding that a complaint stated a claim

against an officer for violation of the fiduciary duty of disclosure and noting that

directors and officers of a corporation generally owe the same fiduciary duties); see

also Baker Hughes, at *15–16; Morrison, 2019 WL 7369431, at *25, *27.

         The disclosure claims involve a two-step analysis. The first step considers

whether the Complaint alleges that Defendants were involved in the preparation of

the Proxy disclosures. The second addresses whether the Proxy is materially

misleading and whether Defendants are protected by a fully-informed, uncoerced

stockholder vote in favor of the Buyout under the Corwin doctrine. 185

                1.    The Complaint Pleads Facts Supporting a Reasonable
                      Inference That Roche (But Not Tauscher) Was Involved in
                      Preparing the Proxy Disclosures.
         Defendants argue that they cannot be held liable for materially misleading

disclosures or omissions from the Proxy because “the complaint fails to allege any

breach of duty by Roche or Tauscher that caused the alleged disclosure

deficiencies.”186 Roche was the CEO of Blackhawk throughout the Buyout process

185
      Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 312–14 (Del. 2015).
186
      Defs.’ Opening Br. 33–35.
                                           55
and an integral figure during Buyout negotiations.187        The Board resolutions

approving the issuance of the Proxy authorized the Company’s “executive officers”

to prepare and issue the Proxy and, most significantly, Roche signed the Proxy.188

See Baker Hughes, 2020 WL 6281427, at *15–16 (holding that a CEO could be

liable for breach of the duty of care for a deficient proxy where the CEO was

involved in the negotiation of the merger and signed the proxy); In re Hansen Med.,

Inc. S’holders Litig., 2018 WL 3025525, at *11 (“Vance affixed his signature to the

Proxy in his capacity as President and CEO and presented the information to the

stockholders for their consideration. This means he may be liable for material

misstatements in the Proxy in his capacity as an officer [and] as a director.”).

Therefore, the Complaint alleges facts from which it can reasonably be inferred that

Roche was involved in preparing the disclosures in the Proxy in her capacity as an

officer of Blackhawk.

      The same cannot be inferred, however, as to Tauscher. The Complaint does

not allege that Tauscher was involved in the preparation of the Proxy, and it is not

reasonably inferable from the Complaint or the Proxy that he was. Tauscher did not

187
   See, e.g., Compl. ¶ 86 (“Roche reported on diligence and negotiations with Silver
Lake/P2”).
188
    Jackson Aff. Ex. 19 at HAWK0000152 (authorizing the “Authorized Officers” to
prepare and issue the Proxy); id. at HAWK0000150 (defining the “Authorized Officers”
as “the executive officers of the Company”); Proxy, at Cover Letter from Talbott Roche
dated March 2, 2018; Compl. ¶ 116 (alleging that Roche addressed the Company’s
stockholders in the cover letter).
                                         56
sign the Proxy. Because “the Complaint is devoid of any allegations that [the officer]

had any role in drafting or disseminating the Proxy,” Plaintiff has not pleaded a claim

that Tauscher could have breached any fiduciary duty by issuing a materially

deficient proxy. Baker Hughes, 2020 WL 6281427, at *16.

                2.   The Proxy Disclosures

       In a request for stockholder action, directors are under a duty to disclose fully

and fairly all material facts within their control bearing on the request. Stroud v.

Milliken Enters., Inc., 552 A.2d 476, 480 (Del. 1989). A stockholder states a claim

for breach of this duty if it can allege facts to support “a rational inference that

material facts were not disclosed or that the disclosed information was otherwise

materially misleading.” Morrison v. Berry, 191 A.3d 268, 282 (Del. 2018). “An

omitted fact is material if there is a substantial likelihood that a reasonable

shareholder would consider it important in deciding how to vote.” Rosenblatt v.

Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v. Northway,

Inc., 426 U.S. 438, 449 (1976)) (internal quotations omitted). “[T]here must be a

substantial likelihood that the disclosure of the omitted fact would have been viewed

by the reasonable investor as having significantly altered the ‘total mix’ of

information made available.” Rosenblatt, 493 A.2d at 944 (quoting TSC Indus., 426

U.S. at 449).

