Dole Food - PLX - Zale - KKR Financial ppt - 11-4-15

Copyright 2015©

In re Dole Food Co. Inc.In re PLX Technology Inc.

In re Zale Corp.Corwin v. KKR Financial

Recent Cases with Significant Implications for Financial Advisors

Kevin MillerAlston & Bird LLP

90 Park AvenueNew York, NY 10016

(212) [email protected]

mailto:[email protected]

- 2 - Copyright 2015©

In re Dole Food Co. S’holder Lit. In re PLX Technology S’holder Lit.In re Zale Corp. S’holder Lit.Corwin v. KKR FinancialPotential Discussion Topics Are financial advisors subject to the same restrictions on relationships with counterparties as

counsel? Are financial advisors fiduciaries? Are they agents? Are any conflicts non-waivable?

When is general v specific disclosure of material relationships with a potential counterparty required? When should it be updated? Outset of engagement; second round; when field narrowed to less than [X] potential buyers?

Can financial advisors provide financial advice and services to one client while contemporaneously providing financial advice and services to a prospective arms-length counterparty w/respect to other matters? Must they be unrelated and what does that mean?

Can a financial advisor advise a controller or executives regarding a potential buyout while contemporaneously advising the company on other matters?

How will KKR Financial impact the outcome of RBC’s appeal of Rural/Metro? How will KKR Financial impact disclosure and litigation strategies in Delaware going forward?


In re Dole Food Co. S’holder Lit. In re PLX Technology S’holder Lit.In re Zale Corp. S’holder Lit.Corwin v. KKR FinancialCaveats Please note that In re Dole Food is a judicial opinion on the merits following a trial at which

many of the factual allegations were disputed. In contrast, In re PLX Technology and In re Zale were rulings on a motion to dismiss, for

purposes of which the Court must generally accept the allegations in the complaint as true. As a consequence, the factual allegations cited in the PLX transcript ruling and the Zale opinion do not reflect the Courts’ findings of fact following a trial. Many of the facts cited in the PLX transcript ruling and the Zale opinion are disputed and the Courts’ ultimate findings of fact following a trial may differ materially from those alleged in the complaint.

With the exception of page 2 (Potential Discussion Topics), page 13 (A Few Takeaways) and page 15 (Key Issues Raised at Oral Argument), virtually all of the statements in these materials are quotes or excerpts from the In re Dole Food opinion, the PLX Technology hearing and ruling transcripts, the Zale opinion and the Delaware Supreme Court’s opinion in KKR Financial and are provided for instructional purposes. They do not necessarily reflect the views of the author, his firm or his clients. In re Dole Food and In re PLX Technology are subject to appeal and further proceedings, respectively.

In light of the Delaware Supreme Court’s opinion in KKR Financial, Zale’s financial advisor has filed a motion for reconsideration of its motion to dismiss with the Court of Chancery.


In re Dole Food Co. S’holder Lit., CA No. 8703-VCL (Del. Ch. Aug. 27, 2015)

Key Claims Breaches of Fiduciary Duty by Directors and Controlling Stockholder Aiding & Abetting Breaches of Fiduciary Duty by Controlling Stockholder’s Financial Advisor and

Lead Financing Source

Key Quotes “The record at trial demonstrated that the Committee carried out its task with integrity. The

Committee was assisted in this effort by legal counsel [S&C] and financial advisors [Lazard Frères] that likewise acted with integrity.”

“What the Committee could not overcome, what the stockholder vote could not cleanse, and what even an arguably fair price does not immunize, is fraud.” “Carter [a director, President, COO and general counsel allegedly working with Murdock] provided

the Committee with lowball management projections.” “Defendant [Murdock's Financial Advisor] acted improperly by favoring Murdock and treating

him as the bank‘s real client in transactions before the Merger, even when [Murdock's Financial Advisor] was officially representing Dole, but [Murdock's Financial Advisor] did not participate knowingly in the breaches that led to liability, and [Murdock's Financial Advisor]‘s role as Murdock‘s advisor did not lead causally to damages.”


In re Dole Food Co. S’holder Lit. (cont’d)

Summary of Court’s Findings of Fact and Conclusions of LawCourt’s Findings of Fact On November 1, 2013, defendant David H. Murdock acquired all of the common stock of Dole

Food Company, Inc. (“Dole”) that he did not already own for $13.50 per share. Before the transaction, Murdock owned approximately 40% of Dole‘s common stock, served as

its Chairman and CEO, and was its de facto controller. The transaction was structured as a single-step merger. In his initial letter to Dole‘s board, Murdock offered to pay $12.00 per share In an effort to avoid an “entire fairness” standard of review under MFW, Murdock’s offer was

conditioned on (i) approval by a committee of the Board made up of independent directors and (ii) the affirmative vote of holders of a majority of the unaffiliated shares.



Court’s Findings of Fact (cont’d) The record at trial demonstrated that the Committee carried out its task with integrity. The

Committee was assisted in this effort by legal counsel (S&C) and financial advisors (Lazard Frères) that likewise acted with integrity.

