Chancery Court OKs Breach of Fiduciary Duty Claim Against Fresh Market's Ex-GC Over Buyout
Shareholders allege Scott Duggan omitted key pieces of information from a SEC filing ahead of Greensboro, North Carolina-based Fresh Market's $1.36 billion merger with private equity firm Apollo Global Management.
January 06, 2020 at 03:20 PM
4 minute read
The original version of this story was published on Corporate Counsel
Scott Duggan, former general counsel and senior vice president of The Fresh Market Inc., has failed to convince a judge to dismiss a breach of fiduciary duty claim he faces for his role in the publicly traded grocery chain's $1.36 billion buyout.
Delaware's Chancery Court found in a Dec. 31 decision that the allegations in a shareholder lawsuit could "conceivably support" a claim that Duggan was grossly negligent when he drafted and certified a filing with the U.S. Securities and Exchange Commission in connection with Fresh Market's sale to private equity firm Apollo Global Management.
According to the court, the schedule 14D-9 filing in question—Fresh Market's response to Apollo's takeover bid—omitted the following key pieces of information:
- Fresh Market former chairman and CEO Ray Berry lied to the company's board about having reached a behind-the-scenes agreement with Apollo before the 2016 merger.
- Berry had expressed a "clear preference" for Apollo and was unwilling to consider offers from other firms.
- Berry indicated he might sell his shares in the company if it did not pursue the sale with Apollo.
- The "depth and breadth" of shareholder pressure to sell.
Vice chancellor Sam Glasscock noted in the opinion that the Delaware Supreme Court already held that the SEC filing "presents a distorted narrative." He wrote that based on Duggan's "role as general counsel, and given the sales process as pled, I can infer that the omitted facts were omitted with his knowledge.
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