Court Opinion

ID: 4378647
Source: CourtListenerOpinion
Date Created: 2019-03-20 15:02:34.937502+00
Date Added: 2024-06-11T14:49:42.148375
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

                                       )
ARON ENGLISH and RICHARD               )
PEPPE, Individually and on Behalf of   )
All Similarly Situated Individuals,    )
                                       )
                        Plaintiffs,    )
                                       )
      v.                               )    C.A. No. 2018-0221-AGB
                                       )
CHARLES K. NARANG, PAUL A.             )
DILLAHAY, JAMES P. ALLEN,              )
PAUL V. LOMBARDI, CINDY E.             )
MORAN, AUSTIN J. YERKS,                )
DANIEL R. YOUNG, CLOUD                 )
INTERMEDIATE HOLDINGS, LLC,            )
CLOUD MERGER SUB, INC., and            )
H.I.G. CAPITAL, LLC,                   )
                                       )
                        Defendants.    )
                                       )

                       MEMORANDUM OPINION

                    Date Submitted: December 18, 2018
                      Date Decided: March 20, 2019

Blake A. Bennett, COOCH AND TAYLOR, P.A., Wilmington, Delaware; W. Scott
Holleman and Garam Choe, JOHNSON FISTEL, LLP, New York, New York;
Counsel for Plaintiffs.

Elena C. Norman and Daniel M. Kirshenbaum, YOUNG CONAWAY STARGATT
& TAYLOR, LLP, Wilmington, Delaware; Joshua Z. Rabinovitz, KIRKLAND &
ELLIS LLP, Chicago, Illinois; Devora W. Allon, KIRKLAND & ELLIS LLP, New
York, New York; Counsel for Defendants.

BOUCHARD, C.
         In January 2016, the board of directors of NCI, Inc. engaged two financial

advisors to solicit interest in a sale of the company. In July 2017, after a sale process

that lasted eighteen months and resulted in at least five other firms expressing

interest in acquiring NCI, the company entered into a merger agreement to sell the

company for $20 per share in cash to affiliates of H.I.G. Capital, LLC. The

transaction was structured as a tender offer followed by a merger. Charles Narang,

NCI’s founder who held about 34% of NCI’s shares and about 83.5% of the

company’s voting power, tendered his shares for the same per-share consideration

that every other stockholder received in the transaction.

         In March 2018, over seven months after the transaction closed, two former

stockholders of NCI filed this action asserting claims against NCI’s directors for

breach of fiduciary duty and against H.I.G. and its affiliates for aiding and abetting

breaches of fiduciary duty. Defendants moved to dismiss these claims under Court

of Chancery Rule 12(b)(6) for failure to state a claim for relief. Their lead argument

is that the complaint must be dismissed under Corwin v. KKR Financial Holding

LLC1 because a majority (approximately 73.6%) of NCI’s disinterested stockholders

tendered their shares in an uncoerced and fully-informed tender offer, subjecting the

transaction to business judgment review.

1
    125 A.3d 304 (Del. 2015).
       Plaintiffs advance two reasons why they believe Corwin should not apply.

First, they contend that the transaction should be subjected to entire fairness review

on the theory that Narang orchestrated a sale of the company for less than fair value

to address a personal need for liquidity prompted by his retirement as the company’s

CEO in 2015 at seventy-three years of age. Second, they contend that the other

stockholders who tendered their shares were not fully informed when they did so

because the recommendation statement for the transaction was misleading and

omitted material information.

       For the reasons explained below, the court concludes that neither of plaintiffs’

theories against applying Corwin holds water based on the facts plead in the

complaint and this court’s precedents. Thus, the transaction is subject to business

judgment review and plaintiffs’ claims must be dismissed for failure to state a claim

for relief.

I.     BACKGROUND

       The facts recited herein are taken from the Verified Class Action Complaint

filed on March 28, 2018 (the “Complaint”) and documents incorporated therein.2

2
  See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013) (citation omitted)
(“[P]laintiff may not reference certain documents outside the complaint and at the same
time prevent the court from considering those documents’ actual terms” in connection with
a motion to dismiss). The Complaint references more than 35 times and incorporates
therein a recommendation statement issued in connection with the commencement of the
tender offer (hereafter, the “Recommendation Statement”). Def.’s Opening Br. Ex. 1 (Dkt.
17). References to the Recommendation Statement are specifically cited.

                                           2
Any additional facts are either not subject to reasonable dispute or subject to judicial

notice.

         A.    The Players
         NCI, Inc. (“NCI” or the “Company”) is a Delaware corporation headquartered

in Virginia that provides enterprise solutions and services to United States “defense,

intelligence, health and civilian government agencies.”3 Before the transaction at

issue (the “Transaction”), NCI had two classes of common stock: (i) Class A shares

with one vote per share that traded publicly and (ii) Class B shares with ten votes

per share that were convertible into Class A shares on a one-for-one basis.

         Plaintiffs Aron English and Richard Peppe allege they owned shares of NCI

common stock at all relevant times. The number of shares they held is not alleged.

         The individual defendants consist of the seven members of NCI’s board of

directors (the “Board”) when it approved the Transaction. Defendant Charles K.

Narang was the Company’s CEO and Chairman of the Board from its formation until

October 1, 2015, and continued to serve as Chairman of the Board until the

Transaction closed in August 2017. Narang also was NCI’s largest stockholder. As

of December 31, 2016, Narang owned 117,659 shares or 1.3% of the Class A shares

outstanding and 4.5 million shares or 100% of the Class B shares outstanding. This

3
    Compl. ¶¶ 41, 43-44.

                                           3
equated to 34% of NCI’s total number of shares of common stock outstanding and

83.5% of the Company’s total voting power.4

       Defendant Paul A. Dillahay served as NCI’s President and CEO and as a

director from October 31, 2016 through the completion of the Transaction.

Defendants James P. Allen, Paul V. Lombardi, Cindy E. Moran, Austin J. Yerks,

and Daniel R. Young were all directors of NCI who are not alleged to have had any

management positions with the Company.

       Defendant H.I.G. Capital LLC (“H.I.G.”), a Delaware limited liability

company headquartered in Miami, Florida, is a global private equity investment

firm. The remaining two defendants are Delaware entities affiliated with H.I.G.:

Cloud Intermediate Holdings, LLC and its subsidiary, Cloud Merger Sub, Inc.

These three entities are collectively referred to as the “H.I.G. Defendants.”