“In contrast to a string of decisions that have criticized financial advisors for flawed and outcome-driven analyses, this opinion can praise and rely on Lazard‘s thorough and balanced work product.”



Court’s Findings of Fact (cont’d) The Committee negotiated an increase in the price from $12.00 to $13.50 per share, which

Lazard opined was fair. Dole’s stockholders approved the Merger, with 50.9% of the unaffiliated stockholders voting in

favor. “What the Committee could not overcome, what the stockholder vote could not cleanse, and

what even an arguably fair price does not immunize, is fraud.” Before Murdock made his proposal, Carter made false disclosures about the savings Dole

could realize after selling approximately half of its business in 2012. He also cancelled a recently adopted stock repurchase program for pretextual reasons. These actions primed the market for the freeze-out by driving down Dole‘s stock price and

undermining its validity as a measure of value. Then, after Murdock made his proposal, Carter provided the Committee with lowball

management projections. The next day, in a secret meeting that violated the procedures established by the Committee,

Carter gave Murdock‘s advisors and financing banks more positive and accurate data.



Court’s Findings of Fact (cont’d) To their credit, the Committee and Lazard recognized that Carter‘s projections were unreliable

and engaged in Herculean efforts to overcome the informational deficit, but they could not do so fully.

Murdock and Carter deprived the Committee of the ability to negotiate on a fully informed basis and potentially say no to the Merger.

Murdock and Carter likewise deprived the stockholders of their ability to consider the Merger on a fully informed basis and potentially vote it down. Murdock and Carter‘s conduct throughout the Committee process, as well as their credibility

problems at trial, demonstrated that their actions were not innocent or inadvertent, but rather intentional and in bad faith.



Court’s Conclusions of Law Under these circumstances, Dole’s stockholders are not limited to just a fair price but are

entitled to a fairer price designed to eliminate the ability of the defendants to profit from their breaches of the duty of loyalty.

Court found Murdock and Carter jointly and severally liable for damages of $148,190,590.18, representing an incremental value of $2.74 per share.

The other defendants were not found liable. Defendant David A. DeLorenzo erred by siding with Murdock at the outset of the Committee

process, but he did not participate in the breaches of duty that led to liability. Defendant [Murdock's Financial Advisor] acted improperly by favoring Murdock and treating

him as the bank‘s real client in transactions before the Merger, even when [Murdock's Financial Advisor] was officially representing Dole, but [Murdock's Financial Advisor] did not participate knowingly in the breaches that led to liability, and [Murdock's Financial Advisor]‘s role as Murdock‘s advisor did not lead causally to damages.



Special Issues and Considerations for Financial Advisors – Contemporaneous Representations Plaintiffs presented evidence that [Murdock's Financial Advisor] had worked with Murdock for

years and took a “long term view [of] the relationship.” Murdock testified that “most of my banks have been with me for 40 years.” Plaintiffs argued that despite being engaged by Dole on a variety of matters prior to the going

private transaction, [Murdock's Financial Advisor]‘s primary loyalty was to Murdock, not Dole and the Court agreed:

“That [Murdock's Financial Advisor] saw Murdock as its primary client is apparent from overwhelming evidence in the record.”

“[Murdock's Financial Advisor] began modeling a transaction in which Dole would spin off Packaged Foods and then Murdock would take the remaining company private. Eric Brook, [Murdock's Financial Advisor] coverage officer for Dole, instructed his team to model “[a] separation of the Packaged Foods business . . . with the idea being that the Fruit/vegetable business would be a privateco . . . . The Consumer team will begin the go private analysis.”’



Special Issues and Considerations for Financial Advisors (cont’d)“[Murdock's Financial Advisor] presented the spinoff-plus-take-private idea to Murdock on April 27, 2012. After the meeting, Brook instructed [Murdock's Financial Advisor] team to work on two separate projects: a split-off and a refinancing for Dole and a freeze-out for Murdock. JX 179 at 1. Brook stressed that the latter was “not to share with Dole mgmt.”’

“On May 2, the Board was scheduled to consider [another financial advisor]‘s plan for the spinoff. So advanced was the transaction that [the other financial advisor]’s presentation contemplated announcing it the next day. But after [Murdock's Financial Advisor]‘s meetings with Murdock and Dole management, the Board decided to conduct a broader strategic business review. Dole retained both [the other financial advisor] and [Murdock’s financial advisor] as advisors. [The other financial advisor] considered primarily U.S.-based transactions. [Murdock’s financial advisor] explored opportunities in Asia.”

“[Murdock's Financial Advisor]‘s roles included advisor and lender to Castle & Cooke and Murdock personally. Those roles provided the context for [Murdock's Financial Advisor]‘s meetings with Murdock about a going-private transaction in early 2012. [Murdock's Financial Advisor] had two separate coverage officers: Brook for Dole, and Richard Grellier for Castle & Cook and Murdock. To maintain a façade of separation, Grellier took the lead during the early 2012 discussions with Murdock. Internally, Brook and Grellier kept each other informed and planned together.”