                                          57
            For the reasons addressed above, the only potential claim against Roche for

issuing a materially misleading Proxy sounds in the fiduciary duty of care because

there is no well-pleaded allegation in the Complaint supporting a reasonable

inference that she acted in bad faith or to further her own self-interest. Roche cannot

be exculpated for breaches of duty of care with respect to challenged conduct taken

in her role as an officer. 189

            To state a claim for breach of the duty of care, Plaintiff must plead that Roche

acted with gross negligence. 190 “Gross negligence involves more than simple

carelessness. To plead gross negligence, a plaintiff must allege ‘conduct that

constitutes reckless indifference or actions that are without the bounds of reason.’”

Baker Hughes, 2020 WL 6281427, at *15 (quoting Morrison, 2019 WL 7369431, at

*22). “‘Because fiduciaries . . . must take risks and make difficult decisions about

what is material to disclose, they are exposed to liability for breach of fiduciary duty

only if their breach of the duty of care is extreme.’” Morrison, 2019 WL 7369431,

at *25 (quoting Metro Commc'n Corp. BVI v. Advanced Mobilecomm Techs. Inc.,

854 A.2d 121, 157 (Del. Ch. 2004)). 191

189
      8 Del. C. § 102(b)(7); Baker Hughes, 2020 WL 6281427, at *15.
190
      Id.
191
   The challenges to the Proxy alleged in the Complaint that are not described below do
not support a claim that Defendants breached their duty of care for reasons described
elsewhere in the Opinion. See Compl. ¶¶ 129–30. Specifically, the Proxy’s failure to

                                               58
                      a.    The Omission of Acquisition Projections

         Plaintiff alleges the Proxy omitted material information in the form of

projections relating to earnings from the Company’s potential acquisitions. The

Proxy contains four sets of projections: (1) the Initial Projections (disclosing

projected adjusted EBITDA of $275 million for 2018, among other projections); (2)

the November Estimate Range (projecting EBITDA of $240–$280 million for 2018);

(3) the Preliminary 2018 Plan (projecting $260 million in adjusted EBITDA for

2018); and (4) the Revised Projections (projecting $240–$250 million in adjusted

EBITDA).192 In each case, the Proxy disclosed the Company’s projected earnings

without acquisitions. Plaintiff contends that the Proxy is materially misleading

because it omits projected earnings from acquisitions that were considered by the

Board at the same time that the Initial Projections and the November Estimate Range

were presented (on November 6, 2017 and November 21, 2017, respectively).

Plaintiff also alleges that the Proxy provides the misleading impression that the

Initial Projections were prepared in the summer of 2017, prior to the Company’s

disclose the management-friendly language in the indication of interest was not materially
misleading in the Proxy because Roche or Tauscher were not conflicted. The allegations
that the Proxy should have disclosed different reasons for lower-than-expected
performance in 2018 than the reasons Roche disclosed at the November 21, 2017 Board
meeting also fail because the Complaint does not contain well-pleaded facts that the stated
rationale was false or materially misleading.
192
      Proxy 38, 39.
                                            59
announcement of lowered guidance in October 2017.193 Defendants argue that the

Proxy did not need to contain acquisition projections because the “complaint alleges

nothing to show that the November acquisition-based projections were reliable,”

they were stale and “likely . . . immaterial,” and that the projections were not the

“best projections” available to the Company.194 Defendants further argue that the

disclosure regarding the timing of the Initial Projections accurately reflects their

preparation “sometime between the summer of 2017 and late October 2017.”195

          The Complaint alleges that the Company historically engaged in a consistent

practice of growth through acquisitions and that shortly before the Buyout process

began, the Company was considering expanding that strategy.              The Board

considered whether to pursue its acquisition strategy as a standalone entity during

the Buyout process. Shortly before the First Indication of Interest, Sandler made a

presentation to the Board stating that Blackhawk had “a full range of options to

finance an aggressive M&A strategy,” including through borrowing under the

Company’s credit agreement, issuing additional stock, obtaining a convertible debt

investment, or financing acquisitions with common stock. 196 After Silver Lake and

P2 submitted the First Indication of Interest on October 20, 2017, the Company

193
      Pl.’s Ans. Br. 64–67.
194
      Defs.’ Reply Br. 29.
195
      Id. at 26.
196
      Compl. ¶¶ 50, 124.
                                           60
continued to evaluate its prospects as a standalone company, including by preparing

projections that included the potential impact of acquisitions.