      B.     Narang’s Tenure as NCI’s CEO

      In 1989, Narang established the predecessor of NCI (NCI Information

Systems, Inc.) as a Virginia corporation. NCI acquired that entity in 2005 as part of

a plan to take the Company public. In 2015, after a twenty-six-year tenure as the

Company’s CEO, Narang decided to step down from that role. On July 29, 2015,

NCI issued a press release announcing that Narang would be stepping down as CEO.

4
  Id. ¶¶ 52-55. The Narang Family Trust controlled 1,412,000 or approximately 15.6% of
the Class A shares, but Narang did not have direct control over those shares. Id. ¶ 56.

                                          4
NCI’s incoming CEO, Brian J. Clark, stated in the press release that NCI “intend[ed]

to explore new strategic avenues for the company . . . includ[ing] acquisitions and

other options.”5

          C.    NCI Retains Advisors and Begins a Sale Process

          In January 2016, the Board engaged two financial advisors—Wells Fargo

Securities, LLC and Stifel, Nicolaus & Company, Inc.—to pursue a sale of the

Company. During the first half of 2016, Wells Fargo and Stifel contacted “various

potential buyers” but only one party emerged as a serious bidder—a private equity

firm known as Party A.6 It subsequently withdrew from the process because of

regulatory concerns relating to one of Party A’s portfolio companies.

          On October 16, 2016, Clark unexpectedly resigned as CEO after serving in

the position for little more than one year. Dillahay later was appointed as NCI’s new

CEO.

          D.    H.I.G. Enters the Sale Process

          In November 2016 and January 2017, NCI representatives received

unsolicited communications from H.I.G., expressing interest in meeting with

5
    Id. ¶ 77.
6
  Id. ¶ 83. The Recommendation Statement, referenced in this paragraph of the Complaint,
actually explains that Wells Fargo and Stifel “contacted 33 potential buyers” during the
first half of 2016, “17 of which expressed initial interest in a possible transaction with
NCI.” Defs.’ Opening Br. Ex. 1 at 16.

                                            5
Dillahay to discuss a potential business relationship. Discussions ceased for a time

after NCI announced on January 23, 2017 that its former controller had embezzled

nearly $20 million from the Company between January 2010 and January 2017.

      On February 22, 2017, H.I.G. reinitiated contact with NCI to discuss its

business operations and express H.I.G.’s desire to buy NCI. On March 8, 2017,

H.I.G. contacted Dillahay and proposed acquiring NCI for $18 per share. Two days

later, NCI received interest from another private equity firm (“Party C”) to acquire

NCI for $19 per share. In response, the Board instructed Dillahay to contact H.I.G.

to advise it of the existence of another buyer and to request that H.I.G. increase its

offer to $20 per share. Three days later, H.I.G. contacted Dillahay and indicated that

H.I.G. was willing to offer between $19 and $21 per share, which was later

memorialized in writing.

      On March 16, 2017, Party C submitted a revised bid to acquire NCI for $20

per share. The next day, the Board met with Wells Fargo and Stifel to discuss the

status of negotiations with H.I.G. and Party C. Dillahay later had discussions with

the founder of Party C about the possibility of NCI acquiring an entity controlled by

Party C’s founder, but the Board vetoed this idea on March 29, 2017.

      On April 5, 2017, NCI announced its earnings for both the full year and fourth

quarter ended on December 31, 2016. During an investor conference call held that

day to discuss NCI’s results, Dillahay discussed a strategic growth plan for the

                                          6
Company that focused on three issues: (1) ensuring that the Company’s personnel

were well-equipped for NCI’s business, (2) “increasing operational performance to

improve margins,” and (3) “overhaul[ing] the business pipeline to focus on larger,

more profitable opportunities.”7     During this call, Dillahay also underscored that

NCI possessed a lot of untapped potential, noted improving market conditions that

bode well for NCI’s success, and expressed confidence in NCI’s ability to execute

the plan. Dillahay further noted that “NCI’s win rates and recompetes have been 90-

plus percent, exceeding the industry average of around 65%.”8 After the April 5

investor call, NCI’s stock price immediately jumped.

         On April 19, 2017, NCI received an indication that Party A was interested in

acquiring NCI for $20 per share, and received updated offers from H.I.G. for $19

per share and Party C for $20 per share. On April 24, 2017, Dillahay and NCI’s

CFO had a dinner meeting with “Party E,” a leading provider of IT services to the

United States government, during which they indicated that Party E would need to

move quickly if it wished to acquire NCI. Party E submitted a non-binding

indication of interest the next day with a price between $18 and $20 per share.

During this time period, NCI also received inquiries from “Party B” and “Party D,”

7
    Compl. ¶¶ 99-100.
8
    Id. ¶ 174.

                                           7
but talks broke down because Party B held a minority interest in a competitor of NCI

and Party D’s proposal valued NCI between only $200 million and $235 million.

         During an earnings call on May 9, 2017, Dillahay highlighted “the progress

[NCI is] making in implementing [its] strategic turnaround plan” and commented

that NCI’s pipeline had increased in the past month.9

         On May 10 and 11, 2017, NCI hosted presentations for representatives of

Parties A, C, E, and H.I.G., after which H.I.G. increased its bid to $20 per share and

the remaining parties withdrew from the process. Parties A and C both indicated

they were concerned with risks associated with the “recompete process,” referring

to the Company’s ability to win the next contract on a particular project after

completing the first contract. Party C also was concerned about the uncertainty of

the timing of NCI’s strategic turnaround plan, and Party E stated that its calculation

of synergies was lower than previously expected and it needed more information to

bid.

         E.     NCI Grants H.I.G. Exclusivity

         On May 27, 2017, NCI granted H.I.G. exclusivity through June 13, 2017 and

agreed to pay H.I.G.’s expenses if NCI pursued an alternative transaction. The

exclusivity period was later extended to June 18, 2017 without any additional

9
    Id. ¶¶ 176-77.

                                          8
consideration. H.I.G. was given access to speak directly with some of NCI’s

customers, without an NCI representative participating on the calls. When the

exclusivity period expired, NCI did not try to contact any other potential buyers.