Special Issues and Considerations for Financial Advisors (cont’d)“On January 11, 2013, [Murdock's Financial Advisor] sent a presentation about a freeze-out to Dole‘s Treasurer, Beth Potillo. [Murdock's Financial Advisor] asked that she review it and “let us know if you catch anything awry.”’

“The sending of the freeze-out presentation to Potillo illustrated how difficult it was for [Murdock's Financial Advisor] to maintain the fiction that it could differentiate between its roles. In this instance, while working for Dole and reporting to its Board, [Murdock's Financial Advisor] sent a presentation about Murdock‘s acquisition bid to a Dole officer and asked the Dole officer for comment. No one passed the information on to the Board.”

“At trial, [Murdock's Financial Advisor] claimed that it was no longer working for Dole when it began working on a freeze-out, but that was not accurate. . . The spinoff and freeze-out were part of a two-step plan in which Murdock would take Dole private in the second step, although the second part of the strategy was “not to share with Dole mgmt.” [Murdock's Financial Advisor] continued its consideration of a take-private during the strategic business review”



A Few Takeaways Documents and Emails at an Early Stage Can Significantly Influence the Court’s Views of the

Motivations Behind Later Actions. Over a year before the transaction, Dole’s CFO prepared a memo outlining potential value enhancing strategies including the divestiture of certain businesses to be followed by Murdock taking Dole private, the strategy largely alleged to have been effected by Murdock and Carter.

Actions Taken After a Going Private Transaction is Conceived Will Be Evaluated Through a Lens that Focuses on Conflicting Interests and Motivations, Particularly if Inconsistent with Prior Statements, Plans or Actions. In an alleged effort to put downward pressure on Dole stock prior to proposing a going private transaction, Carter publicly announced revised annual cost savings from the sale of Dole’s Asia business and, without consulting the Dole board, cancelled a board-approved stock buyback program. Risks can be reduced by (i) contemporaneous documentation that explains the analysis/business rationale for actions/changes in plans and/or (ii) approval by fully informed and disinterested directors acting with the advice of counsel.

Changes to and the Preparation of New Projections Will be Scrutinized. Carter allegedly orchestrated the preparation of lower projections for use by the Special Committee while providing the sources of financing for the buyout with more optimistic projections.

Courts Will Scrutinize Control Over Access to Management.


In re PLX Technology S’holders Lit., CA No. 9880-VCL (Del. Ch. April 15, 2015 (Transcript of Oral Argument) and Sept. 3, 2015 (Telephonic Ruling)

Key Claims Breaches of Fiduciary Duty by Directors

Among other things, plaintiffs alleged that the Board and the Special Committee did not adequately vet [PLX's Financial Advisor] by requiring that it perform a conflict check in retaining [PLX's Financial Advisor] as a financial advisor in connection with the Acquisition. Despite not having taken steps to vet [PLX's Financial Advisor] or have it checked for conflict, the Board placed [PLX's Financial Advisor] in charge of running the sales process for PLXT, contacting potential buyers, and sharing financial information about PLXT with those buyers. After price was agreed to and the essential deal terms locked up, the Board for the first time became informed of some of [PLX's Financial Advisor]'s conflicts of interest, including the true nature and extent of its material relationship with Avago (but not that a lead Avago banker was on the PLXT Fairness Opinion review committee). Still, the Board agreed to move forward with the Acquisition instead of insisting on a fair process and an independent valuation of the Company untainted by the conflicts of interest of the Company's financial advisor.

Aiding & Abetting Breaches of Fiduciary Duty by the Target’s Financial Advisor Plaintiffs alleged that PLX' s financial advisor, was heavily conflicted and had every incentive to force a

sale of the Company to Avago that permitted [PLX's Financial Advisor] to regain the $2.65 million contingent fee it failed to receive on a terminated transaction the previous year and further its pre-existing and continuing material relationship with Avago.PLX’s Financial Advisor ]received more than $56 million from Avago over the last several years, had an existing interest in Avago's credit facility, and was simultaneously representing Avago in its acquisition of LSI at the time of the Acquisition.


In re PLX Technology S’holders Lit. (cont’d)

Key Issues Raised at Oral Argument on April 15, 2015 issues raised by Counsel for the Directors concerning the impracticality of running conflicts

checks at the beginning of a broad market canvas the specter raised by the Court that contemporaneous engagements for potential counterparties

could create disabling conflicts not waivable by contract because they are “non-contractable” under agency law

the issue resulting from the lead banker for the financial advisor on a contemporaneous engagement for the buyer being a member of the fairness opinion committee that reviewed and approved the issuance of the PLX fairness opinion

Telephonic Ruling on September 3, 2015 - Motion to Dismiss Aiding and Abetting Claims Against [PLX's Financial Advisor] Denied

“In my view, [PLX's Financial Advisor] faces a claim for secondary liability [because it knew the Board’s conduct constituted a breach of fiduciary duty and [PLX's Financial Advisor] gave substantial assistance or encouragement to the Board]. By withholding material information from the directors about its conflicts and disclosing at the last minute, [PLX's Financial Advisor], at least at the pleading stage, inferably induced the breaches which, for reasons I have already explained, flow from actions that arguably fell outside or inferably fell outside the range of reasonableness.”



