Chancery Court Dismisses Revlon and Quasi-Appraisal Claim

The Delaware courts apply a high standard of review in sale transactions where a plaintiff pleads a conflict of interest. Where a board sells to a third party and the plaintiff pleads no conflict of interest, however, the Delaware Supreme Court has noted that “an extreme set of facts” is “required to sustain a disloyalty claim premised on the notion that disinterested directors were intentionally disregarding their duties,” as in Lyondell Chemical v. Ryan, 970 A.2d 235, 243 (Del. 2009). Only where a plaintiff pleads facts showing a conscious disregard of duties would a plaintiff be able to allege that the directors had acted in bad faith in approving a sale transaction. And if a plaintiff cannot plead facts showing disloyalty or bad faith, and assuming the board is protected by a Section 102(b)(7) provision, then a plaintiff will not be able to plead any non-exculpated conduct and hence the court will dismiss at the pleadings stage any claim for monetary damages. The recent case of Dent v. Ramtron International, C. A. No. 7950-VCP (Del. Ch. June 30, 2014), illustrates these principles and provides guidance as well into the court’s application of the materiality standard in assessing claims of breach of the duty of candor that might give rise to a quasi-appraisal remedy.

Background Facts

Plaintiff Paul Dent was a stockholder of Ramtron International Corp. when his shares were acquired in November 2012 for $3.10 per share in a merger with a subsidiary of Cypress Semiconductor Corp. The merger was the culmination of a nearly two-year process in which “the individual defendants, among other things, retained outside legal and financial advisers, rejected two Cypress offers as inadequate, contacted 24 potential purchasers with the assistance of their legal and financial advisers, and negotiated an increase in Cypress’ offer price from $2.88 to $3.10 per share.” The company’s financial adviser conducted four valuation analyses, one of which was a discounted cash flow (DCF), and the merger price fell within the value range of three of the analyses, but below the $3.57 to $5.10 per share range of the DCF analysis. The price represented a 71 percent premium over the unaffected stock price.

Plaintiff Fails to Plead a Revlon Claim