         On June 26, 2017, H.I.G. notified NCI that it was prepared to move forward

with acquiring NCI for $20 per share. NCI shares were trading at $21.15 per share

at that time. Also on June 26, “a representative of Wells Fargo contacted a

representative of H.I.G. to inform it that NCI was proposing transaction and

retention bonuses for certain key employees in the aggregate amount of

approximately 1.75 million.”10

         On June 27, 2017, the NCI Board met to discuss H.I.G.’s proposal. During

the meeting, Wells Fargo and Stifel presented a summary of their preliminary

financial analyses of the H.I.G. proposal. After the meeting, Wells Fargo informed

H.I.G. that the aggregate amount of the proposed transaction and retention bonuses

NCI intended to make would be $1.25 million, including a $300,000 bonus for

Dillahay.11 On June 29, 2017, during an NCI Board meeting, Wells Fargo and Stifel

discussed their financial analyses of H.I.G.’s proposal and provided fairness

10
     Id. ¶ 123.
11
  According to the Recommendation Statement, the retention bonuses were “to be paid to
NCI employees in connection with the closing of the Transactions. . . . who made
significant contributions to the success of the transaction and such retention bonuses would
be paid to employees whose continued employment, through the closing, is necessary to
HIG’s assuming operation of the business or to the Company’s continued operation of the
business in the event the closing does not occur.” Defs.’ Opening Br. Ex. 1 at 26-27.

                                             9
opinions on the $20 per share price. During the meeting, the Board voted to enter

into the merger agreement.

      F.     The Merger Agreement and Tender Offer

      On July 2, 2017, NCI and H.I.G. affiliates Cloud Intermediate Holdings, LLC

and Cloud Merger Sub, Inc. executed an Agreement and Plan of Merger (the

“Merger Agreement”) under which H.I.G., through its affiliates, would acquire all

of NCI’s outstanding common stock for $20 per share or approximately $283 million

in total through an all-cash tender offer to be followed by a merger. On July 3, NCI

issued a press release announcing the execution of the Merger Agreement. On June

30, 2017, the last day of trading before the acquisition was announced, NCI’s shares

closed at $21.20.

      The Merger Agreement contained a number of deal protections, including a

“no solicitation” provision that prohibited NCI from soliciting alternative proposals

but also contained a “fiduciary out” provision allowing the Board to consider a

superior proposal in limited circumstances. The Merger Agreement also contained

a matching rights provision and a termination fee of approximately $11 million,

representing approximately 4% of the implied enterprise value of the Transaction.12

12
   Compl. ¶¶ 154-56. The Merger Agreement also included a 7% reverse termination fee
if H.I.G. backed out of the Transaction. Defs.’ Opening Br. Ex. 1 at 31.

                                         10
       In connection with the execution of the Merger Agreement, Narang entered

into a tender and support agreement to tender all of his shares to H.I.G., and the other

directors and certain members of NCI’s management indicated that they would

tender their shares as well.          As a group, these individuals accounted for

approximately 35% of the outstanding shares of NCI.

       On July 17, 2017, NCI filed the Recommendation Statement on Schedule

14D-9, and the tender offer commenced. The tender offer expired twenty-five days

later, on August 11, 2017. In response to the tender offer, NCI stockholders

(including Narang) tendered 11,924,366 shares, representing “approximately 82%”

of the total shares outstanding.13 Excluding the shares Narang held and tendered,

approximately 73.6% of the outstanding shares were tendered.14 The merger closed

on August 15, 2017, four days after the tender offer expired.

13
   Defs.’ Opening Br. Ex. 2 at 2 (Aug. 15, 2017 SEC Form 8-K) (“[A]s of the Expiration
Time, a total of 11,924,366 Shares had been validly tendered and not validly withdrawn
pursuant to the Offer, which tendered shares represent approximately 82.0% of the voting
power of the Shares outstanding on a fully-diluted basis (assuming that the Class B Shares
converted to Class A Shares upon consummation of the Offer, the exercise of all options
and the vesting of all restricted stock awards).”) (Dkt. 17). The court takes judicial notice
of this information, which plaintiffs do not question, because it is not subject to reasonable
dispute. See D.R.E. 201(b). Extrapolating from the 82% figure in this disclosure, the total
number of outstanding shares was approximately 14,541,909.
14
   Narang held 4,617,659 common shares, consisting of 117,659 Class A shares and 4.5
million Class B shares. Compl. ¶ 52. The 73.6% figure is derived by dividing (i) the
number of shares tendered less Narang’s shares (11,924,366 – 4,617,659 = 7,306,707) by
(ii) the total number of shares outstanding less Narang’s shares (14,541,909 – 4,617,659 =
9,924,250).

                                             11
II.      PROCEDURAL HISTORY

         On March 28, 2018, plaintiffs filed the Complaint, asserting two claims.

Count I asserts a claim for breach of fiduciary duties against the individual

defendants, contending that they “sanctioned a process and price that was not

entirely fair” and “failed to disclose material information.”15 Count II asserts a claim

for aiding and abetting against the H.I.G. Defendants.

         On May 14, 2018, defendants filed a motion to dismiss the Complaint in its

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

The court heard argument on the motion on December 18, 2018.

III.     ANALYSIS

         The standards governing a motion to dismiss for failure to state a claim for

relief are well settled:

         (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
         unless the “plaintiff would not be entitled to recover under any
         reasonably conceivable set of circumstances susceptible of proof.”16

15
     Id. ¶ 196.
16
     Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (citations omitted).

                                             12
          Defendants’ primary argument for dismissal is based on Corwin v. KKR

Financial Holdings LLC17 and its progeny.18 Under Corwin, “when a transaction not

subject to the entire fairness standard is approved by a fully informed, uncoerced

vote of the disinterested stockholders, the business judgment rule applies.”19

“[S]tockholder approval of a merger under Section 251(h) by accepting a tender

offer has the same cleansing effect as a vote in favor of that merger.”20 As our

Supreme Court has explained:

          When the business judgment rule standard of review is invoked because
          of a vote, dismissal is typically the result. That is because the vestigial
          waste exception has long had little real-world relevance, because it has
          been understood that stockholders would be unlikely to approve a
          transaction that is wasteful.21
          Defendants argue that plaintiffs have not pled facts sufficient to trigger entire

fairness review and that the Transaction is thus subject to the business judgment rule

under Corwin because it was approved by a fully informed, uncoerced vote of the

disinterested stockholders, i.e., a 73.6% majority of the stockholders other than

Narang who tendered their shares in the tender offer. It is not disputed that a majority

17
     125 A.3d 304 (Del. 2015).
18
  Defendants also argue that the Complaint should be dismissed for failure to plead a
breach of the duty of loyalty against any of the individual defendants. Because this case
must be dismissed under Corwin, the court does not reach that issue.
19
     Id. at 309.
20
  In re Volcano Corp. S’holder Litig., 143 A.3d 727, 738 (Del. Ch. 2016), aff’d, 156 A.3d
697 (2017) (TABLE).
21
     Singh v. Attenborough, 137 A.3d 151, 151-52 (Del. 2016) (Strine, C.J.).