Key Quotes From Oral Argument on Motion to Dismiss – Directors’ Counsel [Directors’ Counsel]: “The facts as laid out in the 14D-9 once again are undisputed. In March

2012, when the post-IDT go-shop process commenced, the PLX directors were generally aware of [PLX's Financial Advisor’s] business relationships with Avago. In May 2012, [PLX's Financial Advisor] and the directors discussed [PLX's Financial Advisor]'s relationship with Avago. In August 2013, when [PLX's Financial Advisor] met with the special committee to reconsider PLX's strategic options, the PLX directors once again were aware of the [PLX's Financial Advisor]/Avago relationship. And then, in June 2014, prior to the fairness opinion and prior to the signing of the merger agreement, all of the details of [PLX's Financial Advisor’s] relationship with Avago, including all fees received by [PLX's Financial Advisor] from Avago and the existence of [PLX's Financial Advisor’s] positions in the Avago debt instruments, were disclosed to and discussed with the Board.

After discussing with counsel [PLX's Financial Advisor’s] disclosures, the board determined that a second fairness opinion was unnecessary, and the board continued to believe, based on its intimate familiarity with [PLX's Financial Advisor] and its work on the two-year sale process, that [PLX's Financial Advisor] did not have a conflict of interest and could render an impartial fairness opinion.



Key Quotes From Oral Argument on Motion to Dismiss – Directors’ Counsel (Cont’d) The law that plaintiffs would have Your Honor adopt would be to the effect that after

addressing [PLX's Financial Advisor’s] relationship with Avago four times in a two-year period, the PLX directors could be liable for a breach of fiduciary duty claim because they supposedly utterly failed, in the words of the governing legal standard, to consider potential conflicts. That doesn't work on the undisputed facts that are presented. It also doesn't work because the plaintiffs ignore entirely the fact that the PLX directors who hired [PLX's Financial Advisor] in 2012 were intimately familiar with the semiconductor business, and they had a deep knowledge about the key players in the industry.

If Your Honor looks at, for example, at the PLX Schedule 14A that was filed on November 25, 2013, there's a nifty chart in that document that lays out in detail the background, experience, cross-directorships, and management experience of all of the Avago directors who hired [PLX's Financial Advisor]. And the list is beyond impressive. There is zero possibility, in the context of the small semiconductor word in the Silicon Valley, that these directors were unaware of the [PLX's Financial Advisor]/Avago relationship or the developments, such as the LSI sale that [PLX's Financial Advisor] was involved in, that give rise to the claims by the plaintiffs.



Key Quotes From Oral Argument on Motion to Dismiss – Directors’ Counsel (Cont’d) The other key point to focus on with respect to [PLX's Financial Advisor] allegations is that

the plaintiffs, who have had the benefit of three depositions and fulsome document production at the preliminary injunction stage of the case, have not identified in the complaint or their answering brief a single negative effect of the [PLX's Financial Advisor]/Avago relationship on the sale process or on the fairness opinion.

This case is nothing whatsoever like Rural Metro or Del Monte, where the financial advisors pursued their own financial interest in the buy-side financing, to the detriment of their client, and plaintiffs do not allege in this case that [PLX's Financial Advisor] did anything to promote its own interests over PLX's interests. This situation is completely different than Rural Metro because there's no allegation that [PLX's Financial Advisor] concealed anything about its relationship with Avago, that it steered the transaction to Avago, or engaged in any inappropriate activity with Avago. . . .



Key Quotes From Oral Argument on Motion to Dismiss – Directors’ Counsel (Cont’d) I don't know what the rule would be that Mr. Baron would propose to this Court with respect

to how investment bankers, at the outset of an outreach process, are supposed to run conflicts, or how a public company board or their lawyers are supposed to investigate the situation. The full disclosure of the details of [PLX's Financial Advisor]'s relationships with everybody in the semiconductor business in the spring of 2012 was obviously impractical and unnecessary. It was an outreach to 35 companies at that time. It's not feasible, in the real world, to hire a banker who has the necessary expertise in relationships to run a sell-side process to go through the disclosures on 35 companies, and it's unnecessary, particularly in this context, where it's undisputed that the PLX directors were aware of the [PLX's Financial Advisor]/Avago relationship.

When PLX engaged [PLX's Financial Advisor] in 2012, the PLX directors obviously had no knowledge whether Avago or any of the other 34 parties were even going to be interested in PLX or would submit a bid. It cannot be that there was a conscious disregard by the directors of their duties when they were aware of the conflict at the time they started the process and the question was revisited three additional times.



Key Quotes From Oral Argument on Motion to Dismiss – Directors’ Counsel (Cont’d) For the same reasons that a fulsome conflict check in early 2012 was inappropriate,

unnecessary, and impractical, the same thing is true with respect to the market check and the sale process that was conducted in the fall of 2013. The board knew about the relationship. Avago was but one of 15 potential suitors who were being contacted at the time, and Avago declined to bid in the fall of 2013. So without identifying somebody who's ready to step up to the plate, and given the board's familiarity with the Avago/[PLX's Financial Advisor] relationship, there was nothing to do.

