Domineering Chairman, Derivative Claims, and More

In re NYMEX S’holders Litig., C.A. 3621-VCN, 2009 WL 3206051 (Del. Ch. Ct. Sept. 30, 2009).

A couple of noteworthy principles were touched on in an opinion dismissing a litany of shareholder claims regarding NYMEX’s approval of a merger with CME.  Primarily, the shareholders claimed they did not receive fair value for their shares.

First was the court’s response to allegations of board acquiescence in the face of an imperial chairman.  The court responded: “That directors acquiesce in, or endorse actions by, a chairman of the board-actions that from an outsider’s perspective might seem questionable-does not, without more, support an inference of domination by the chairman or the absence of directorial will.”  The most that could be inferred from Plaintiff’s allegations is that the Board’s process was not perfect.  But, the court reaffirmed, “there is no single blueprint that a board must follow to fulfill its duties.”

Second, the court relied on the standard recently articulated in Lyondell and Corti to dismiss any claims of bad faith.  Specifically, the Complaint failed to allege that the Board “utterly failed to obtain the best sale price.”

Finally, the court provided some lengthy guidance on the Parnes exception to the direct/derivative claim distinction in a merger context.  The court explained that to be considered a direct claim under this narrow exception “there must be a causal link between the breach complained of and the ultimate unfairness of the merger.”  Here, the plaintiffs did not demonstrate causality when significant time lapsed between the collapse of negotiations with one bidder and the serious negotiations with the final bidder.

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