                                              13
of disinterested stockholders tendered their shares in connection with the

Transaction or that the Transaction was uncoerced.

         Plaintiffs advance essentially two arguments for why Corwin does not apply.

First, they argue that entire fairness should apply on the theory that Narang, NCI’s

controlling stockholder, was conflicted in the Transaction because of his need for

liquidity. Second, they argue that the vote was not fully informed based on three

alleged deficiencies in the Recommendation Statement. The court addresses each

of these arguments in turn below.

         A.     The Transaction Is Not Subject to Entire Fairness Review

         Entire fairness is “Delaware’s most onerous standard.”22 “Once entire fairness

applies, the defendants must establish ‘to the court’s satisfaction that the transaction

was the product of both fair dealing and fair price.’”23 “[C]ontrolling stockholders

are not automatically subject to entire fairness review when a controlled corporation

effectuates a transaction. Rather, the controller also must engage in a conflicted

transaction for entire fairness to apply.”24 “Conflicted transactions include those in

22
     In re Trados Inc. S’holder Litig. (Trados II), 73 A.3d 17, 44 (Del. Ch. 2013).
23
  In re PLX Tech. Inc. S’holders Litig., 2018 WL 5018535, at *31 (Del. Ch. Oct. 16, 2018)
(quoting Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156, 1163 (Del. 1995)).
24
  IRA Trust FBO Bobbie Ahmed v. Crane, 2017 WL 7053964, at *6 (Del. Ch. Dec. 11,
2017) (internal quotation marks omitted).

                                              14
which the controller stands on both sides of the deal”25—which does not apply here

since a third party acquired all of NCI’s shares—and those “where the controller gets

a unique benefit by extracting something uniquely valuable to the controller.”26

         Plaintiffs argue that entire fairness should apply here because “Narang

controlled NCI and was conflicted with respect to the Acquisition” in that it afforded

him a “unique benefit” to address his “need or desire for liquidity.”27 In support of

this argument, plaintiffs rely heavily on this court’s decision in N.J. Carpenters

Pension Fund v. infoGROUP, Inc.28 Defendants disagree. They contend that

“Narang’s ownership of NCI stock aligned his interests with other stockholders” and

that the Complaint does not plead facts necessary to support entire fairness review

under a “need for liquidity” theory.29 In support of their position, defendants rely

25
     Larkin v. Shah, 2016 WL 4485447, at *8 (Del. Ch. Aug. 25, 2016).
26
  Crane, 2017 WL 7053964, at *6 (internal quotation marks and citation omitted); see also
In re EZCORP Inc. Consulting Agreement Deriv. Litig., 2016 WL 301245, at *11-15 (Del.
Ch. Jan. 25, 2016) (collecting cases and stating that “the entire fairness framework governs
any transaction between a controller and the controlled corporation in which the controller
receives a non-ratable benefit”); In re Crimson Expl. Inc. S’holder Litig., 2014 WL
5449419, at *12 (Del. Ch. Oct. 24, 2014) (“The second variety of controller transactions
implicating entire fairness review involves situations where the controller does not stand
on both sides of the transaction, but nonetheless receives different consideration or derives
some unique benefit from the transaction not shared with the common stockholders.”).
27
     Pls.’ Opp’n Br. 20, 22-23.
28
     2011 WL 4825888 (Del. Ch. Sept. 30, 2011, revised Oct. 6, 2011).
29
  Defs.’ Opening Br. 15-16. In a footnote, defendants also contend that Narang “was not
controlling in the context of the acquisition.” Id. at 14 n.9. This issue was not fully briefed

                                              15
heavily on this court’s decision in In re Synthes, Inc. Shareholder Litigation.30 The

court begins by discussing the two key cases on which the parties rely before turning

to analyze the allegations of the Complaint.

          In infoGROUP, a stockholder challenged a third-party acquisition of

infoGROUP, Inc. that allegedly was orchestrated by the company’s founder and 37%

stockholder Vinod Gupta “so that Gupta could obtain desperately needed

liquidity.”31 The complaint specifically alleged that Gupta “owed over $12 million

as a result of [prior] derivative and SEC settlements,” had over $13 million of debt

from loans used to buy infoGROUP stock, “had not received a salary since leaving

his job as CEO under the terms of the derivative settlement,” “did not hold

investments that provided him with ‘meaningful cash,’” planned to launch a new

business to be funded with his own money, and that the company’s board had

“repeatedly discussed” his “liquidity problems.”32 The court found that these “well-

pleaded facts . . . support an inference that the liquidity benefit received by Gupta

was a personal benefit not equally shared by other shareholders” such that he

and need not be addressed given the court’s conclusion that Narang was not conflicted in
connection with the Transaction.
30
     50 A.3d 1022 (Del. Ch. 2012).
31
     2011 WL 4825888, at * 2.
32
     Id. at *2-3.

                                          16
“suffered a disabling interest” as a director with respect to the transaction.33 Based

on this finding, and its inference that Gupta dominated his fellow directors and

rendered “them non-independent for purposes of voting on the Merger,” the court

concluded that plaintiff’s loyalty claim stated a claim for relief.34

          In Synthes, which was decided one year after infoGROUP, the court

considered another “liquidity-based” challenge to a third-party acquisition of a

company involving a stockholder (Hansjoerg Wyss) who allegedly controlled 52%

of the company’s shares.35 Chief Justice Strine, writing as Chancellor, ultimately

declined to apply entire fairness review to the transaction and dismissed the

complaint for failure to state a claim for relief despite “hints” in the complaint “that

as Wyss aged, he was anxious to get out of Synthes and that this anxiety drove the

strategic process of the company in a way that was unfair to the minority.” 36 In doing

so, the court expounded on the type of circumstances where a need for liquidity

could create a disabling conflict of interest for a controlling stockholder, as follows:

          It may be that there are very narrow circumstances in which a
          controlling stockholder’s immediate need for liquidity could constitute
          a disabling conflict of interest irrespective of pro rata treatment. Those
          circumstances would have to involve a crisis, fire sale where the
          controller, in order to satisfy an exigent need (such as a margin call or
33
     Id. at *10.
34
     Id. at *11.
35
50 A.3d at 1025.
36
     Id. at 1034-35.