You know, later, in 2013, there were discussions with eight potential bidders. Even at that stage, it's impractical and unnecessary to make detailed investigation about all potential bidders at this stage. Avago, in particular, twice declined to bid in the fall of 2013. There is no allegation whatsoever that [PLX's Financial Advisor] attempted to steer, much less accomplished any steering of the sale process to Avago. . . .

When Avago did emerge in 2014 as a credible bidder, and which finally put a concrete acquisition proposal on the table, [PLX's Financial Advisor] made the requisite disclosures, and the board of directors considered fully the [PLX's Financial Advisor]/Avago relationship in advance of agreeing to the merger agreement or receiving the fairness opinion. The board concluded in its business judgment that the potential conflict was not disabling and that [PLX's Financial Advisor] was still the best firm to advise on the transaction.

”



Key Quotes From Oral Argument on Motion to Dismiss – the Court [the Court]: “[W]hy isn't the answer on that that you get the inference that [the Board’s

decision to go forward with [PLX's Financial Advisor] as it’s financial advisor] wasn't a decision falling within the range of reasonableness. That means to go forward with [PLX's Financial Advisor] having a direct concurrent relationship representing the opposite party to the deal; that that even might be such a direct conflict that it would be non-contractable. You at least get that inference at the pleadings stage, which is where we are. . . .

[Counsel to the Target’s Financial Advisor]: As to what Your Honor referred to as a contractable conflict, I believe, this is not an instance where [PLX's Financial Advisor] is making a claim against PLX or, as Your Honor pointed out, representing two sides of the same deal. I would venture to say that if this is not a conflict that can be waived on an informed basis, very few could be.



Key Quotes From Oral Argument on Motion to Dismiss – the Court [the Court]: Why is that? I mean, come on. Analogize this to attorney conflicts. And granted,

we have ethical rules, but they're basic agency principles. There are a wide range of attorney conflicts that can be waived. There are some that are non-contractable. One that is non-contractable is representing the other side of the case. One that is possibly contractable, depending on facts or circumstances, is representing the other side of the case in a different matter.

The analysis then changes and shifts to whether the matter is related or unrelated. If it is sufficiently related, such that it would impair your ability to act as an agent -- and this isn't just attorney stuff, this is agency stuff -- if it's sufficiently related such as to impair your ability to act as agent, it's non-contractable. You can't waive it. . . .

[P]laintiffs have specifically alleged reasons why you would tank the deal. In other words, [Avago] were your other client. . . . They were going to be running the company going forward and, hence, a source of future business. And [the financial advisor] circulated an internal e-mail which said, "Look at this. Our actions on this deal were great evidence of our Avago relationship.”

.



Key Quotes From Telephonic Ruling on Motion to Dismiss on September 3, 2015 [the Court]: “The most significant aspect of [PLX's Financial Advisor]'s role was its status as

an advisor to Avago, the buyer, on a different deal in the same space. [PLX's Financial Advisor] also had received many millions more in fees from Avago. There was the issue of the individual who served on both fairness committees. And then the timing of the disclosures that [PLX's Financial Advisor] made itself renders them suspect. They were delayed until the last minute, where it was difficult for the board to take corrective action. The easiest course was rationalization, and it was easiest for the board to sort of brush things aside rather than to act on them proactively.

[N]ow let's talk about that. Let's talk about what decisions of the board fell outside the range of reasonableness at the pleading stage.

There is a second category of conduct that supports a reasonable inference that the plaintiffs could prove at trial fell outside the range of reasonableness, and that's regarding the board's interactions with [PLX's Financial Advisor]. The first area is the board's failure to identify [PLX's Financial Advisor]'s conflict of interest earlier in the process. One of the Delaware Supreme Court's clearest teachings is that directors cannot be passive instrumentalities during merger proceedings. . . . Part of providing active and direct oversight and acting reasonably is learning about actual and potential conflicts faced by directors, managements and advisors.



Key Quotes From Telephonic Ruling (cont’d) We all know that directors' advisors play a pivotal role. Particularly, the role of expert

financial advisors is crucial. Because of the central role played by investment banks in the evaluation, exploration, selection and implementation of strategic alternatives, Delaware decisions examine investment banker conflicts closely to determine whether they tainted the process. . . . When a court reviews the terms of the financial advisor's engagement and the actions that the banker took during the sale process, the court will consider whether the board has acted reasonably such that the terms of the banker's engagement and its conduct promote rather than inhibit realization of the best transaction reasonably available.

I am now going to quote from an article by Professors Bratton and Wachter called "Bankers and Chancellors" from 2014. "The client, the sell-side board, must be ready to go into arm's length mode in dealing with its banker, no longer acting like a passive consenting beneficiary preserving a valued relationship. The board should be ready to deal with a banker conflict the same way it deals with every other aspect of the merger: With two-fisted bargaining."



