*1 1037 E Delaware, STAT of Plaintiff
Below, Appellee. (f/k/a HOLDINGS, CDX INC. Car Sciences, Inc.), is Life Defendant- 653,
No. 2015 Below, Appellant/Cross-Appellee, v. Supreme Court of Delaware. FOX, Kurt Plaintiff-Below, Appellee/Cross- 15, April 2016 Submitted: Appellant. 3, Decided: June 2016 526, No. 2015 Supreme Court of Delaware. Superior Court of the Below— April Delaware, Submitted: 2016 State of Cr. ID Nos. 1312008135 Decided: June 2016 and 1508013143. Reargument Denied June AFFIRMED. COLEMAN,
Darrell Defendant Below-Appellant,
v. of Delaware, STATE Plaintiff Below-Appellee.
No. Supreme Court Delaware. 4,May
Submitted: Decided: June Court Below: Superior Court of the Delaware, State of ID No.. 1305011774A. AFFIRMED. *2 Simon, David Esquire, P. G.
Christopher Simon, LLC, Holmes, Esquire, Cross & Delaware; Cahill, Daniel S. Wilmington, Gambino, Es- Esquire (Argued), Louis LLP, Saratoga quire, Gambino Cahill York, Attorneys for Plain- Springs, New tiff-Below, Appellee/Cross-Appellant the Class. STRINE, Justice; Chief
Before HOLLAND, VALIHURA, VAUGHN, Justices, MEDINILLA,1 Judge,
constituting the Court en Banc. Justice,
HOLLAND, Majority: Sciences, (“Caris”) Caris Life Inc. was a corporation. privately Delaware held subsidiaries, operated Through three Target- Diagnostics, units: Caris business Now, Diagnostics and Carisome. Caris consistently profitable. TargetNow generated profits. but not Cari- revenue stage. developmental some in the goals securing To achieve the dual TargetNow and financing for Carisome generating a return for its stockhold- ers, to Miraca Diagnostics Caris Caris sold (“Miraca”). To minimize Holdings, Inc. taxes, using structured the transaction was (the a “Miraca spin/merge structure Transaction”). Caris first transferred TargetNow and Carisome to ownership of subsidiary, spun then off that new sub- Beck, Esquire, (Argued), A. Thomas (the “Spinoff’). to its sidiary stockholders Williams, Esquire, P. Brock E. Gregory owning Diagnos- point, only At that Caris Czeschin, Esquire, Hannigan, M. Susan tics, merged wholly with a Caris owned Horn, Esquire, Rachel E. Mat- Esquire, (the “Merger”). subsidiary of Miraca Perri, Richards, Esquire, Layton D. thew Delaware; (“Halbert”), P.A., Wilmington, Halbert the founder Finger, David & Holmes, Caris, Esquire, fully L. of its Daniel owned 70.4% diluted Michael C. (“Fund VI”), Zieminski, VI, Esquire, Craig equity. Whitney E. Es- L.P. Tobey, JH fund, Howe, Esquire, George private equity M. owned another quire, Olivia D. Padis, Elkins, LLP, and Fund Esquire, & 26.7%. Halbert VI received Vinson Dallas, Texas, equity spun-off in the Attorneys proportionate for stake Defendant- Below, entity kept which them whole Appellani/Cross-Appellee. (“SpinCo”), IV, 4(a) preme complete Sitting by designation pursuant Rules to art. quorum. § 12 of the Delaware Constitution and Su- Board, Administrator, purposes pre-transaction their bene- than the as the Plan ownership ficial and Cari- how much determinéd holders Merger, paid some. In the Miraca He also receive. contended (“Re- determination, million for what was left of regardless Caris of who made the mainCo.”)- Each share of RemainCo. per SpinCo share attributed to $0.61 *3 to right stock was converted into the re- was not a faith good and determination ceive cash. Halbert Fund VI arbitrary and resulted from an' and capricious $4.46 cash, their represent- received share of the process. Finally, he the contended ing pre-transaction value of their the bene- Plan permit did not Caris to a withhold Diagnostics. ficial interest Caris Through option portion part of the consideration as Transaction, the Miraca Halbert and Fund by of the escrow holdback contemplated proceeds total approximate- VI received merger agreement. the ly million. They SpinCo by financed $560 3-5, place Trial took from December reinvesting million. 2014. Fox had the burden óf his proving remaining of the approximately
Most by preponderance contentions evi- of the fully 2.9% of Caris’s diluted took entity the parties dence. The introduced 217 exhib- stock options form of cancelled were its, witnesses, for depositions nine and Merger. with connection the the Under presented testimony live fact wit- five terms 2007 Stock Incéntive Plan expert. trial, nesses one and After Caris (the “Plan”), each holder was to entitled permitted supplement was to the record by for each an op- receive share covered with two exhibits. additional amount by tion the which the Market Fair Chancery Court Decision (“FMV”) of
Value the share' exceeded the price. Plan exercise The FMV as defined required The Plan and Ad- directed the amount determined the Caris board (the Board) good ministrator entire to use (the “Board”). of directors Plan The re- to properly adjust the determine and Board, quired the Plan the Administra- options to for SpinCo. account the of- FMV tor, adjust options for account fi- obligations, These contractual were not Plan, Spinoff. Under the terms of the duciary responsibilities, under the Plan: determinations, good faith Board’s as the determined, Chancery The Court of as a Administrator, were conclusive unless arbi- fact, Board, matter of as the capricious. trary and Administrator, never made determina- option tion option told the of the value Caris holders that holders would Plan, adjust receive under would the difference failed receive between $5.07 spinoff. per and the The Court share exercise their options, Chancery minus concluded that go 8% that would to an certain directors were not even aware of contemplated by merg- escrow account their duties as $5.07, Plan’s agreement. er Of the was for Administrator the Plan itself $4.46 RemainCo.; remaining merely was for deferred Halbert —Caris’ Chair- $0.61 man, 70.4% The SpinCo. CEO and stockholder. Chancery Court of found that Caris’ CFO/ Plaintiff’s Contentions (“Martino”) COO Martino made Gerard (“Fox”), plaintiff-below, Kurt Fox options-value determination obtain sued on behalf a class of holders. spinoff tax-free rather than to determine According to Caris the Plan Plan and breached FMV that determination management, members of perfunctory sign-off by because rather received Halbert. the firm that re- Grant Thornton found with before Chancery Court - later, days work. Martino determina- started Two made the value gardless who determined, tion, precisely not was an email to Halbert FMV sent option holders was anticipated range of consideration value received good addition, In reports per faith. the two not determined share Chancery found evidence proceed- the Court of Thornton then Grant support. value support decided prepare largely— used a valuation that ed through process by Martino determined admittedly! copied analysis. PwC’s — - “arbitrary capricious,” The just came in Grant Thornton’s answer opin- Chancery began page its not valuation was de- PwC’s. The below following summary: ion faith, the process (cid:127)termined *4 at trial established that The evidence arbitrary capricious. and was Mar- [Fair not make the Board did the of-the Finally, plain language the sup- it was Value]' ket determination permit por- not Caris withhold did Martino, A. to make. Gerard