          The Proxy selectively discloses portions of these projections. In particular, as

discussed above, the November Forecast presented to the Board on November 6,

2017 contained three-year projections estimating the Company’s EBITDA with and

without acquisitions. 197     To estimate potential earnings from acquisitions, the

November Forecast assumed that the Company would spend $700 million in

acquisitions over the following three years. 198 As Plaintiff alleges, “[t]he $700

million acquisition plan was projected to add $98 million in yearly EBITDA by

2020, representing approximately 25% of Blackhawk’s 2020 adjusted EBITDA.”199

The Initial Projections disclosed in the Proxy were derived from the November

Forecast, but excluded projected earnings from acquisitions as presented to the

Board. 200 The Proxy similarly omitted acquisition projections from the November

Estimate Range assuming that the Company would earn $20 million in EBITDA for

acquisitions in 2018.201

197
      Compl. Ex. A.
198
      Id. at 10.
199
      Compl. ¶ 120.
200
      Proxy 38.
201
      Id. at 39.
                                             61
      Cast against this background, the Complaint adequately pleads that omission

of the acquisition projections presented to the Board during the Buyout process was

material.    A reasonable stockholder would have wanted to know information

regarding management’s projections of the Company’s potential earnings from

acquisitions, especially because the acquisition projections were provided to the

Board.      Those projections would have altered the “total mix” of information

available because they would have formed a basis against which a reasonable

stockholder could compare the price she would receive through the Buyout and to

assess the basis for the Board’s recommendation of the Buyout. The Company’s

ability to pursue a standalone acquisition strategy was considered by the Board

several times, including on October 9, 2017 (before the Buyout process began), at

the November 9 Board meeting, and again at the December 13 Board meeting.

      Defendants argue that the acquisition projections were immaterial because

they were speculative and that subsequent market events rendered them unreliable.

To support this argument, Defendants cite In re Micromet, Inc. S’holders Litig., 2012

WL 681785, at *13 (Del. Ch. Feb. 29, 2012), for the proposition that “Delaware law

does not require disclosure of inherently unreliable or speculative information.” The

Court in Micromet was deciding a motion for preliminary injunction and based its

decision on discovery relating to the challenged disclosures. Id. (holding that

undisclosed projections were unreliable in part because the CEO testified that they

                                         62
were “not realistic” and a director testified that they were “highly subjective”). By

contrast, the Court does not have the benefit of a discovery record in adjudicating

Defendants’ motion to dismiss. As a consequence, accepting Defendants’ argument

regarding the weight of the acquisition projections would require drawing an

impermissible inference in favor of Defendants at this stage. See Savor, 812 A.2d

at 897 (“[T]he Court must draw all reasonable inferences in favor of the non-moving

party”).

         The omission of the acquisition projections from the Initial Projections and

the November Estimate Range is compounded by the Proxy’s description of the

Initial Projections. The Proxy states that the Initial Projections were “based on the

information contained in Blackhawk’s financial model, which was prepared by

Blackhawk’s management during the Summer of 2017 from financial models used

in connection with its annual internal planning processes, and were provided to

Sandler O’Neill, [Silver Lake and P2], and the Blackhawk board of directors in late

October and early November 2017.”202           The “Initial Projections” refer to the

November Forecast, with acquisition projections excised. The Proxy is misleading

because the Initial Projections were not generated in “the Summer of 2017”—they

were prepared in November 2017 and compared to projections made in July 2017.