Key Quotes From Telephonic Ruling (cont’d) In my view, this isn't a step that the directors and their advisors can check off early in the

sale process and never revisit. The oversight obligation is ongoing. . . .This type of continuous and diligent oversight is necessary because issues can arise during the sale process that were not foreseen or could not be fully vetted at the outset. It may be that at the outset you don't know that a particular bidder will emerge as the most likely candidate. Here there were stronger indications from the outset that Avago was, if not the most likely bidder, then one of the top candidates, and so it was something that it certainly fell within the range of reasonableness, in my view, at the pleading stage to think that the directors would have vetted it.

The directors' toolbox for vetting these things and continuing their oversight includes basic contracting techniques, such as representations, covenants and disclosure schedules. But it also involves just keeping your eyes open, asking questions, and getting straight and complete answers as the process unfolds.



Key Quotes From Telephonic Ruling (cont’d) I think it is important to note that all conflicts are not equal. They run the gamut from minor

issues, where directors can readily understand them after disclosure and where the board can easily waive them or authorize the bank to proceed. But at the other end of the spectrum are major problems that may be so pervasively impairing that the directors could not reasonably consent. The clearest example, I think, would be permitting a sell-side advisor simultaneously to represent the buyer in the price negotiations over the same deal. That would seem really obvious to me. But in between lies a range of possibilities involving buy-side relationships in a sell-side representation. . . .

If the conflict is significant enough, disclosure alone, and particularly generic disclosure, is not a panacea. As support for that proposition, I look to El Paso. . . .That case, as you will remember, was the one where Goldman Sachs advised El Paso Corporation. Goldman Sachs and El Paso were going to pursue a spin-off. Kinder Morgan approached El Paso with a bear-hug letter in which it proposed to buy the whole firm, so Kinder now is on the buy side. Goldman Sachs disclosed to the El Paso board that it held a 19 percent stake in Kinder Morgan worth approximately 4 billion and controlled two of its board seats. Given its position, Goldman would gain or lose 147 million for every $1 change in the price Kinder Morgan paid for El Paso. That was an interest that dwarfed its $25 million advisory fee for its work for El Paso.



Key Quotes From Telephonic Ruling (cont’d) Now, it is important to note that this conflict was disclosed. To address it, the El Paso board

had its CEO instead of Goldman negotiate with Kinder Morgan. It retained Morgan Stanley to advise on the deal, and it constrained Goldman's role. But the Chief Justice, writing as Chancellor, held that the facts of El Paso supported a reasonable probability that the El Paso directors had breached their fiduciary duties.

Now, there was a lot of other things going on in this case. I don't think you can read this case as standing for the proposition that Goldman's conflict standing alone, the disclosed part of it, was necessarily dispositive. Nevertheless, the decision does suggest that Goldman's conflict and the measures that the board took to remedy it, even though they were disclosed, fell short of the range of reasonableness. . .



Key Quotes From Telephonic Ruling (cont’d) In my view, the allegations of the complaint support a reasonable inference that the

committee did not take sufficient steps at the outset to determine whether [PLX's Financial Advisor] faced conflicts of interest before retaining the firm in August 2013. The complaint supports a reasonable inference instead that the committee hired [PLX's Financial Advisor] because of the tail provision without conducting adequate inquiry into [PLX's Financial Advisor]'s relationships, whether they could interfere with the sale process and what steps could be taken to address issues.

I also think the allegations of the complaint support a reasonable inference that the committee did not take sufficient steps while overseeing the sale process to determine whether conflicts for [PLX's Financial Advisor] emerged. Part of this shortcoming may have resulted from the initial contracting failure. If the committee had gotten in there at the outset and secured representations or disclosure covenants from [PLX's Financial Advisor], it might have been different. Instead, the committee only learned the details of [PLX's Financial Advisor]'s relationship with Avago when [PLX's Financial Advisor] chose to disclose them one day before presenting its fairness analysis.



Key Quotes From Telephonic Ruling (cont’d) I think the allegations of the complaint support a reasonable inference that at that point the

committee did not take sufficient steps to respond. As discussed, the complaint suggests that the committee considered only whether PLX needed to hire a second banker. What the directors should have considered was the magnitude of [PLX's Financial Advisor]'s conflict, whether it tainted the sale process up to that point, whether it suggested any steering, and the implications of [PLX's Financial Advisor]'s work to date and for the sale process going forward.

There were a wide range of options available to the directors both in terms of the [PLX's Financial Advisor] relationship and the sale process. The alternatives ranged from doing nothing, which the director actually chose -- that would be one extreme -- to firing [PLX's Financial Advisor], seeking legal remedies and starting all over. That's the other extreme. Those are both the fat tails of the distribution. The spectrum of intermediate possibilities is limited only by the resourcefulness of the directors and their legal advisors. But one could envision lots of potential fixes that would likely fall within the range of reasonableness even at the pleading stage. They could range from [PLX's Financial Advisor] paying for the retention of a second bank to review the process and recommend any corrective action and carry it out. They could have ranged, as I suggested, to reaching out again to particular competing bidders, providing them with additional time or releasing them from their standstills. It could have extended to contacting new bidders.