the poséd option tion of the consideration in es- President, Finan- Chief Executive Vice merger agreement The was not crow. Officer, Officer, Operating and Chief cial governed the the contract that relation- determinations, then received made ship holders between and Halbert. signoff from The perfunctory -The Plan Caris. was. that at trial further established evidence Caris Plan. The class'is breached the SpinCo picked Martino the number $16,260,332.77, damages to. entitled good faith not a determination was plus pre- post-judgment and interest figure It was the Value. Fair Market rate, legal compounded quarterly, PricewaterhouseCoopers by generated from 2011 until date November advisor, tax us- (“PwC”), Company’s payment. analy- intercompany tax transfer ing an designed to ensure sis that Appellant’s Contentions corporate would result zero Spinoff appellant argues PwC where to tax. Martino told level- Chancery legal by committed error focus- out, he PwC with supplied come Martino’s) ing (specifically on an officers’ the valu- projections support reduced conduct, conduct; instead of the Board’s PwC’s he wanted. conclusion ation finding a breach of the Plan con- contract’s million SpinCo had a value $65 standard; subjective good and meas- subjective, faith belief with Martino’s flicted damages by decided an ob- TargetNow uring what year earlier from would, have jectively and $300 was .worth-between reasonable alone appellant also contends that It conflicted with likewise" million. done. VI, Halbert, Chancery by imposing Court of by Fund erred views held It on the Company’s heightened financial advisor. contrast- standard review- higher that a different good values faith determina- ed with Plan’s contractual firm, LLP, accounting tions; capricious Thornton applying arbitrary Grant standard; -generated same businesses on top test prepared dur- reports defining series the Plan contract's arbitrary, valuation ing 2011. on capricious based the fed- standard Act. Final- Administrative Procedures questioned eral
Miraca valuation PwC’s ly, appellant on a that-the Court opinion second from submits and insisted Chancery valuing SpinCo erred in Thornton. PwC met based Martino and Grant data; on concluding outdated that the un- Plan Administrator’s obli- contractual derlying valuing SpinCo gations motivation in solely by noting in resolutions that using projections obligations, achieve zero taxes such exist: low”; “falsely by calculating that were The minutes October damages making without a determination meeting reflect that recog- goodwill SpinCo. as to the associated with adjust nized the to- need the exercise price of the stock options to reflect the of Review Standard Spinoff. value of the But the Board nev- trial, After a findings of histori er adjusted price. set the The resolu- subject cal fact are the deferential tions' adopted meeting at the state: ‘clearly erroneous’ standard review. - RESOLVED, that, subject to the con- That deferential not applies only standard [ n &, summation the Distribution upon historical facts that are based Spinoff], the exercise of each Op- credibility determinations but also find tion shall be proportionately adjusted to ings of historical fact are based- Distribution;, take into account the [sic] infer-, physical documentary evidence or however, provided, fractional enees from other facts. Where there are resulting adjustment shares permissible evidence, two views of the shall eliminated[.] *5 factfinder’s choice them between cannot clearly erroneous.2 factual'findings When just easily' The as Board could have are based on regarding determinations the passed a saying resolution Compa “the witnesses, credibility of the al deference ny- shall be in compliance with all of its ready required by clearly the erroneous contractual Passing commitments.” appellate standard of is enhanced.3 review such a resolution not it make so.4
Judgment
Affirmed
The
Chancery
Court of
also found that
the Board subjectively
Target-
believed
Plan,
As the Administrator of the
of
Now
Carisome had FMV “around
required
the Board was
perform
to
certain
million”
upon
con-
based
extensive
$300
obligations. The
of Chancery
Court
found
temporaneous
Although
evidence.
several
that “the
not
Board did
make the [FMV]
to
defense witnesses tried
disavow such
determinations it
supposed
was
to make”
evidence,
Court of Chancery
assessed
Instead,
under
the Plan.
the Court of
credibility,
contempora-
their
reviewed
Chancery found that Martino separately
neous
not to
evidence
decided
credit
determined the
holders’ value. The
testimony..
their
trial
unsubstantiated
rejected
court'
theory,
defense
which
attempted
equate
to
upon
Board resolution
The Plan
called
the Board
de-
approving the
good
Miraca Transaction
in
adjust
with
FMV
faith and to
termine
performance by
in
Spinoff.
its role
reflect the
Because
Chancery
act,
Administrator. The
of
Court
Board did not
Court
Chan-
perform
cery
found
not
“good
Board did
stated the
argu-
standard
Co.,
Inc.,
Holdings,
Bank N.Y.
Trust
v.
Mellon
N.A. Liber
Fox v. CDX
2015. WL
ty
Corp.,
*17,
(Del.
Media
29
(Del.2011).
2015)
A.3d
July
*24
Ch.
original).
(emphasis in
Technicolor, Inc:,
3. Cede & Co. v.
758 A.2d
(Del.2000) (citing
City
Anderson v.
N.C.,
564, 575,
City,
Bessemer
470 U.S.
(1985))
S.Ct.
ly, the decision Court lyzed Martino and acted whether Halbert Chancery judgment of the Court of subjective faith: is affirmed. question is whether the operative placed SpinCo they million value VALIHURA, Justice, dissenting: subjective belief about
reflected their Caris, Carisome. the value of as the The Board “Administra- It did not. tor” Incen- Company’s 2007 Stock (the “Plan”), required
tive Plan make determinations. The first was two analysis Assuming purposes fair value determine market subjec- Halbert believe Martino and did (“FMV”) selected, of the common stock of the Com- tively they in the valuation they pany. The process followed was nonetheless second determination arbitrary capricious. capitalization adjustments make certain spin-off connection with a of two give This must to find- deference Company’s business units. The Court ings trial courts supported fact when view, Chancery, my finding that erred in record, by the and when are obli- these contractual breached lqgical product orderly and of an deduc- gations. Accordingly, respectfully dis- reasoning process, especially tive when *6 sent. in findings part those are on testi- based