                                             17
         default in a larger investment) agreed to a sale of the corporation
         without any effort to make logical buyers aware of the chance to [buy],
         give them a chance to do due diligence, and to raise the financing
         necessary to make a bid that would reflect the genuine fair market value
         of the corporation.37
With this framework in mind, the court found that “there are no well-pled facts to

suggest that Wyss forced a crisis sale of Synthes to J & J in order to satisfy some

urgent need for cash,” noting plaintiff’s failure to allege facts suggesting that Wyss

had tried to sell his stock “in whole or in substantial part” after stepping down as

CEO, that Wyss (rather than the board) initiated the sale process, or that the process

was rushed or unreasonably restricted.38

         In my opinion, the alleged facts here are similar to those pled in Synthes and

bear no resemblance to those pled in infoGROUP. As discussed next, the Complaint

contains no concrete facts from which it reasonably can be inferred that Narang had

an exigent or immediate need for liquidity.

         The crux of plaintiffs’ case, as described in their brief, is that once Narang

decided to retire in mid-2015 at seventy-three years of age, he “needed to liquidate

his position as part of his estate planning and wealth management strategy” because

“his NCI holdings accounted for nearly all of his net worth.”39 Accepting as true

37
     Id. at 1036.
38
     Id. at 1036-37.
39
     Pls.’ Opp’n Br. 23.

                                           18
plaintiffs’ assertion that Narang’s holdings in NCI accounted for nearly all of his net

worth—an assertion that is lean on factual support,40 plaintiffs have not identified

any allegations of fact in the Complaint about Narang’s estate planning or wealth

management strategy to support the inference that he was seeking to liquidate his

shares quickly. To be more specific, the Complaint discusses what plaintiffs contend

a “prudent” or “suitable” approach to investing and estate planning would be during

retirement as a “general matter,” but plaintiffs make no connection between their

views on those subjects and Narang’s actual investment strategy or objectives.41

         Plaintiffs’ contention in their brief that Narang unsuccessfully had “attempted

to unload his shares on the open market” before the Transaction is similarly devoid

of factual support in the Complaint.42             Plaintiffs plead no specifics in the

Complaint—such as the dates and amounts of Narang’s stock sales—to back up this

contention. There is no legitimate excuse for failing to plead this information since,

as plaintiffs admit, it should be readily available in public filings.43 The only

40
  Plaintiffs’ assertion that Narang’s NCI holdings accounted for nearly all of his net worth
appears to be based on research from public sources that likely would not provide a full
picture of Narang’s sources of wealth. See Compl. ¶ 64 (Narang “had no other discernible
significant business interests, and Plaintiff’s counsel’s public records searches did not
reveal any extensive real estate holdings.”).
41
     See id. ¶¶ 66-71.
42
     Pls.’ Opp’n Br. 23.
43
  When pressed during oral argument about the lack of specifics in the Complaint about
Narang’s stock trades, plaintiffs’ counsel suggested that the court take judicial notice of his

                                              19
allegation in the Complaint about Narang’s selling NCI shares is plaintiffs’ non-

specific assertion that “Narang did, in fact, attempt to sell some of his shares on the

open market beginning in late 2015.”44 Narang’s SEC filing for this transaction

shows, however, that Narang sold pursuant to a 10b5-1 plan only 9,610 shares of

NCI, equating to less than 0.2% of his NCI stock at the time—hardly an attempt to

“unload” his position.45

         What the Complaint does plead factually is that, after founding NCI in 1989,

Narang had accumulated a large stake in the Company over the course of his twenty-

six-year career as its CEO, and two additional years as Chairman, worth more than

$90 million at the Transaction price.46 In other words, Narang was a wealthy man

when he decided to retire from his day-to-day responsibilities as the CEO of NCI

with a large stake in the Company. But, critically, as in Synthes, there are no facts

pled in the Complaint that “support a basis for conceiving that [Narang] wanted or

needed to get out of [NCI] at any price, as opposed to having [millions] of reasons

to make sure that when he exited, he did so at full value.”47

“SEC filings.” Tr. 37 (Dkt. 33). As much as the Court of Chancery prides itself on its
diligence, it is not responsible for doing a litigant’s work.
44
     Compl. ¶ 74.
45
     Defs.’ Reply Br. Ex. 4.
46
     Compl. ¶¶ 40-42, 141.
47
     Synthes, 50 A.3d at 1037.

                                          20
          The facts plead here are dramatically different than the situation in

infoGROUP, as plaintiffs concede.48 Unlike there, the Complaint in this case is

devoid of any facts suggesting, for example, that Narang had any—much less

significant—debt obligations, needed to exit his position in NCI in order to pursue a

new business venture, or had admitted to others a need for liquidity.

          Nor do the facts pled in the Complaint support a reasonable inference that NCI

was sold in a crisis or “fire sale” without any effort to make logical buyers aware of

the chance to bid or to give them a meaningful chance to do so. To the contrary, the

Complaint acknowledges that the sale process extended over a period of more than

eighteen months from late 2015 until the Merger Agreement was signed in July

2017;49 that the Board decided to initiate the process by engaging two financial

advisors in January 2016, Wells Fargo and Stifel;50 that those advisors contacted

numerous potential buyers;51 that at least five firms other than H.I.G.—both strategic

and financial firms—expressed interest in the Company but none was prepared to

48
  Tr. 41 (“And admittedly, [this situation is] not the fire sale situation that was involved in
infoGROUP.”).
49
     Compl. ¶¶ 2, 80.
50
     Id. ¶¶ 80-81.
51
     Id. ¶ 83.

                                              21
pay more than H.I.G.;52 that H.I.G. initiated contact with the Company and not the

other way around;53 and that the final decision to enter into the Merger Agreement

was made by a seven-person Board that included five directors other than Narang

who are not alleged to have had any management positions with the Company and

whose independence is not seriously questioned.54

         In sum, plaintiffs have failed to plead facts to support a reasonable inference

that Narang’s retirement as NCI’s CEO posed some sort of exigency or emergency

situation where he needed liquidity fast so as to create a disabling conflict of interest

with respect to the Transaction.55 Accordingly, no basis exists to subject the Board’s

consideration of the Transaction to entire fairness review.