Key Quotes From Telephonic Ruling (cont’d) We know from Vice Chancellor Strine, then Vice Chancellor Strine's decision in Pennaco as

well as the Supreme Court's decision in C&J that there is a relationship between what you do pre-agreement and what you can agree to post-agreement. In other words, the degree of pre-agreement exploration and price discovery affects the amount of post-agreement lockup. Once you had [PLX's Financial Advisor]'s taint revealed, the board, in my view, had to rethink that calibration. In other words, what might have fallen within the range of reasonableness as to a package of defensive measures and deal certainty measures in an untainted process no longer looks like the right calibration once it is revealed to you that your sell-side advisor actually has a client relationship with the buy-side company. I don't think it is doubtful at all that this would have necessitated conversations with Avago. But frankly, Avago at that point would have had a substantial interest in fixing the problems. As this decision shows, in my view, the situation that [PLX's Financial Advisor] created and the decision to go forward with the status quo gives rise to litigable claims, so both sides of the deal would have been motivated to solve the problem.

[. . .]



Key Quotes From Telephonic Ruling (cont’d) [L]et's get to aiding and abetting. Section 876 of the Restatement of Torts makes clear that a secondary actor can be liable for

harm resulting to a third party from the tortious conduct of another in three settings. The first, subpart (a), is when the secondary actor does a tortious act in concert with the primary actor or pursuant to a common design with him. Subpart (b) is when the secondary actor knows that the other's conduct constitutes a breach of duty and the secondary actor gives substantial assistance or encouragement to the other. And then the third is when the actor gives substantial assistance and owes a duty herself and the conduct constitutes a breach.

When we are dealing with fiduciary duty, Delaware considers all these things types of aiding and abetting. For reasons explained in many decisions, we haven't seen fit to parse these out as one being a conspiracy claim, one being an aiding and abetting claim. They are all species of aiding and abetting.

In my view, [PLX's Financial Advisor] faces a claim for secondary liability under (b). By withholding material information from the directors about its conflicts and disclosing at the last minute, [PLX's Financial Advisor], at least at the pleading stage, inferably induced the breaches which, for reasons I have already explained, flow from actions that arguably fell outside or inferably fell outside the range of reasonableness.”


In re Zale Corp. S’holder Lit., CA No. 9388-VCP (Del. Ch. Oct. 1, 2015)(Ruling on Motions to Dismiss)

Key Claims Breaches of Fiduciary Duty by Directors Aiding & Abetting Breaches of Fiduciary Duty by Target’s Financial Advisor and Lead Financing

Source

Holding I grant the motions as to Zale Corporation‘s board of directors and Signet Jewelers Limited, but deny

them as to [Zale’s Financial Advisor].

Key Quotes [In November 2013] the [Zale ]Board received an offer from Signet to purchase all of Zale‘s

outstanding common stock for $19 per share in an all cash deal.

But see Ruling on Motion for Reconsideration (Del. Ch. Oct. 29, 2015) summarized infra I have reconsidered my Opinion in the context of this request for reargument. The Complaint provides

no basis for a showing of waste. Assuming that under Corwin the gross negligence standard for a duty of care breach under BJR would apply, Plaintiffs have not alleged sufficient facts to make it reasonably conceivable that the Director Defendants breached their duty of care. As a result, I dismiss the Complaint with prejudice as to the aiding and abetting claim against [Zale’s financial advisor]. The Opinion is hereby amended in a manner consistent with this Letter Opinion.


In re Zale Corp. S’holder Lit. (cont’d)

Key Quotes (cont’d) In September 2013, Golden Gate notified Zale that it intended to sell its shares into the public

markets in an IPO-like secondary offering (the ―Secondary Offering"). To effectuate this offering, Golden Gate and Zale engaged [Zale’s Financial Advisor] as lead underwriter. . .

On November 8, 2013, the Board met to consider Signet‘s proposal. At that meeting, the Board retained Cravath, Swaine & Moore LLP (“Cravath") as its legal advisor and approved the formation of the Negotiation Committee to consider possible financial advisor candidates. The Board agreed that [Zale’s Financial Advisor] should be considered, based on their historical relationship with Zale and their involvement with the Secondary Offering, “unless a conflict or other consideration affected representation." The Negotiation Committee then met with [Zale’s Financial Advisor] on November 11.