mony of live whose demeanor witnesses credibility judge the trial has I. STANDARD OF REVIEW opportunity to evaluate.5 The record in Determining a has party whether appeal compels application of that duty a faith good breached contractual of According- appellate of review. standard requires legal a court a conclu- to reach ly, judgment Chancery Court sion. This Court a trial court’s reviews on the basis of and for the affirmed legal conclusions de novo.7 Court will This 28, July reasons in its 2015 stated deci- uphold Chancery’s factual Court sion.6 findings long clearly they so are not Cross-Appeal clearly erroneous.8 The erroneous stan- Fox typographical applies contends a error dard to factual determinations inadvertently credibility or mistake altered dam- based and the evidence.9 Blackwell, 1366, 1378 Co., Safety Appliances 5. Nixon v. 626 A.2d Co. 105 Ins. v. Mine (Del. 1993). 369, (Del.2014)). n. 16 380-81 A.3d Inc., Holdings, Props., Auriga Capital Corp., 6. Fox CDX WL 8. v. 2015 LLC v. 59 Gatz (Del. 28, 2015). (citation omitted). (Del.2012) July Ch. 1212 4571398 A.3d Int'l, L.P., Co., Hill Opportunity Inc. v. 9. Bank N.Y. N.A. v. Liber- Partners Mellon Trust (Del.2015) (Del.2011). (citing ty Corp., 119 37 A.3d N. River Media 29 A.3d 236 authority test, This Court also has the to review As to the first the Court of Chan- cery no findings made factual supporting reject the entire record and the trial the conclusion that a majority of the Board findings they court’s if not supported are in acted bad That is faith. because the product or are not record a trial court concluded Board did logical orderly process.10 deductive not act—a conclusion with which I dis- Here, Chancery’s certain the Court of agree. Because the court never made the view, findings, in my satisfy fail to Board-related findings required bad faith test. Plan, by the this Court is only left incomplete findings factual to which we plaintiff, required prove to properly cannot defer.12 The trial court the Board breached its contractual erroneously then applied good- faith test duty of subjective good either solely to the actions and beliefs Martino demonstrating that the Board in acted Halbert, analyzing they whether acted subjective faith or by showing bad that it in If faith.13 the trial court believed consciously disregarded a duty known to acted, the Board had not then it respect subjective faith, act.11 to With bad .proceeded, analyze should have whether Fox required prove that majority intentionally majority subjectively Board did not believe in failed to act duty the face of a known proceeded the FMV If Fox determined. typically act. This requires an extraordi- n disregard under a conscious theory, he nary facts, set facts. Such as to the required prove would have been that a conduct, Board’s are not present here. majority of intentionally the Board failed conclusions, view, The trial my court’s subjective to form a as to belief FMV are not entitled deference another duty face a known act. do not reason. Court Chancery implicitly supports believe the record either conclu- rejects the trial testimony of the directors sion. passages refer unidentified “de- Bouvier, (Del 10. Levitt v. A.2d apply then assumed that it did to Martino and . .1972) Halbert, stating: actually "Martino made the determination, off, signed and Halbert so this ev3, Lesh, (Del. Inc. v. 114 A.3d analyzes decision whether in sub- acted 2014) (citing Realty DV LLC Advisors v. Po Thus, jective good faith.” Id. Annuity Chicago, & licemen’s Fund *7 Benefit of Chancery's the statements —contained in Ill., (Del.2013)) ("[A] plain A.3d “Damages” Opinion section of its —about contending party tiff that not comply a did “what the Board would have determined to express duty good with its contractual faith be the Fair Market Value of a share Caris typically party would have to that show the [m]erg- common stock in connection with the subjective (emphasis acted bad faith.” er, adjusted if it had the to take into Partners, original)); Energy Allen v. Encore Spinoff account the L.P., and made its determina- (Del.2013) (“To 72 A.3d 105-06 faith,” good findings tion in are not plead subjective good a breach of the faith subjective acted in disregard theory, standard bad faith in deter- under a conscious plaintiff mining Rather, [the must that the defen FMV. Id. at demonstrate *36. the court’s consciously disregarded dant] its contractual is decision clear that it found the Board duty subjective form a to belief. It would had failed to to act determine FMVi that.”). extraordinary take an set of facts to do 13.The trial court's discussion of scienter scru- expressly trial court held “the Halbert, tinizes the conduct of Martino and as act,” Board did not and observed that "the opposed subjective beliefs actions good arguably faith standard does not even each the members of the Board. Inc., apply.” Holdings, Fox CDX v. 2015 WL (Del. 28, 2015). July at *26 Ch. It trial upon “hindsight following court had the “reactions”18 based fense -witnesses” three-day after the trial: psy- it derived certain theory bias” defendants, I concludes think The. So for the what’s chological literature. court very, very strong the contractual stan- regard: in this dard, good faith standard assuming witnesses defense trial,..the At testified is, indeed, operative standard, for Except differently. Martino credibility people on Halbert, the defense seemed witnesses these who made decisions.19 honestly testifying when believe # n * thought TargetNow and Carisome they PwC, know, think you And I there’s In fall very 2011.14 value little problems I PwC’s work. think view, hindsight product my problems there’s serious with Grant “Hindsight bias has been defined bias. I think the Thornton’s work. since So psychological as in the literature good position on defendant’s faith tendency people with outcome people issue and knowledge falsely believe think, said, is, I I quite as involved predicted the'reported have out- would strong, going I’m bit dilate little of an come event.”15 more PwC Grant Thornton things.20 : view, skepti- In my this Court should be cal of court rulings predicated upon social [*] * # studies, where, This troubling things is one these particularly science people top where the at the seem impact a court’s here, trial such theories proceed have in the tried correct testimony post-trial impressions own offered,16 manner.21 appro- skepticism seems Such n * * case, priate immediately after in this since Chancery Court of helpful trial the I be I stated think it don’t would —as said, credibility people on you present your “the case post- can [in you briefing] made these trial who decisions” [B]oard however want. helpful For “very, strong.!’17 don’t think it make example, very trial, Martino, (1994); plaintiff Dunagin City Hal- L.Ed.2d 345 v. At called Ox F, Miss., (5th bert, ford, expert, Reilly, as 718 F.2d 748 n.8 Cir. Robert wit- 1983) (subjecting findings “the called Laurie ‘fact’ of a The defense directors trial nesses. (“Johansen”), "judge "in as to the truths the social Knowles Jonathan Johansen .latest ("Knowles”), ("Cas- "clearly sciences” to the erroneous standard M. Peter Castleman “[cjlearly tleman”), .Thus, appropriate), of review” is not” to be appears court trial denied, 1259, 104 3553, 82 cert. 467 U.S. S.Ct. referring the" honest beliefs three (1984). L.Ed.2d four members of the Boárd "who testified trial,. *8 Cindy (quoting 15. *3 A. at Arkes Id: R. & Hal ("[Tjhese my are reactions hav- Malpractice A793 from Medical Business Schipani, v. the Bias, ing you been here all three Judgment Hindsight last Rule: in Differences days.”). (1994)). 73 Or. 591 L. Rev. 16. n 19. A794. See, Peters, e.g., 12 706 Free v. F.3d (7th C.J.) 1993) (Posner, (observing that Cir. 20. A794-95. of on scien- review conclusions "social based .., is or othér data cert. de plenary”), tifie nied, 115 130 A805. 513 U.S. S.Ct.