52
   Id. ¶¶ 83, 92, 95, 97-98, 104, 107, 109-10, 112-14 (describing the nature and level of
interest expressed by Parties A-E and whether those firms were financial or strategic
buyers).
53
     Id. ¶¶ 86, 89.
54
    Id. ¶¶ 25-29, 128. The Complaint alleges that these five directors each received payments
in the Transaction for their NCI shares and stock options ranging in value from
approximately $136,000 to $890,000. Id. ¶¶ 25-29, 141. Because these payments were
made at the same per-share price that all of NCI’s other stockholders received, they reflect
an alignment of interest with the other stockholders rather than any form of conflict. See
Iroquois Master Fund Ltd. v. Answers Corp., 2014 WL 7010777, at *1 n.1 (Del. Dec. 4,
2014) (TABLE) (“When a large stockholder supports a sales process and receives the same
per share consideration as every other stockholder, that is ordinarily evidence of fairness. .
. . ”); Synthes, 50 A.3d at 1035 (“[W]hen a stockholder who is also a fiduciary receives the
same consideration for her shares as the rest of the shareholders, their interests are
aligned.”). The only other benefit these five directors received in connection with the
Transaction was a $3,500 per-meeting fee. Compl. ¶¶ 126, 141.
55
  See Larkin, 2016 WL 4485447, at *17-18 (concluding that a liquidity theory did not raise
a pleadings-stage inference that a transaction was conflicted where “Plaintiffs failed to

                                             22
                B.     The Tender Offer Was Fully Informed

         Plaintiffs’ second line of attack for why Corwin should not apply in this case

is that the stockholders were not fully informed during the tender process.

Specifically, plaintiffs contend that the Recommendation Statement was deficient

because: (i) “the Board made material misrepresentations or omissions regarding

NCI’s financial projections;” (ii) “the Board failed to disclose material information

concerning potential conflicts of interest arising out of post-close opportunities for

NCI’s management;” and (iii) “the Board failed to disclose material information

concerning potential conflicts affecting NCI’s financial advisors.”56

         “Under Delaware law, when directors solicit stockholder action, they must

disclose fully and fairly all material information within the board’s control.”57

Information is material if there is “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.”58               Put

allege that any existing need for cash . . . was exigent” or that any need for cash was an
“unusual crisis”).
56
     Pls.’ Opp’n Br. 35, 38, 40.
57
  In re Solera Hldgs., Inc., 2017 WL 57839, at *9 (Del. Ch. Jan. 5, 2017) (internal
quotation marks omitted).
58
     Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270, 1277 (Del. 1994).

                                             23
differently, information “is material if there is a substantial likelihood that a

reasonable shareholder would consider it important in deciding how to vote.”59

         “[A] plaintiff challenging the decision to approve a transaction must first

identify a deficiency in the operative disclosure document, at which point the burden

would fall to defendants to establish that the alleged deficiency fails as a matter of

law in order to secure the cleansing effect of the vote.”60 The plaintiffs identified in

their Complaint three disclosure deficiencies in the Recommendation Statement.61

For the reasons discussed next, the court concludes that defendants have established

that each of these deficiencies fails as a matter of law and thus defendants have met

their burden of showing that the vote was “fully informed.”

                  1.   The Recommendation Statement Did Not Misrepresent
                       NCI’s Financial Outlook with Respect to the Company
                       Projections

         Plaintiffs’ lead argument for why the Recommendation Statement is

misleading is that it “materially misrepresents NCI’s financial outlook [by]

disclosing financial projections [the ‘Company Projections’] that understated the

Company’s upside and overstated certain risk factors.”62 Plaintiffs rest this argument

59
   Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (adopting the materiality
standard of TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).
60
  Solera, 2017 WL 57839, at *8; see also Morrison v. Berry, 191 A.3d 268, 282 n. 60 (Del.
2018) (agreeing with this statement of the law in Solera).
61
     Compl. ¶¶ 161-92.
62
     Id. ¶ 161.

                                           24
on statements Dillahay made during two investor conference calls before the tender

offer was commenced and in an article published after the Transaction closed.

         Before turning to plaintiffs’ allegations, it bears mentioning what plaintiffs do

not argue. They do not contend that the disclosure concerning the Company

Projections in the Recommendation Statement was incomplete or missing any

information, or that management had prepared a different set of projections before

the tender offer commenced that should have been disclosed. Nor do plaintiffs

attempt to explain why the Board would want to include falsely pessimistic numbers

in the Company Projections. Those projections were the same ones that were

provided to potential acquirors.63 Yet plaintiffs offer no logical reason why any of

the members of the Board would want a lower price for the Company even if the

Board had been rushing a sale of the Company.64

         The two investor calls occurred in April and May 2017, about two to three

months before the tender offer commenced. According to plaintiffs, Dillahay made

statements during these calls that reflected optimism about NCI’s prospects and

63
     Defs.’ Opening Br. Ex. 1 at 47.
64
   See In re BioClinica S’holder Litig., 2013 WL 5631233, at *6 (Del. Ch. Oct. 16, 2013)
(“It seems highly unlikely that the BioClinica directors would have any incentive to
artificially raise the capital expenditure estimates to the extent that it would depress the
offer from JLL; their interests, like those of all the stockholders, was to the contrary.”).

                                            25
show that the Company Projections “grossly understated NCI’s long-term prospects

and overstated the Company’s purported risks” in eight respects, namely:

         [T]he strength of NCI’s customer relationships, the Company’s strong
         positioning, the drastically improving market for NCI’s products or
         services, the Company’s confidence in its strategic plan, the timing of
         expected increases in revenue, NCI’s longstanding success in earning
         repeat business, progress reports given during the second quarter of
         2016, and the growing size in the Company’s pipeline.65

The fundamental flaw in plaintiffs’ argument is that Dillahay’s statements do not

reflect an inconsistency with the Company Projections sufficient to support a

reasonable inference that they were materially false or misleading. Indeed, the

Company Projections were generally positive: they projected a compound annual

growth in revenue of 6.9% and compound annual growth rates of 11.7% of EBIT

and 8.9% of Adjusted EBITDA.66

         All eight of the grounds supporting plaintiffs’ allegations speak to economic

growth and opportunities, mostly in general terms, but none of them provide any

quantitative support from which it is reasonably inferable that the Company

Projections were misleading. For example, plaintiffs allege that Dillahay stated that

NCI’s “3-year pipeline increased from $4 billion to $4.3 billion and our qualified

portion has grown from $2 billion to $2.4 billion.”67 But this pipeline increase is not

65
     Pls.’ Opp’n Br. 36 (citing Compl. ¶¶ 168-78).
66
     Compl. ¶¶ 162-63.
67
     Id. ¶ 177.

                                             26
inconsistent with the increase in revenues in the Company Projections and plaintiffs

do not explain how this increase means that the Company Projections were false.