202
      Proxy 38.
                                          63
Defendants argue that the Proxy “tell[s] the reader that they were an update of a

projection model prepared several months earlier,” but there is no reference to any

“update” in the Proxy language.203         Instead, the Proxy states that the Initial

Projections were based on management’s financial model prepared in the summer

of 2017 and “provided to Sandler O’Neill, the Sponsors and the Blackhawk board

of directors in late October and early November 2017.” Defendants also imply that

whether the Initial Projections were prepared in the summer of 2017 or November

2017 is immaterial,204 but that argument ignores the fact that Roche announced

downward revisions to the Company’s earning guidance in October 2017.205

         Viewed in totality and drawing all reasonable inferences in favor of Plaintiff,

the Complaint supports a reasonable inference that the Proxy selectively disclosed

projections regarding its potential earnings in a manner that rendered the Proxy

disclosures misleading because, under these circumstances, a reasonable stockholder

would have wanted to know management’s projections of earnings from acquisitions

in deciding how to vote. Maric Capital Master Fund, Ltd. v. Plato Learning, Inc.,

11 A.3d 1175, 1178 (Del. Ch. 2010) (enjoining a transaction because the proxy

203
      Defs.’ Opening Br. 38.
204
      Id. at 38–39.
205
   Compl. ¶ 58 (“On October 11, 2017, the Company announced negative guidance and
management made public comments that created uncertainty about the Company’s growth
prospects.”).
                                           64
statement “selectively disclosed projections relating to [the company’s] future

performance” that related to the “value that might obtain if the corporation remains

independent and delivers on management’s expected cash flows”); NECA-IBEW

Pension Trust Fund v. Precision Castparts Corp., 2017 WL 4453561 (D. Or. Oct. 3,

2017) (holding that a proxy statement was materially misleading because the

company’s “acquisition strategy was a continuing part of its business plan” and the

proxy disclosed projections that excluded the effect of future acquisitions), report

and recommendation adopted, 2018 WL 533912 (D. Or. Jan. 24, 2018).

                     b.    The Go-Shop Provision

         The Complaint alleges the Proxy disclosures describing the Board’s right to

terminate the Merger Agreement in response to a superior acquisition proposal

during the go-shop is false. According to the Proxy, during the go-shop period, the

Board may “solicit higher offers during the go-shop period and to consider and

negotiate certain higher offers thereafter, including the Company’s right to solicit

offers with respect to acquisition proposals during a 25-day go-shop period and to

terminate the Merger Agreement to enter into an agreement with respect to a superior

proposal during the go-shop period,” subject to payment of a termination fee. 206

206
      Proxy 35.
                                          65
          Section 7.1(a)(i) of the Merger Agreement permits the Company to “initiate,

solicit, facilitate and encourage Acquisition Proposals” for a period of 25 days.207

Except in the case of a material positive event, Section 7.2(c) prohibits the Board

from changing its recommendation regarding the Buyout or terminating the Merger

Agreement to enter into an alternative merger agreement unless the Board

determined that a competing acquisition proposal was a “Superior Proposal.”208 In

pertinent part, Section 7.2(c) states:

          (c) No Change in Recommendation or Alternative Acquisition
          Agreement. Except as set forth in this Section 7.2(c), the Company
          Board . . . shall not:

          (i) (A) withhold, withdraw, qualify or modify (or publicly propose or
          resolve to withhold, withdraw, qualify or modify), in a manner adverse
          to Parent, the Company Recommendation with respect to the Merger,
          (B) authorize, approve, recommend or otherwise declare advisable, or
          publicly propose to authorize, approve, recommend or otherwise
          declare advisable, any Acquisition Proposal or proposal reasonably
          likely to lead to an Acquisition Proposal, (C) fail to include the
          Company Recommendation in the Proxy Statement, (D) take any action
          or make any recommendation or public statement in connection with a
          tender offer or exchange offer other than an unequivocal
          recommendation against such offer or a temporary “stop, look and
          listen” communication by the Company Board of the type contemplated
          by Rule 14d-9(f) under the Exchange Act in which the Company Board
          or the Company indicates that the Company Board has not changed the
          Company Recommendation or (E) fail to reaffirm the Company
          Recommendation within the earlier of three Business Days prior to the
          Stockholders Meeting and five Business Days after receiving a written

207
  Merger Agreement § 7.1(a)(i). The Merger Agreement is attached to the Proxy as
Annex A.
208
      Id. § 7.2(c).
                                           66
            request to do so from Parent (any of the foregoing, a “Change of
            Recommendation”); or