1045 argument that these folks intention- of testimony the directors’ Opinion, in the ally tried to harm their holders'. based apparently solely on its hind- here, Having people very seen the it’s sight strains, theory,' bias point hard for me to think that’s they what breaking, my strong desire and inclination Maybe put’it did. if you together all judicial to exercise restraint in the area of everything up, line that will be what deference trial fact-finding. court As you try to of. I convince me have a lot such, post-trial the court’s statements con- thinking trouble actually that’s what my tribute to conclusion that the on.22 went Chancery’s findings ultimate are logically Admittedly, there are comments some disconnected from the record evidence be- tilt way, the other pri- but are it, from fore trial court’s own immedi- marily analyses, focused the advisors’ ate, impressions trial, on-the-record of the and none genuinely seem to discredit the requirements and from the legal testimony directors’ or the trial court’s test established the Plan. impressions that the Board had acted in Employing hindsight theory, its bias good faith. I recognize that the trial trial court unspecified found that “defense post-trial court’s comments may have been not subjectively witnesses” did believe in a designed to parties direct the to focus on low valuation in support late 2011. In certain issues for purposes post-trial conclusion, this the court upon “con relied briefing perhaps to encourage par- temporaneous” appears evidencé that ties settle. That' guidance kind of consist of indications of interest helpful po from litigation process. But even so, tential bidders for TargetNow, Chancery’s credit Grant the Court com- ments as being pre-transaction valuations,23 an accurate Thornton’s and sincere evidence, impressions of its account trial testi- “from the files of JH Whit mony. subsequent implicit The discrediting ney.” trial court also eer- referenced trials, rejection products uct and the of the companies, doctors and insurance each of reports 23. The reflecting losses, Grant Thornton accelerating val- which contributed forecasts, uations in downgraded declining excess utilized the trans- those reve- See, (Castleman ranging action had e.g., valuation dates nues. A700-01 testimo- B2; through summer, March ny lab, stating: "By 2011. See March the late B73; B143; B213; business, discussing B291. In generated AP about million of attributed, TargetNow, value the Board yet cash and were down 20 we million of alone, stating court cited to an email internal .PwC cash. So those two businesses for a Martino, member, time, very period "thinks short non-Board eaten mil- B209, [TargetNow 150 to is] worth 300 M.” lion of going cash. were toward a So..we Further, Chancery the Court of relied on Citi- cash crunch and a situation that was not—we ("Citi”) group sug- going Global Markets money. estimates were to run out of So we had a gesting regard,”). unit was business bad'situation $195 worth. lion, $300 between million and mil- 24.Fox, in addition to documents of J.H. internal 2015 WL There are *27. Whitney referencing figures greater findings any Company's than no rectors, di- B480; addition, Halbert, million. See B484. In any other than knew flaws contemporaneous generated by in PwC's or analyses. evidence Grant Thronton’s Nor (cid:127) pre-dated Grant Thornton Citi the events is there evidence record before this Board, Castleman, occurred of 2011. including summer Court that the collective statements of the who Whitney directors tes- reviewed documents from J.H. tified at trial Spin- indicated that the value that the Board saw ever the Grant-Thornton *9 of, Co among declined in late .report 2011-as a result used in-the See transaction. A709-10. fact, things, assay, other prod- failed In cancelled Castleman was asked at trial about that Nor did it find to the close determination. lead-up in the sent tain emails disregarded communi a known consciously transaction. The of the Miraca op Further, and Johansen’s knowledge reflect Halbert of bad cations duty to act. potential to the value respect timism with from an executive imputed cannot be not amount to Board do SpinCo, but entire Board from a to the or even director of millions hundreds of valuations approval Accordingly, basis of this record.26 on the of Prieewaterhouse- excess of dollars judgment the Court I would reverse (“PwC”) million valuation.25 Coopers’ Chancery this basis. subjective on the focused The trial court Martino, Company’s CFO beliefs AND ACTIONS II. THE BOARD’S COO, not a of the who was member BELIEFS SUBJECTIVE is true that live determi it Board. While to defer credibility are entitled nations of of the A. The Terms Court, live the trial court’s from this ence Agreement Merger support this a find case determinations of the of certain features A brief review testimony is credi ing the directors’ that im- of Chan documents are appears And it Court transaction and related ble. theory hindsight overrode those cery’s bias that my conclusion portant explaining conclusions. of the in satisfaction the Board acted 2011, Caris requirements. Plan’s In Chancery held
Because the ownership of Carisome and transferred act to did not determine that the Board subsidiary. That TargetNow to a new FMV, majority of the not find that it did spun off to the Com- subsidiary was then making faith in acted in bad directors L.P, VI, recipients of the email Whitney also stated that the 2011 J.H. the November juggernaut Meeting presentation by the "all characterizing SpinCo discussed as Annual ‘if,’ he did not attend and testified that implied trial court understood kind meeting, no role the creation go explaining the email.” A763. into didn't went to investors in Fund the documents VI, Chancery’s findings reflect also The Court of meeting annual not seen the and had SpinCo. future value of the indeterminate litigation in this mat- prior to the document that, example, concluded "al- For the court "did not testified that he ter. Castleman riskier,” thought though Carisome Car- be sold” and that could think TargetNow, "likely more” than was worth years” years com- or 20 isome was "ten Fox, lottery paid only "but if the ticket off.” rejected trial court mercialization. *36. The trial 2015 WL at court by simply stating, "I credit the con- testimony "Placing value on Cari- concluded: an actual Fox, WL temporaneous documents.” if extremely difficult because it suc- some was also testified *27 n.15. Johansen billions, ceeded, be worth company price range of a was not aware that she failed, nothing.” if it would be worth but Whitney conveyed for the sale to J.H. at *26. Id. findings Green, TargetNow. There are no as B734. George Stephen two Poste and to Dr. Barrows, 924 A.2d Desimone v. never testified. who outside directors Cf. ("I (Del. Ch.2007) reject plain [the also (noting at *27 2015 WL 25. See knowledge part on the contention that tiff's] manage- and other members that "Halbert imputed any one board member can glowingly optimistically spoke ment as a result of their other board members prospects”). ex- Johansen about Carisome's service.... Dela shared board or committee "jugger- SpinCo plained her reference impu permit law not the wholesale ware does referring by testifying, "I was naut” knowledge every tation one director’s technology if the were successful fact (cita purposes.” excusal other demand big opportunity.” She em- A762. there was omitted)). tions ‘if,’ course, big we phasized “the technology.” prove Id. Johansen had to *10 Thereafter, pan/s stockholders. Caris pursuant ministrator” provisions unit, only owned a third business Caris the Plan are “final binding on the (the Diagnostics Business”), “AP and Company [participants Plan], in the merged wholly subsidiary with a owned of unless such decisions are determined be merger, Miraca. In the paid Miraca $725 arbitrary capricious.” million