Similarly, plaintiffs do not explain how general statements concerning the

“Company’s strong positioning” or “an improving market for NCI’s products” are

inconsistent with the Company Projections, which reflected a positive outlook. All

eight factors that plaintiffs contend show inconsistencies suffer from this same

flaw—in no case is it apparent why Dillahay’s statements are inconsistent with any

of the specific inputs or growth rates built into the Company Projections. At most,

Dillahay’s comments during the investor calls amount to “soft” statements or

“puffery” about the Company’s prospects, but none of them contradicts any aspect

of the Company Projections sufficiently to support a reasonable inference that they

were false or misleading.68

      With respect to the post-close time period, plaintiffs focus on an article

published on October 10, 2017, about two months after the Transaction closed. In

that article, Dillahay allegedly “boasted about his plans to triple NCI’s earnings in

just three years” and his “ambitious goal” to grow EBITDA from approximately $30

68
   See In re BJ’s Wholesale Club S’holder Litig., 2013 WL 396202, at *12 (Del. Ch. Jan.
31, 2013) (considering the fact that management’s “assurances, however confident, of
future performance are inherently speculative and easily modified” in dismissing a claim
that the board relied in bad faith on their financial advisors’ fairness opinion, which was
based on poorer financial forecasts than the forecast that management’s statements
reflected).

                                            27
million in 2017 to $100 million in 2020—“more than double the estimate for 2020

Adjusted EBITDA contained in the Company Projections.”69              Although these

comments portray a rosier financial picture of NCI than the Company Projections, it

is not reasonable to infer from them that the Company Projections were false or

misleading as disclosed in the Recommendation Statement for at least two reasons.

         First, Dillahay’s statements concern a post-acquisition company under new

ownership with a different funding source and a different capital structure. In other

words, key aspects of the Company had changed from what they were before the

Transaction closed. Second, the Recommendation Statement explains that the

Company Projections were completed “prior to completing [the Company’s] review

of its first quarter financial results for 2017,”70 which means that they were prepared

about six months before Dillahay made his comments in October 2017. Given this

significant gap in time, the intervening change of circumstances, and the aspirational

nature of Dillahay’s comments, which refer to “plans” and “ambitious goals,” it is

not reasonable to infer from Dillahay’s comments that the Company Projections

were false or misleading as portrayed in the Recommendation Statement.

69
     Compl. ¶ 180.
70
     Defs.’ Opening Br. Ex. 1 at 47.

                                          28
                2.     The Complaint Fails to Plead Facts to Support a Reasonable
                       Inference that the Recommendation Statement Omitted
                       Material Information About Post-Close Employment
                       Discussions

         Plaintiffs next argue that the Recommendation Statement “omits material

concerning when, and the extent to which, discussions occurred regarding post-close

employment opportunities for NCI management.”71 If discussions of this nature had

occurred during the sale process, i.e., before NCI entered into the Merger Agreement

with H.I.G., they may reflect that the expected recipients of post-close employment

opportunities had a reason to favor H.I.G. over another bidder and thus could be

material to the stockholders in deciding whether or not to tender their shares.72 The

problem for plaintiffs is that the factual allegations in the Complaint do not support

a reasonable inference that such discussions occurred at this time.

         This court has held that “[i]f a disclosure document does not say that the board

or its advisors did something, then the reader can infer that it did not happen.” 73 It

is not disputed that the Recommendation Statement, which devotes thirteen pages to

71
     Compl. ¶ 183.
72
   See In re Topps Co. S’holders Litig., 926 A.2d 58, 74 (Del. Ch. 2007) (Strine, V.C.) (“As
it currently stands, the Proxy Statement creates a misleading impression that Topps
managers have been given no assurances about their future by Eisner. In reality, Eisner
has premised his bid all along as one that is friendly to management and that depends on
their retention.”).
73
     In re Sauer-Danfoss S’holders Litig., 65 A.3d 1116, 1132 (Del. Ch. 2011).

                                             29
describe the background of the Transaction from January 2016 up to the

announcement of the Merger Agreement on July 3, 2017,74 does not discuss “the

timing and extent of any discussions between NCI and H.I.G. regarding post-close

employment.”75 Therefore, unless plaintiffs allege facts from which it reasonably

can be inferred that such discussions occurred during the sale process, the logical

inference is that they did not happen during that period.

         Plaintiffs suggest that post-employment discussions with H.I.G. “likely”

occurred based on two allegations, namely that: (i) NCI management knew before

the acquisition “that H.I.G. routinely retains the existing management team to

continue executing the business plans in place” and (ii) NCI announced in a Form

8-K filed on August 15, 2017, the date of the closing, that Dillahay and two other

managers “would continue their employment in the post-Acquisition entity.”76

Focusing on the second allegation, plaintiffs argue that post-close employment

discussions must have occurred before the closing if such arrangements were

announced on the day of the closing.77 This inference makes sense, of course, but

misses the key point.

74
     See Defs.’ Opening Br. Ex. 1 at 15-28.
75
     Pls.’ Opp’n Br. 39.
76
     Compl. ¶¶ 184-86.
77
     See Tr. 56-57.

                                              30
       What is important for purposes of determining whether stockholders deciding

whether or not to tender their shares received all material information is whether

discussions about post-close employment occurred before the Company agreed to

do a deal with H.I.G. This is because the issue that could create a conflict of interest

and be material to stockholders in deciding whether to tender their shares is whether

a fiduciary of the Company (e.g., Dillahay) had a motive to play favorites during the

sale process in order to secure post-close employment. In other words, to be

material, post-close employment discussions must have occurred before the Merger

Agreement was signed on July 2, 2017, which was more than six weeks before the

Form 8-K disclosure.

       Based on the allegations of the Complaint, it would be speculative—rather

than reasonable—to infer that such discussions occurred during the sale process

simply because H.I.G. has a reputation for retaining management.78 Put differently,

the only non-speculative, reasonable inference that can be drawn from the

Complaint’s allegations is that post-close employment discussions occurred at some

point after execution of the Merger Agreement and before the announcement in the

Form 8-K filing issued on the closing date. For the reasons explained above,

78
  See BioClinica, 2013 WL 5631233, at *10 (stating that “[t]he Plaintiffs have the burden
of bringing claims based on actual facts and reasonable inferences, rather than speculation”
and therefore dismissing a claim based on clauses that plaintiffs had no evidence even
existed).

                                            31
however, such an omission from the Recommendation Statement would not be

material to stockholders in deciding whether or not to tender their shares.

