In re Rural Metro Corp.
88 A.3d 54
| Del. Ch. | 2014Background
- Rural merges with a Warburg-affiliate; Rural shareholders receive $17.25 cash per share.
- Plaintiffs allege the Rural Board breached fiduciary duties by approving the merger and by omitting material information in the Proxy Statement; RBC aided and abetted those breaches.
- Directors settled before trial; Moelis settled as a financial advisor; trial proceeded against RBC only.
- The court holds RBC liable for aiding and abetting the Board’s breaches; remedies, including damages and fee-shifting, to be addressed after further briefing.
- The case centers on the sale process and disclosure theory, with emphasis on RBC’s conflicts of interest and its influence on valuation and timing of the sale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RBC aided and abetted fiduciary breaches in the sale process. | RBC manipulated process to serve its own financing interests. | RBC contends it acted properly as a financial advisor. | Yes; RBC aided and abetted breaches under enhanced scrutiny. |
| Whether RBC aided and abetted disclosure breaches in the Proxy Statement. | RBC’s false/omitted disclosures misled stockholders. | RBC’s disclosures were not misleading. | Yes; RBC aided and abetted disclosure breaches. |
| Whether the 102(b)(7) exculpation shield applies to aiding and abetting. | Exculpation does not extend to aiders and abettors. | Exculpation should shield directors; RBC argues it should extend as well. | No; exculpation does not apply to aiders and abettors. |
| Whether RBC’s engagement letter insulates it from liability. | Engagement letter cannot waive claims for conflicts. | Engagement letter may be read as broad consent/notice. | No; engagement letter does not immunize RBC. |
Key Cases Cited
- Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) (aiding and abetting liability possible for fiduciary breaches)
- Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) (established enhanced scrutiny standard in takeover contexts)
- Revlon, Inc. v. MacAndrews & Forbes Hldgs., 506 A.2d 173 (Del. 1986) (sales context; enhanced scrutiny to maximize value for stockholders)
- QVC, Inc. v. Dollar, 637 A.2d 34 (Del. 1994) (enhanced scrutiny; reasonableness of decision-making process)
- Dollar Thrifty S’holder Litig., 14 A.3d 573 (Del. Ch. 2010) (clarifies range-of-reasonableness standard under enhanced scrutiny)
- Arnold v. Soc’y for Sav. Bancorp., Inc., 678 A.2d 533 (Del. 1996) (development of predicate aiding-and-abetting claims against acquirer despite exculpation)
- McMullin v. Beran, 765 A.2d 910 (Del. 2000) (governs consideration of going-concern value in valuation)
- In re El Paso Corp. S’holder Litig., 41 A.3d 432 (Del. Ch. 2012) (conflicts and gatekeeper concerns in fiduciary contexts)