for what remained of Caris after Section 12.3 the Plan states that the TargetNow and spun Carisome were off. Company, “to permitted the extent by ap- Each share RemainCo stock was con- law, plicable but otherwise the sole dis- verted into right to receive $4.46 Administrator,” cretion may provide Option cash. holders were to receive the for the cancellation outstanding options difference per between share and $5.07 in exchange for “the difference between price exercise of their options, minus the Fair Market Value and the exercise 8% that placed would be into an escrow price for all shares of Common Stock sub- contemplated by account Agreement ject (i.e., vested) to exercise to the extent Merger (the and Plan of with Miraca any outstanding under Option[.]”29 Sec- “Merger Agreement”). $5.07, Of the $0.61 tion 12.1 of requires the Plan spun-off attributed entity. Board, Administrator, as capitaliza- make option price Carls’ by driven $5.07 tion adjustments in connection with the million merger price and PwC’s $725 spin-off of the TargetNow and Carisome million valuation of SpinCo. business units. Specifically, the Plan man- provides The Plan option each hold- dates that the Board account for spin- er is entitled receive for each share by off adjusting the exercise of the by covered by the amount which any “to reflect or increase decrease the FMV the share exceeds the exercise in the number of issued shares Common price. As by defined Section 2.25 of the Stock, change or in the Fair Market Value Plan, FMV “the value the Common of such Common resulting Stock from such Stock as in good determined transaction....”30 Administrator....”27 The Plan does not “good Further, Merger define Agreement faith.” contemplates Section 3.B Plan, the Plan affords the the Board actions required by Administrator the 2.11(a) any broad discretion “to make provides: and all oth- well. Section “Effective er determinations which it of immediately prior to as Closing, determines to the necessary Company advisable administra- shall all necessary take actions tion of (and the Plan.”28 pursuant Under Section 3.4 of underly- [ ] Plan, “[a]ll decisions made ing option grant the Ad- agreements)31 Fur- purchase price price, or exercise or the Award; any outstanding term of ... and 28. A817. Section 3.3 of the Plan affords the (xii) any to exercise discretion to make authority. broad administrative In rel- all other determinations which it deter- part, provides: evant Section 3.3 necessary mines to be or advisable for ad- Specific particular, 3.3 In Powers. the Ad- ministration of the Plan. authority: ministrator shall have the Id. (iii) execute, any person ... to authorize 29. A835-36. Company, on behalf of the instrument required carry purposes out Plan; (ix) ... any outstanding A835. amend Awards, including purpose of modi- fying added). vesting, the time or (emphasis manner of 31. A1224
1048 2.11(b) legal provides Company’s counsel recommended ther, “[t]he [ that ] Section independent Board “hire an the advis- shall terminate Plan Effective Time, Company -Options determining the no holder of or” to assist directors and any to the pursuant [] [the Board] did[ ] “And that’s issued FMV.35 what value,” according Plan shall have fair participant [] the to market determine The rights thereunder....”32 “Effective to Johansen.36 Agree- by Merger Time,” the as defined . The Meeting 1. October 5 Board ment, time that Certificate of is the the accepted filing by the Secre- Merger is 5, 2011, October Board a On the held specified or a later tary of date State All telephonic meeting. members the agreed upon Merger the Certificate present. present Board were Also at the In the parties to by the transaction. Citi, PwC, counsel, meeting legal were case, 22, 2011. was November Company meeting The other executives. Merger to the convened consider B. The Board Determined spin-off of the Agreement Target- and a Fair Market Value units. Dur- Now Carisome business following suggest facts to me The that meeting, presentation a ing the Citi made did determine the FMV the Board the concerning equity the Board the to water- preliminarily tri- stock. observe used to fall mechanics that would be effect Johansen, al, who served as President of adjustment options the of the mandated Diagnostics and Chairman of Caris Vice spin-off.37 Plan as result of the the Board, that, the the testified “under terms [P]lan, minutes, required According to 5 to the October ] of the [ [BJoard determining presented fair the Tar- good faith market PwC the valuation use getNow stated that the Board visit- and Carisome business assets value.”33 She legal counsel “to the Target- with understand how Board. discussed “[PwC] ed Now, intangibles discharged duty faith in Carisome and [its] valua- [it] meeting, determining fair Prior to the the Corn- market value.”34 tions.” added). management engage reputable another (emphasis A1225 32. firm. Mr. Martino [PwC] and discussed A766. 33. sought second valuation would from Grant Thornton. Id. findings suggesting no Id. There are presentation not occur or PwC did A767, minutes axe an account inaccurate Compare Board's'discussion. 2015 WL 36. Id. (“On at *15-17 October 2011 the Citi, PwC, telephonically met Board with its 37. A789. counsel, legal and Caris executives consid respect approve Agreement With the October er and and Plan Board, presentation Merger 2011 PwC the min- minutes with of the Miraca.... utes also meeting state: October reflect recognized adjust need to the exer engaged The Board in discussion with of the cise reflect the stock assumptions [PwC] understand the Spinoff.”), Capital RBC value Mkts., required methodology valuation. As Jervis, (Del. LLC v. 129 A.3d Agreement Merger with Miraca Hold- 2015) ("The found, however, Inc., trial court ings, acknowledged re- quirement indepen- description process in the minutes obtaining a second (internal quotation TargetNow, marks dent was false....” valuation Carisome omitted)), Corp. In Rural Metro related business assets and instructed re S'hold- pany’s legal Board, chief officer distributed what with the and the Board authorized he Board as final transaction upon identified PwC’s “valua- based those valua- SpinCo.”39 provided tion PwC also tions.44 * Board with a draft memoran- valuation On the basis of the million valuation dum, subject of which was: “Valuation provided by PwC and the additional infor- *12 trademarks, assets, of analysis certain Citi, provided by mation the Board held an businesses of Caris Life Sciences.”40 The executive session the October 2011 provides Company memorandum meeting during which it “voted and unani- “engaged perform PwC to a valuation mously approved adopted” resolutions of; analysis 1. [sic ] Caris US’ Merger Agreement authorized (‘TN Business’); business 2. Caris US’ , Separation and the and Distribution (‘Carisome Business’); Carisome business (the Agreement “Separation Agreement”). Sciences,’ ‘Caris,’ 3. The ‘Caris Life ‘Caris- October 5 provided resolutions also Path,’ ‘CarisDiagnostics,’ ‘Pathology following recital: (‘Trademarks’); Partners’ trademarks and WHEREAS, pursuant to Section 12.1 of (‘Other Assets’) 4. intangible Other assets the Corporation’s 2007 Stock Incentive operation used of -pa- the anatomic (the “Corporation Plan”) Stock (‘AP Business’), thology business TN Busi- underlying grant and the option agree- ness, and Carisome Business.”41 re- ments, With- subject to the consummation of spect to TargetNow, PwC’s valuation prior Distribution to the con- provided: the memorandum upon “Based summation the Merger, Corpora- analysis, PwC final tion proportionately adjust determined a car- shall each 47,23 rying outstanding value USD million purchase shares of (the Corporation’s whole common stock the TN Business.”42 As to PwC’s Carisome, “Options”) to valuation take into account the Dis- the memorandum - tribution, however, provided, set analysis, forth: “Based on this PwC resulting fractional from the shares ad- determined a final value for .Carisome justment shall be eliminated[.]45 Business of USD 17.79 million.”43 At the 5 meeting, October “that, uncontroverted subject The Board resolved record is that PwC Distribution, reviewed its valuations of the consummation the ex- (Del. (“The Ch.2014) Litig., ers wisely A.3d witnesses tried to: distance themselves minutes ... by. conceding have feel of a document draft Grant Thornton's work anticipation litigation, arguing ed in and the that no one rose- flawed it.”). description colored relied process sale appears in up the minutes does not match added). actually place.”). what took (emphasis 45.A1193 The October following 2011 resolutions also set forth the 39. A1148. recitals: WHEREAS, pursuant to Section 11.1 of the 40. A1161. Plan, Corporation immediately prior Stock Merger, to the consummation vesting Board will accelerate each Option Option fully such that each vest- added). (emphasis 42. A1163 (cid:127) ed; . WHEREAS, upon the consummation of the Id. Merger, Options of the all will cancelled right and converted into the to receive the A1399; A764-72, A1191; Merger set in ... forth Cf. consideration (“At trial, WL Agreement^] at *32 the defense determining duty propor- Option shall be of each ercise fair market value. account to take tionately adjusted intcj recommendation, which we their .”46 And Distribution... with, an hire agreed we should authorized the Board On November evaluation, an ex- independent find options with the cancellation evaluating pert experience who had market fair understanding that PwC early- very or these difficult-to-evaluate testi- used. Johansen’s would be valuation companies that stage venture-backed testi- She mony supports this conclusion. mounting los- significant losses and as follows: fied TargetNow, Cari- es like we had with unanimous consent is [sic] A. This some, just experimental which was at the time signed [B]oard our someday have hoped might idea we *13 transaction. closing of the value. consent the written Q. And what did hire an they we recommended So accomplish? advisor, agreed, independent and we con- the distributions approved A. This course, And that’s that made sense. [Separation by the templated market to fair did[ what we determine ] where we issued [A]greement report on the value. relied We existing stockhold- stock to the new experts. adjustments as well as the ers by trial court as finding is no There plan. option, option testimony is not credible.47 why Johansen’s Target- value Q. the [B]oard How did purchase on the million Based $725 in connection and Carisome Now representing for AP Business $4.46 spin-off and cash-out with the valuation share and the million per options? share, the SpinCo representing per $0.61 the terms of the incentive A. under So Thus, FMV of each was $5.07.48 to use required plan, [B]oard the determination Board-confirmed determining fair mar- faith in good on November by written consent FMV time, at that there And ket value. on, going but we were was a lot 2. The Board Entitled Was Sterling <& working with Shearman Rely on PwC’s Valuation And we for all of the transaction. Caris’ trying about trial court took issue with with them visited valuation, finding our on the PwC discharged we reliance understand how company's & A responsible M A1194. corporate projects. finance "that, resolved The Board also A1195. immediately prior secondary clearly played a consummation 48.Grant Thornton vesting role, Merger, Option have its each shall advisory as reflected and minimal folly vest- be deemed accelerated and shall performed the amount amount of work (ob- ed[.]” Id. compensation See A802 earned them. en- serving Grant Thornton’s that the cost of $22,000). Although gagement and law de- amounted 47. Laurie Johansen had business advisors’ legitimate criticisms of the grees University After there are of Texas. from the school, whether the analyses, question for me is as a graduating worked from law she reasonably on the advice Gump relied corporate Akin Strauss associate at Thereafter, testimony recounted unaddressed was the PwC. The above, Hauer & Feld LLP. she Johansen’s, me particularly convinces general secretary corporate for a counsel and capacity, it did. public company. she was In that tax valuation instead of a transfer Board “ever the fair mar- discussfed] trial, fair But at market valuation.49 Hal- value of Caris ket at the time bert, Caris, the Chairman and CEO of repurchased,” were Knowles testified that engaged get testified that PwC was “to to the Board “did discuss the think [PwC]—I value, a fair market an arm’s- arm’s—what it was who [PwC] did valuation.”57 length third-party pay for the as- ”50 As to the Board’s faith reliance on set— He that he stated “under- they the PwC valuation and what were presen- stood” from PwC’s October told, the of Chancery commented as “they doing tation that a fair were market follows the conclusion trial: providing value”51 and that were Board with valuations of the TargetNow ... think tax-style do PwC did a intel- According Carisome businesses.52 property lectual valuation. The stan- Halbert, original report he received may dard of fair market value be the PwC maintained cover sheet same, professionals but when valuation said “fair market value the business approach these things, they things do enterprise.”53 The Caris Chairman and with different mindsets. that, also CEO testified October it to “believed [PwC was] attempting provide a fair market value very striking changes There’s *14 between [TargetNow number valuation for the what the [B]oard was told that PwC was arm’s-length in an Carisome] businesses ie., doing, valuing the [C]ompany, and way.”54 When asked his whether under- what PwC then actually said it did in its said, standing changed, ever Halbert final, assets, valuing which was “No.”55 methodologies what PwC’s analysis Similarly, Johansen and Knowles both did, demonstrated it which was value the they testified at trial that understood PwC way in assets the same that they had to providing be the Board with FMV previously done transfer tax valuations. TargetNow for According and Carisome. very good That’s in [B ]oard Johansen, to pro- Board asked PwC terms It’s [B it board’s analysis vide with “a fair value market faith. very hard when the [B ]oard told because we one needed have done under something to think that the members option plan. they the stock So were—that or, here, [B ]oard is what I admin providing [P ]lan understood them be istrators, they [B]oard.”56 When asked whether acted in bad when A430, “[ojver- finding trial court’s that 51. whelming evidence in record makes clear decision, rendering in that its PwC did not 52. A554. determine the fair market value and Carisome” should not be read to mean 53. A431. that it found that no determination valuation made. been 2015 WL 54. A554. Rather, Chancery *13. the Court of found provided that the valuation awas transfer 55. A555. pricing property. valuation of intellectual Again, perfectly, while not did act 56. A768. finding it did act. And there is no that a majority subjective of the directors acted in bad faith. 