            (ii) except as expressly permitted by, and after compliance with, the last
            paragraph of this Section 7.2(c), cause or permit the Company or any
            of its Subsidiaries to enter into any letter of intent, memorandum of
            understanding, agreement in principle, acquisition agreement, merger
            agreement or other similar agreement (other than a confidentiality
            agreement referred to in Section 7.2 (a) or 7.2(b) entered into in
            compliance with Section 7.2(a) or 7.2(b)) (an “Alternative Acquisition
            Agreement”) relating to any Acquisition Proposal or otherwise resolve
            or agree to do so.

            Notwithstanding anything to the contrary set forth in this Section 7.2(c),
            the Company Board may, prior to but not after the time the Requisite
            Company Vote is obtained, . . . (B) make a Change of Recommendation
            or, prior to the expiration of the Go-Shop Period only, authorize the
            Company to terminate this Agreement pursuant to Section 9.3(a) if the
            Company receives an Acquisition Proposal and (I) prior to taking such
            action, the Company Board determines in good faith, after consultation
            with its outside legal counsel and financial advisor, that failure to take
            such action, in light of the Acquisition Proposal and the terms of this
            Agreement, would reasonably be expected to be inconsistent with the
            directors’ fiduciary duties under applicable Law and (II) the Company
            Board has determined in good faith, based on the information then
            available and after consultation with its outside legal counsel and
            financial advisor, that such Acquisition Proposal constitutes a Superior
            Proposal[.] 209

Section 10.13 of the Merger Agreement defines Superior Proposal as an “unsolicited

bona fide written Acquisition Proposal.”210

209
      Id.
210
      Id. § 10.13.
                                               67
         The Proxy’s disclosure about the go-shop period is contrary to the Merger

Agreement.        The Proxy indicates that the Board may terminate the Merger

Agreement to enter into a solicited “superior proposal during the go-shop period.”211

In fact, under the structure of the Merger Agreement, the Board was only allowed to

change its recommendation or to terminate the Merger Agreement in response to an

unsolicited acquisition proposal. 212

         Defendants do not contest that the plain language of the Merger Agreement

prohibited the Company from entering into any alternative acquisition proposal

solicited during the go-shop period. Rather, Defendants argue that Plaintiff’s

construction of the go-shop would negate the purpose of the go-shop and is contrary

to the way “anyone” interpreted the go-shop.213 To survive a motion to dismiss,

however, Plaintiff must only proffer a reasonable reading of the contract, and

Plaintiff has done so here.214 Defendants further argue that any person could read

211
      Proxy 35.
212
      The Merger Agreement does not define the term “solicit.”
213
    The concept of contractual language that prevents a Board from changing its
recommendation except in response to an unsolicited offer is not unprecedented. Cf. In re
NYSE Euronext S’holders Litig., C.A. No. 8136-CS (Del. Ch. May 10, 2013)
(TRANSCRIPT) (declining to issue an injunction challenging a merger agreement that
prevented a board from changing its recommendation unless it received a “Superior
Proposal,” defined as an unsolicited offer for 100% of the company’s assets or stock).
214
   “At the motion to dismiss stage, ambiguous contract provisions must be interpreted most
favorably to the non-moving party. Thus, ‘[d]ismissal, pursuant to Rule 12(b)(6), is proper
only if the defendants’ interpretation[s] [are] the only reasonable construction[s] as a matter

                                              68
the provision because the Merger Agreement was attached to the Proxy as Annex A.

Attaching the Merger Agreement does not cure the Proxy’s inaccurate and

misleading disclosure regarding the go-shop. In re Topps Co. S’holders Litig., 926

A.2d 58, 64 (Del. Ch. 2007) (holding that to satisfy the duty of disclosure, “directors

must also avoid making materially misleading disclosures, which tell a distorted

rendition of events or obscure material facts.”). A reasonable stockholder is not

required to validate each disclosure by reference to the underlying contract. See

Appel v. Berkman, 180 A.3d 1055, 1064 (Del. 2018) (“Under Delaware law, when a

board chooses to disclose a course of events or to discuss a specific subject, it has

long been understood that it cannot do so in a materially misleading way, by

disclosing only part of the story, and leaving the reader with a distorted

impression.”).