               3.    The Recommendation Statement Adequately Discloses Past
                     Work NCI’s Financial Advisors Performed for H.I.G.

         Plaintiffs’ final disclosure challenge is that the Recommendation Statement

“omits material concerning potential conflicts of interest affecting NCI’s financial

advisors,” i.e., that each financial advisor had previously performed work for H.I.G.

or one of its portfolio entities.79

         To be clear, what is not at issue is how much Wells Fargo and Stifel stood to

receive in connection with their work on the Transaction and the conditions

associated with receiving compensation for that work.80 That information was fully

disclosed to NCI’s stockholders. Specifically, the Recommendation Statement

explains that each firm was entitled to receive an “opinion fee” for providing a

fairness opinion ($500,000 for Wells Fargo and $375,000 for Stifel) and a fee upon

79
     Compl. ¶ 191.
80
   See In re Atheros Commc’ns, Inc. S’holder Litig., 2011 WL 864928, at *8 (Del. Ch. Mar.
4, 2011) (“Stockholders should know that their financial advisor, upon whom they are
being asked to rely, stands to reap a large reward only if the transaction closes and, as a
practical matter, only if the financial advisor renders a fairness opinion in favor of the
transaction.”); David P. Simonetti Rollover IRA v. Margolis, 2008 WL 5048692, at *8 (Del.
Ch. June 27, 2008) (“[I]t is imperative for the stockholders to be able to understand what
factors might influence the financial advisor’s analytical efforts. . . . A financial advisor’s
own proprietary financial interest in a proposed transaction must be carefully considered
in assessing how much credence to give its analysis.”).

                                              32
consummation of the Transaction based on its implied value, estimated to be

approximately $2,750,000 for Wells Fargo and $2,030,000 for Stifel, and against

which the opinion fee would be creditable to the extent previously paid.81

          The issue here is disclosure about past work these advisors performed for

H.I.G. or its affiliates that may have predisposed one or both of these advisors to

favor H.I.G.’s bid for the Company over other bidders. Although the parties did not

focus on it in their briefs, the Recommendation Statement provides a disclosure on

past work that both of the Company’s financial advisors performed for H.I.G. With

respect to Wells Fargo the Recommendation Statement states, in relevant part, that:

          Wells Fargo Securities and/or its affiliates are lenders to or have
          otherwise extended credit to certain members of the HIG Group by
          means of, among other things, loans, letters of credit, financing leases
          and purchasing cards, [and] may in the future provide investment and
          commercial banking advice and services to, and may otherwise seek to
          expand its business and commercial relationships with, . . . members of
          the HIG Group.82

With respect to Stifel, the Recommendation Statement states, in relevant part, that:

          Other than the services provided by Stifel to NCI in connection with
          the Transactions and Stifel’s opinion, there were no material
          relationships that existed during the two years prior to the date of
          Stifel’s opinion or that were mutually understood to be contemplated in
          which any compensation was received or was intended to be received
          as a result of the relationship between Stifel and any party to the
          Transactions; Stifel notes that during such period, Stifel received

81
     Defs.’ Opening Br. Ex. 1 at 39-40, 47.
82
     Id. at 40.

                                              33
          trading commissions from affiliates of [H.I.G.] in an aggregate amount
          significantly less than the Opinion Fee.83

         Given the disclosures block-quoted above, and given the disclosure of the

compensation Wells Fargo and Stifel each were entitled to receive for their work on

the Transaction and the conditions upon which such compensation would be earned,

it cannot be said that the Recommendation Statement omitted facts about past work

Wells Fargo and Stifel performed for H.I.G. that “would have been viewed by the

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

made available” concerning the financial advisors’ incentives in connection with the

sale process.84 Accordingly, plaintiffs’ third disclosure challenge is without merit.

                                        *****

          In sum, each of plaintiffs’ challenges to the Recommendation Statement fails

to show that NCI’s stockholders were not fully informed when deciding whether to

tender their shares in connection with the Transaction, which indisputably received

the uncoerced support of a majority of NCI’s disinterested stockholders. For this

reason, and because entire fairness does not apply to the Transaction (as discussed

above) and waste has not been alleged, the Transaction is governed by the business

83
     Id. at 47.
84
     Arnold, 650 A.2d at 1277.

                                           34
judgment rule under Corwin and its progeny. Accordingly, Count I of the Complaint

fails to state a claim for relief and must be dismissed.85

         C.     The Aiding and Abetting Claim Fails to State a Claim for Relief

         In Count II of the Complaint, plaintiffs assert that the H.I.G. Defendants aided

and abetted the members of the Board in breaching their fiduciary duties with respect

to their approval of the Transaction.

         “Under Delaware law, a claim for aiding and abetting includes four elements:

(i) the existence of a fiduciary relationship, (ii) a breach of the fiduciary’s duty, (iii)

knowing participation in the breach by the non-fiduciary defendants, and (iv)

damages proximately caused by the breach.”86 “As a matter of law and logic, there

cannot be secondary liability for aiding and abetting an alleged harm in the absence

of primary liability.”87

         Here, because plaintiffs’ breach of fiduciary duty claim fails to state a claim

for relief against the individual defendants for the reasons explained above, the

85
     See Singh, 137 A.3d at 151-52.
86
 Lee v. Pincus, 2014 WL 6066108, at *13 (Del. Ch. Nov. 14, 2014) (internal quotation
marks omitted).
87
  In re Alloy, Inc. S’holder Litig., 2011 WL 4863716, at *14 (Del. Ch. Oct. 13, 2011); see
also Singh, 137 A.3d at 153 (affirming dismissal of all claims, including an aiding and
abetting claim, stating that “[h]aving correctly decided, however, that the stockholder vote
was fully informed and voluntary, the Court of Chancery properly dismissed the plaintiffs’
claims against all parties.”).

                                            35
aiding and abetting claim fails as well for lack of a predicate breach of duty.88

Accordingly, Count II will be dismissed.

IV.   CONCLUSION

      For the reasons explained above, both counts of the Complaint fail to state a

claim for relief. Accordingly, defendants’ motion to dismiss is GRANTED, and the

Complaint is dismissed with prejudice.

      IT IS SO ORDERED.

88
  See Volcano, 143 A.3d at 750 (dismissing a claim under Corwin and the accompanying
aiding and abetting claim by stating that “[a]n aiding and abetting claim . . . may be
summarily dismissed based upon the failure of the breach of fiduciary duty claims against
the director defendants.”) (internal quotation marks omitted).

                                           36