57. B753-54. some, Company some Halbert testified doing PwC we’re that were told do,58 “at a have the business unit would sold they really didn’t thing that price, just you for sure. It certain was with permitted are consult Boards why anything So don’t have marketable. determining com- whén financial advisors somebody they would buy it? So Here, un- also directors valué. pany’s and it buy it for some reason unknown relied, their views upon questionably own. -price. very low So be would'have no Company’s value. are There it it there’s no to sell because would reason majority by the trial court that a findings very, very cheap.”63 testified be Halbert PwC’s any in Board knew of flaws that, “roll dice preferred in he analyses,59 are Thornton’s Nor or Grant if make keep going we can see findings acted that' the directors there . why something That’s [Carisome]. out relying, to the extent in in bad faith Further, at that time.”64 wouldn’t sell did, on PwC. that, Company was he stated develop a “[h]opeful” The Board’s that Carisome would Views on product, it “couldn’t SpinCo marketable but the Value of nothing was get anything to work. ifSo asked of the directors who were Each working, was a difficult it timé at trial testified PwC’s valuation about standpoint.”65 The a Carisome absence . Target- optimistic. it Carisome testified, chal- “was the product, Halbert significant difficulties Now encountered lenge for the valuation.”66 re- products. developing With effective Knowles, Johansen, and Cas- TargetNow particular, Directors spect to' Halbert tleman, at trial PwC’s losing each testified it that was between testified month,60 Company market valuation line million fair While subjective might higher than their beliefs “hopeful” was nonetheless *15 SpinCo. of Knowles testified sale the value of big obtain “a number” in a able to TargetNow for business,61 testi- TargetNow Halbert valuations presented PwC basically Carisome businesses that “we would sold fied have at 5, 2011 both was not on October were any price” Company that Board sensitive,”62 high,67 TargetNow, As to stated respect Cari- Knowles “price With 58, added). (emphasis 66. A546. A795-96 59, fact, During deposition, In trial court concluded that his Knowles was asked report. never saw Thornton "understanding the Grant [PwC] his that whether it was Fox, 4571398, (finding WL at *4 that See assets of provided a fair value of the market Caris[,]” "knew that responded and Halbert Martino as B754. He follows: report”). Grant never saw the Thornton value "The definition market —market fair for, my So if you sell it in view. what could A555, 60, left you I was ask me do think that what disposal the AP business was Caris after A462, salable, a,memory can’t re- then have —I were, but I re- member the numbers what very thinking it would be diffi- Id. that member price.” sell cult to it kind B755. that Further, "any he when asked had whether repurchase opinion at time of value of—the in November 201 i what the A437. TargetNow ] business [sic fair market value 65, A533, was[,]” he stated Carisome business that [B]oard, lot that PwC’s million valuation was for a usof on the felt $47.23 that we n books, off “high” very just getting because of “the it of our substantial it because required losing money, just that be to make was investment would would be will- —we seriously profitable product.”68 ing just it Fur- give a to almost it away because—or ther, down, when asked whether he even shut viewed it because it was not—it million valuation of the Cari- highly complex PwC’s was a distracting busi- $17.79 reasonable, losing some business Knowles ness that money.and mounting was that, data, in “light Carisome, both at testified losses.”73 As Johansen testi- time I think preclinical, clinical and fied at company just trial that the an “was that, high.”69 this is too in experimental might Knowles stated idea hoped that we determination, making valuation someday was According have value.”74 Jo- necessary hansen, “bear mind” that there just was Carisome “was basi- proportion “a research cally substantial even ... or experiment series of mini- people ap- who experiments, didn’t believe that but there product was no of- proach give diagnostics_ fering. nothing There was really viable there that, absolutely cutting-edge This is hope might .science. more than a someday,,we know, You lot usually, offering, that’s have a not worth successful but there was you have nothing until clinical really Ultimately, data.”70 sell.”75 Jo- hansen testified that PwC’s con- valuation trial, At Johansen oncolo- testified that TargetNow clusions for and Carisome gists TargetNow were “resistant” to’the fair, very “were were fair on the product companies and that insurance being generous side because of the. loss- to pay Accordingly, “didn’t want for it.”71 in TargetNow es we state that, 2011, “TargetNow Johansen stated of the Carisome research.”76 losing money, still and losses seemed (cid:127) accelerating opposed to be to narrow- views of Castleman’s ing.” She no optimistic observed that “there was Carisome less those were than Knowles, TargetNow]. Halbert, minimum I think [for and Johansen.77 At thinking he entirely were "remember[ed] [PwC’s] the directors unaware relatively generous obligations his or her under context Of valuation Plan. ” directors, Company’s six trial court found of market value.... Id. only Knowles "did not know 68. A675. 2015 WL existed.” *16 during deposition, *23. But his Knowles was 69. A676. "anybody asked whether from the Caris discussed with him the [B]oard” "cancella- 70. Id. repurchase tion or under th[e] Plan.” B753. Knowles answered: "There was 71. A745. proposal presented a B753. [B]oard.” Further, "any when asked he whether had 72. A748. paid” options, idea what was Knowles responded as follows: "I wouldn’t remember. 73. A756. part I I would believe that had of that —I been presentation part had heard a been 74. A767. I that discussion. But don’t Id. remember.” expressed independent Knowles nonetheless 75. A760. Also, views as to FMV. from Knowles arrived evening before Finland the trial and de- was 76. A769. p.m. posed p.m. until 10:30 7:30 view, my 77. In before night, record evidence this years samé after the three Board acted support does not pursuant the conclusion that Plan. 1054 faith, will view, the “determination good his in define
trial,
testified
Castleman
it
faith unless”
good
in
considered
be
Target[Now] down be
shut
you
“was
of reason-
the bounds
beyond
‘so far
except
“went
everyone in Carisome
you fire
essentially
it
seems
judgment
you run this as
able
people, and
R & D
for ten
bad
any ground other than
inexplicable on
it what
But make
D company....
Ran &
”83
stan-
subjective
purely
This is a
faith.’
company,
D
instead
is,
an R &
is
it which
trial court dis-
Opinion,
In
its
companies, which
dard.
two
combining those
testimo-
independent directors’
year
a
missed the
were,
million
bleeding
again,
on
based not
as to valuation
ny and beliefs
specifically,
cash.”78 As
credibility determi-
any express negative
it
that he believed
reiterated
Castleman
theory.
nations,
hindsight bias
on
but
its
down.”79 He testified
“should be shut
in
con-
rejection stands
stark
implicit
This
losing compa
thought it was a
“I
follows:
reflections,
post-trial
to its own
still
trast
that.
It’s
ny.
I still believe
it
years ago,
it where
stated:
four
it was
position
same
IPO.”80 Castleman
almost, ironically,
a
think the [B]oard
dreadful
view Cari-
they
that he did not
off
infinitely better
also testified
would be
“highly valuable”
ob
to be
or PwC and
some
Thornton
never hired Grant
not
a
“did
have
serving
company
judgmental
assess-
just
type
made the
he believed
stand.
He stated that
to on the
product.”81
like
testified
ment
highly valu
“potentially
tough
Because, obviously,
Carisome
was a
“agree
not
able,”
question
that he
is no
but
did
There
company to value.
in 2011.82
business”
highly
that,
very sympathetic
valuable
and I’m
about
that.84
subject to a contractu-
is
a board
Where
me,
rejection
trial court’s blanket
in For
to make
determination
obligation
al
testimony by
thoughtful
not
and consistent
does
and the contract
“good faith”
Accordingly,
reliance
their manufacturer.
78. A705.
assumptions
endemic to
a multitude
profitability of
prospective
valuation of the
79. A723.
(internal
products.”
cita
pharmaceutical
new
(11th
omitted)),
Fed.Appx.
aff'd,
501
294
tion
80. Id.
context,
Cir.2008).
pharmaceutical
In the
recently
wrestled
Delaware courts have
damages
for breach
expectation
awards
negotiate
obligation to
contractual
82. Id.
PharmAthene,
Techs.,
Inc. v. SIGA
faith. See
(Del.
Inc.,
Sept.
Ch.
