In re Books-A-Million, Inc. Stockholders Litigation, C.A. 11343-VCL

Background

Books-A-Million (BAM), controlled (~57.6%) by the Anderson family, was taken private in a 2015 squeeze-out merger that paid minority holders $3.25 per share; the deal was financed using BAM’s credit facility.
The Anderson family’s January 29, 2015 offer conditioned the transaction on (i) approval by an independent Special Committee and (ii) a non-waivable majority-of-the-minority vote.
The Board formed a Special Committee (Domanico and Wilhelm ultimately served), retained independent counsel and Houlihan Lokey as financial advisor, solicited other interest (Party Y submitted a $4.21 indication but would not buy only minority shares), negotiated over months, and secured a Houlihan Lokey fairness opinion supporting $3.25.
The Special Committee met extensively, negotiated counteroffers, and recommended the transaction; the full Board (excluding recused Andersons) approved and the minority vote (66.3% of unaffiliated shares) accepted the merger.
Plaintiffs (minority stockholders) sued alleging fiduciary breaches by directors, controlling stockholders, and officers and aiding-and-abetting by the purchaser vehicles; defendants moved to dismiss under Court of Chancery Rule 12(b)(6).
The court evaluated whether the M&F Worldwide (MFW) framework applied (which, if satisfied, invokes the business judgment rule) and whether plaintiffs pleaded facts sufficient to rebut it or to show waste.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Applicability of MFW business-judgment framework	MFW shouldn’t apply because the controller’s earlier 2012 proposal lacked the twin upfront conditions, and Party Y’s superior $4.21 offer shows the committee acted disloyally	Anderson family conditioned the 2015 offer ab initio on a Special Committee and majority-of-the-minority vote; those conditions match MFW and were publicly disclosed	MFW framework applied — the 2015 offer was distinct and included the twin upfront conditions, so business judgment review governs
Special Committee independence	Committee members actually favored controller; Bruno’s participation tainted the process; Party Y’s higher bid shows bad faith by committee members	Committee members (Domanico, Wilhelm) were independent/disinterested; Bruno resigned early and only sat for a single presentation; no facts plausibly show beholdenness or personal benefit	Independence requirement satisfied; plaintiffs failed to plead facts showing lack of independence or subjective bad faith
Committee’s duty of care in negotiating price	Committee was grossly negligent by accepting a lower controller bid when a higher third-party indication (Party Y) existed	Committee negotiated, solicited market interest, obtained diligence and analyses, held 33+ meetings, secured a fairness opinion and improved the offer from initial $2.75 to $3.25	No reasonable inference of gross negligence; duty-of-care element met and process was robust
Waste / coercion and minority vote adequacy	The $3.25 price was unfair given Party Y’s $4.21; minority vote may have been uninformed or coerced	Proxy disclosures, a solvency opinion, Houlihan Lokey fairness opinion, and a 66.3% informed minority approval rebut claims of coercion or waste	No plausible claim of waste or coercion; information disclosed and majority-of-minority approval support business-judgment protection

Key Cases Cited

Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (establishes controller buyout framework where controller conditions transaction on independent committee and majority-of-minority vote)
In re MFW Shareholders Litigation, 67 A.3d 496 (Del. Ch. 2013) (Chancery articulation of procedure that, if followed, shifts review to business judgment rule)
Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) (standards governing motion to dismiss in Chancery Court)
Mendel v. Carroll, 651 A.2d 297 (Del. Ch. 1994) (explains differences between controller buyout and third-party offers and limits board action against controlling shareholders absent abuse)
Disney II (In re Walt Disney Co. Derivative Litigation), 906 A.2d 27 (Del. 2006) (discusses subjective bad faith as basis to rebut business judgment rule)
Stone v. Ritter, 911 A.2d 362 (Del. 2006) (good-faith requirement as element of duty of loyalty; conscious disregard can show bad faith)