             3.     The Complaint Pleads Facts Supporting the Availability of
                    Damages.
      Defendants contend that, even if the Proxy is materially misleading, the

Complaint does not plead causation or damages arising from the Proxy. To state a

claim for damages from a breach of the duty of disclosure, “the damages must be

logically and reasonably related to the harm or injury for which compensation is

of law.” Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *8 (Del. Ch. Sept. 18, 2014)
(emphasis in original) (quoting VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606,
615 (Del. 2003)).
                                           69
being awarded.” In re J.P. Morgan Chase & Co. S’holder Litig., 906 A.2d 766, 773

(Del. 2006). Thus, a complaint must typically allege “(i) a culpable state of mind or

non-exculpated gross negligence, (ii) reliance by the stockholders on the information

that was not disclosed, and (iii) damages proximately caused by that failure.”

Chatham Asset Mgmt., LLC v. Papanier, 2017 WL 6550428, at *5 (Del. Ch. Dec.

22, 2017) (internal quotations omitted).

      For the reasons discussed above, the Complaint has alleged that Roche may

be subject to liability for non-exculpated gross negligence to the extent that she was

involved in preparing a materially misleading proxy. The Complaint has also

adequately pleaded reliance because, at the pleading stage, the Complaint need not

prove “actual reliance on the disclosure, but simply that there was a material

misdisclosure.” Metro Commc’n Corp. BVI v. Adv. Mobilecomm Techs., Inc., 854

A.2d 121, 156 (Del. Ch. 2004). The Complaint need not plead that omissions or

misleading disclosures were so material that they would cause a reasonable investor

to change his vote. Morrison, 191 A.3d at 283 (“[The] materiality test does not

require proof of a substantial likelihood that disclosure of the omitted fact would

have caused the reasonable investor to change his vote.”) (internal quotations

omitted).

                                           70
         At this stage, the Complaint adequately alleges damages to survive

dismissal. 215        As Plaintiff argues, if it proves that Roche “committed a non-

exculpated breach of the fiduciary duty of disclosure, then damages can be awarded

using a quasi-appraisal measure.” Chen, 87 A.3d at 691 (citing In re Orchard

Enters., Inc. S’holder Litig., 2014 WL 1007589, at *32–*43 (Del. Ch. Feb. 28,

2014)). In their Reply Brief, Defendants identified no reason why quasi-appraisal

damages would be unavailable beyond arguing that Plaintiff has failed to plead a

breach of fiduciary duty.216 Because the Complaint does plead a breach of fiduciary

duty, however, further “consideration of damages awaits a developed record.”

Morrison, 2019 WL 7369431, at *22 n.273; see also Baker Hughes, 2020 WL

6281427, at *15–16 (denying motion to dismiss breach of fiduciary duty claim

seeking compensatory damages against an officer for his involving in preparation of

a proxy statement).

                 4.      Corwin Cleansing Does Not Apply.
         Defendants argue that the Complaint is subject to dismissal under Corwin v.

KKR Fin. Holdings LLC, 125 A.3d 304, 312–14 (Del. 2015), because Defendants

obtained a cleansing stockholder vote. As discussed above, Plaintiff has stated a

claim that the Proxy contained material omissions and misleading disclosures.

215
      Compl. ¶¶ 141, 146.
216
      Defs.’ Reply Br. 25.
                                             71
Therefore, Defendants have not established that the stockholder vote approving the

Buyout was fully informed. Accordingly, the Complaint is not subject to dismissal

under the business judgment rule. Corwin, 125 A.3d at 312 (“[T]he doctrine applies

only to fully informed, uncoerced stockholder votes”); Baker Hughes, 2020 WL

6281427, at *14.

IV.   CONCLUSION
      For the foregoing reasons, Defendants’ Motion to Dismiss is granted with

respect to the claims against Tauscher. Defendants’ Motion to Dismiss is granted in

part and denied in part with respect to the claims against Roche.

      IT IS SO ORDERED.

                                         72