C. The Board Determined 2011, the Company delivered to Miraca a Adjustment good faith estimate of purchase price Nor Ido believe that sup- (the record in connection with merger “Esti- ports the conclusion Price”). the Board mated Purchase Merger The required breached the Plan as to the Agreement required ad- also Compa- justment. required Plan ny, Adminis- no later than three days prior business to proportionately adjust trator closing, the exer- “prepare and deliver price cise options to reflect setting [Miraca] schedule forth the re- change in Company’s the FMV the com- spective amounts of pay- the consideration mon stock spin-off result Closing able to each holder of Com- TargetNow and Carisome.86 Because pany Equity holder-by- Securities” on a granted participants options pur- (the holder “Closing basis Consideration stock, Schedule”).90 chase Caris both the number Company also delivered shares underlying participant’s Certificate, award an Officer’s dated November adjusted. exercise were As executed on behalf of Caris explained by Company, by Martino, dividing the certifying that the Estimated See, ("The e.g., Time) *23 id. at Board could have Target- fective included value of the empowered one-person Halbert as a commit- Now and Carisome assets distributed to stock- didn't."). tee. It part spin-off.”). holders as 5-6, May 86. See 2015 Letter at Fox v. CDX Id. at 4-5. Inc., 8031-VCL, Holdings, C.A. No. 2015 WL (Del. 28, 2015) ("Rather, July Ch. 88. Id. at 5. adjustments such were made to ensure that paid the amount holders virtue (which 89. Id. Option Payment was based on the number of actually that were issued *18 outstanding immediately prior and to the Ef- 90. A1220. RESOLVED, hereby Board de- Closing and Consider- the the Price
Purchase payment Distribution good in of the clares the were calculated ation Schedule Separation contemplated by Certifi- the as Specifically, the Officer’s faith.91 by that, hereby the Agreement and as resolved undersigned “[t]he states cate hereof, 5,2011; that, Board October of the date the as certifies in the RESOLVED,, set forth Estimated information of the Effective that as Closing Consider- Price Time, Purchase and the in the Plan terminate [] shall was calculated person ation Schedule no with and accordance its terms Merger Agreement with the in accordance any rights the [ ] shall have under of the Com- Governing Documents thereafter, the and other forth in as the set than that Martino It states further pany.”92 Agreement by applicable or Merger Company it “on of the executed behalf Law; personal capacity.”
not in his RESOLVED, that, upon, effective to, Dis- subject the consummation the Board en- On November tribution, Option Company each shall into a Unanimous Consent tered Written proportionately adjusted accordance 141(f) (the § “Con- Del. pursuant to 8 C. 12,1 Plan and the [ with Section of the ] sent”).93 that Caris The Consent reflects agreements to underlying option grant Merger Agreement, into the dated entered Distribution; pro- into take account the 6, 2011, October with Miraca and as of any shares result- vided that fractional that, merger, a condition of the Caris as be elimi- ing adjustment such shall Separation Agreement, into a dat- entered nated; and 16, 2011, wholly of November ed as RESOLVED, Company.94 all actions taken owned subsidiaries officer(s) Corpo- the Board desired to recitals state hereof, prior con- payment the distribution as ration the date declare Agree- contem- contemplated by Separation nection with the transactions ment, hereby, Board on plated as in order effectuate resolved purpose forgoing 2011. to Section of the Pursuant and intent October be, are, 2.11(b) Con- rat- Merger Agreement, hereby resolutions [sic ] approved.96 termi- the Plan ified and sent also recites that would merg- nate the Effective Time Chancery’s agree with the Court er, ultimately November which was a resolution conclusion because simply pursuant It further recites that 2011. something will not make says be done does Plan, 12.1 of-the Caris shall take Section in the it so. record But evidence necessary proportionately “to all actions that, in the mandate of shows accordance outstanding Company Options to adjust all resolutions, Caris’ Board’s officers and into account the Distribution....”95 take prepared spreadsheet setting advisors recitals, each with these forth consideration Consistent adjusting after unanimously following consented to the holder receive Company’s factoring resolutions: Separation Agree- approved 94. The Board 91. AR411. on October 2011. Id. ment 92. Id. A1400. Id.
1057- complicated, Company’s supplemental structure.97 equity Johansen submission “con- ,had approved at the testified adjusted trial that firmed op- that Caris” the adjustment price of an the exercise during; tions post-trial described “as oral to options spin-off.98 take into account the argument.”101 parties may While the have by suggesting contributed to confusion the Further, it to me that the Court appears options the had been treated differ- Chancery’s of is Opinion internally incon- ently pre-trial.proceedings, the an ad- respect sistent with to its of discussion justment, as authorized the adjustment November and whether how the was de- 22, Consent, that, was made Martino termined. court states combi- n 6, Company’s nation with an October 2011 discussion and the advisors. of of of the value the common stock the In foregoing, view the believe the of Company, exchange an email between Hal- Board, evidence demonstrates that the as resolving Martino to bert and utilize the pursuant it was authorized to to do Section valuation of purposes PwC for transac- the Plan, delegated 3.3 the complex the - “was the the tion extent determination computational determining task the ad- both the Fair Value Market share for justment to to options the Martino and the adjustment common stock and the Company’s advisors.102 ap- The Board options purposes [spin- the stock the for these in its proved actions November 22 also,recounts..that “[ajfter Yet it off].” approval unanimous That is consent. un- trial, to permitted supplement Caris was questionably Although Board action. the the record with two exhibits.”100 additional Court of Chancery concluded that the pursuant These submissions made to were adjustment, Board failed to the make an extended discussion between counsel recognized nonetheless that Caris “han- during of Chancery post- the Court and adjusting options” by dled the the exercise arguments regarding adjustment trial price.103 Sections '3.3 3.4 the Plan that was made. In simultaneous submis- sions, gave authority in Board broad its May parties dated fur- ad- contract, ministration of ther addressed the mechanics and the dele- adjustment. adjustment The trial court found that gation was within the AR410-35, A789; adjust- 97. October resolu- understand the mechanics ments, waterfall, failing adjust- tions should not be faulted-for docu- or whether an adjustment options options, ment ment to the fact occurred. Merger Agreement ancillary questioned Nor is Fox documents there evidence that Citi, contemplated respect equity action with Martinó who created wa- terfall, options immediately prior closing taken about the mechanics. Time, which was November Effective 102. Johansen testified that the was not 2011. responsible developing for me- waterfall (Q. ap- adjustment. A765 "And also did the [BJoard 98. chanics to'effect the A789. Rath- er, prove adjustment complicated delegated of the exercise this exercise-was to take account the distribu- worldng into staff Martino "the finance “Yes.”). tion New Caris A. stock?” the bankers and accountants.” Id. Ac- [the] Johansen, cording “spent many Martino Fox, .¡countless through trying sort (emphasis WL at *23 hours it all 99. Id, added). view, original complexity.” my because of In . ¡the type justified that a Board is of task . advisors, in.delegating to its and the 100. Id. at *3. CFO permits delegation. Elan Id. *34. It is not evident from the sought record before this that Fox ever 2015 WL at *33-34. *20 all “to make discretion Board’s which determines
... determinations for necessary or advisable administra- be “arbitrary not of the Plan” tion Board, therefore, de- capricious.”104 in a adjustment manner termined under the Plan. obligations its satisfied III. CONCLUSiqN erred, of Chancery I believe the I dissent. as set forth above. respectfully WIGGINS, Cheryl Defendant, Plaintiff/Counterclaim v. ASSESSMENT SER- PHYSIOLOGIC VICES, LLC, and Defendant/Coun- Plaintiff,
terclaim Klear, Jordan Defendant. C.A. No. N15C-01-186 CLS Superior Court Delaware. March Date Submitted: Date June Decided: litigated conclud- 104. See I do not address whether at trial. would have A817-18. Thus, employing erred in argument the trial court arbi- I do ed that the waived. trary capricious developed in standard might possibility not address the context of decisions administrative arbitrary have been breached under an agencies. question whether where, capricious example, the standard the Plan Board's decisions under were “arbi- subjective good but the acted in trary capricious” was not identified might manipulated. have been valuation parties' pre-trial order as one of the issues