In re OM Group, Inc. Stockholders Litigation, CA 11216-VCS

Background

OM Group accepted a $34/share cash acquisition by Apollo, approved by stockholders in August 2015 by roughly 10:1. Shortly after announcement, stockholder plaintiffs filed suit alleging the board rushed a sale to avoid a proxy fight and breached Revlon duties.
Plaintiffs’ operative complaint alleged disclosure omissions and misleading statements in the proxy, focusing on the “evolution” of Deutsche Bank’s retention and fee arrangement as a second financial advisor.
Plaintiffs claimed the Board initially intended to retain Deutsche Bank on a flat-fee basis but then converted the engagement to a contingent-fee arrangement without adequate disclosure of who approved or why.
Defendants moved to dismiss under Ch. Ct. R. 12(b)(6). The Court held that the proxy adequately disclosed Deutsche Bank’s contingent compensation and that the alleged omissions were not material.
Because a majority of disinterested, uncoerced, fully informed stockholders approved the merger, the Court applied the business judgment rule (per Corwin), dismissing the complaint. Plaintiffs sought reargument under Rule 59(f); the Court denied reargument.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether proxy omissions about Deutsche Bank’s fee evolution rendered the stockholder vote uninformed	Plaintiffs said the proxy failed to explain how/why Deutsche Bank’s fee changed from flat to contingent and who approved it, making the vote uninformed	Defendants said the proxy disclosed Deutsche Bank’s contingent compensation and the board had approved the engagement by the time of disclosure	Court held disclosures adequately revealed Deutsche Bank’s contingent incentives; omissions not material
Whether conversion of Deutsche Bank’s fee to contingent fee was a Board decision that needed explanation	Plaintiffs argued the Complaint shows the Board did not consciously approve the change and failed to disclose its role	Defendants said initial contemplation of a contingent second-stage retention and either agreement or acquiescence by the Board sufficed; disclosure reflected approval	Court held it was immaterial whether approval was express or by acquiescence; proxy informed stockholders of contingent compensation
Whether engagement of a contingent-fee second banker raises a disclosure-based claim that survives Corwin deference	Plaintiffs relied on cases suggesting contingent second bankers can reinforce conflicts and thus require disclosure	Defendants relied on Corwin and related authority that a fully informed disinterested stockholder vote invokes business judgment review	Court held RBC/El Paso context differs; here Corwin applies because proxy sufficiently disclosed and vote was fully informed, so business judgment rule governs
Whether the Court misapprehended pleaded facts sufficient to warrant reargument	Plaintiffs claimed the Court misunderstood the Complaint’s factual allegation about Deutsche Bank’s engagement	Defendants said the Opinion addressed the allegation and correctly concluded no material omission; reargument merely rehashed prior arguments	Court denied reargument, finding no overlooked controlling law or misapprehension that would affect the outcome

Key Cases Cited

Revlon, Inc. v. MacAndrews & Forbes Hldgs., Inc., 506 A.2d 173 (Del. 1986) (board duties when effecting sale to maximize shareholder value)
In re KKR Fin. Hldgs. LLC S’holder Litig., 101 A.3d 980 (Del. Ch. 2014) (discussing standards and Corwin-related issues)
Corwin v. KKR Fin. Hldgs. LLC, 125 A.3d 304 (Del. 2015) (fully informed, uncoerced stockholder approval invokes business judgment rule)
Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) (standards for pleading material omissions that defeat Corwin defense)
In re El Paso Corp. S’holder Litig., 41 A.3d 432 (Del. Ch. 2012) (contingent-fee second banker can create conflict concerns)
RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015) (role of contingent-fee bankers in aiding-and-abetting and conflict analyses)