In a recent ruling, the Delaware Court of Chancery made clear that claims based on allegedly inadequate disclosures brought after a merger closes face an exacting standard on a motion to dismiss. Vice Chancellor Sam Glasscock III in Nguyen v. Barrett, C.A. No. 11511-VCG,rejected the assertion that plaintiffs with a pre-closing disclosure claim can choose to bring the claim post-closing without repercussion—clarifying that the “preferred method for vindicating truly material disclosure claims is to bring them pre-closing, at a time when the court can ensure an informed vote.” Glasscock further opined that a rule that disclosure claims “pleaded but not pursued pre-close” are waived would be “salutary.”
Background
The lawsuit arose from the October 2015 acquisition of Millennial Media Inc. by AOL Inc. Plaintiff An Nguyen, on behalf of a class of Millennial stockholders, brought a pre-closing action challenging the acquisition based on allegedly deficient disclosures by Millennial. Nguyen’s initial complaint identified nearly 30 disclosures, but he moved for a preliminary injunction based on only his “most serious” claim—that Millennial selectively disclosed its cash flow projections. Glasscock denied the preliminary injunction, finding that Nguyen failed to demonstrate that the projections were materially misleading, and the merger closed. Nguyen moved for certification of an interlocutory appeal to the Delaware Supreme Court, which Glasscock denied. The Delaware Supreme Court subsequently denied Nguyen’s appeal.
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