Key Quotes (cont’d) At the November 11 meeting, [Zale’s Financial Advisor] made a presentation to the Negotiation

Committee describing its history with Zale and good working relationship with Zale‘s management. [Zale’s Financial Advisor] also represented that it did not expect its previous relationship with Golden Gate, through the Secondary Offering, to impact its ability to advise the Board and that it had ―limited prior relationships and no conflicts with Signet."6 In fact, [Zale’s Financial Advisor] received approximately $2 million in fees from Signet from 2012 to 2013. More significantly, [Zale’s Financial Advisor] had, on October 7, 2013— one day after Barnes initially indicated to Olshansky that Signet was interested in a transaction with Zale and while [Zale’s Financial Advisor] was working on the Secondary Offering— made a presentation to Barnes and Signet‘s CFO regarding a possible acquisition of Zale. This presentation was aimed at soliciting business from Signet and proposed an acquisition of Zale at a value of between $17 and $21 per share. [banker], a managing director at [Zale’s Financial Advisor], was a senior member of both the team that made the presentation to Signet and the team that eventually was engaged to advise the Zale Board during the merger process. Neither [banker] nor [Zale’s Financial Advisor] disclosed to the Board that they made this presentation to Signet until March 23, 2014, which was after the merger agreement was signed, in connection with the preparation of the Proxy.



Key Quotes (cont’d) On May 29, 2014, the stockholder vote on the Merger took place, with 53.1% of Zale‘s

stockholders approving the Merger.

Plaintiff’s Contention Plaintiffs allege that [Zale’s Financial Advisor] also aided and abetted the Director Defendants‘

breaches of fiduciary duties. According to the Complaint, "[Zale’s Financial Advisor], for improper motives of its own, intentionally created an unreasonable sale process." In particular, the Complaint alleges that [Zale’s Financial Advisor] undermined the Board‘s ability to maximize stockholder value in the Merger by making a presentation to Signet “with an illustrative price analysis of Zale” at a time when [Zale’s Financial Advisor] had access to Zale‘s non-public information. Defendants oppose these claims on numerous grounds, emphasizing that Plaintiffs failed to allege both underlying fiduciary duty breaches by the Director Defendants and, if there were underlying breaches, that [Zale’s Financial Advisor] was a knowing participant in those breaches. Further, Defendants argue that [Zale’s Financial Advisor]‘s presentation to Signet: (1) was in the ordinary course of business; (2) created no conflicts of interest between [Zale’s Financial Advisor] and Zale‘s stockholders; (3) did not involve any of Zale‘s non-public information; and (4) was disclosed to the Board and Zale‘s stockholders before the Merger was consummated.



Court’s Analysis Defendants argue that the business judgment rule, rather than Revlon enhanced scrutiny,

applies in this case. According to Defendants, I should extend the reasoning in In re KKR Financial Holdings LLC Shareholder Litigation and hold that “[t]he business judgment standard of review applies to mergers ”approved by a majority of the shares held by disinterested stockholders . . . in a vote that was fully informed.” In KKR, Chancellor Bouchard held that although the entire fairness standard of review generally would apply to a merger where a majority of the corporation‘s directors were not independent, the business judgment rule applies, instead, when the merger is approved by a majority vote of disinterested, fully informed stockholders, even if that vote is statutorily required as opposed to voluntarily sought by the directors. Chancellor Bouchard also addressed the potential conflict between his decision and the Supreme Court‘s decision in Gantler v. Stephens. . .

Under KKR, the legal effect of a fully informed vote by a majority of Zale‘s disinterested stockholders is that the ―the business judgment rule applies and insulates the [Merger] from all attacks other than on the grounds of waste." In this case, for reasons explained below, I would follow the reasoning articulated in KKR if it permitted a review of the Merger under the business judgment rule that included an analysis of whether the Director Defendants breached their duty of care by committing gross negligence.



Court’s Analysis (cont’d) For purposes of Defendants‘ motion to dismiss, I would reach the same conclusion as to all

Defendants, except [Zale’s Financial Advisor], whether I followed the holding in KKR and held that the fully informed vote of a disinterested majority of the Zale stockholders in favor of the Merger had the effect of subjecting Plaintiffs‘ claims to business judgment rule review or determined that Gantler required continued use of enhanced scrutiny in these circumstances. In the latter case, however, where no cleansing effect is given to the stockholder vote, I would find that Plaintiffs conceivably could prove their claim that [Zale’s Financial Advisor] is liable for aiding and abetting a breach of the Director Defendants‘ duty of care. (emphasis added)

Because this area of Delaware law is unsettled, I will conduct my analysis under a more strict reading of Gantler. Until the Supreme Court signals otherwise, I interpret Gantler as holding that an enhanced standard of review cannot be pared down to the business judgment rule as a result of a statutorily required stockholder vote, even one rendered by a fully informed, disinterested majority of stockholders. As a result, I conclude that where, as here, the merger consideration paid to the target company‘s stockholders is cash, Revlon enhanced scrutiny applies, even after the merger has been approved by a fully informed, disinterested majority of stockholders.



Significant Dicta (footnote 106) The threshold for finding a breach of the duty of care in the Revlon reasonableness context is

lower than in the business judgment rule context. In re Netsmart Techs., Inc. S’holders Litig., 924 A.2d 171, 192 (Del. Ch. 2007) (“What is important and different about the Revlon standard is the intensity of judicial review that is applied to the directors‘ conduct. Unlike the bare rationality standard applicable to garden-variety decisions subject to the business judgment rule, the Revlon standard contemplates a judicial examination of the reasonableness of the board‘s decision-making process. Although linguistically not obvious, this reasonableness review is more searching than rationality review, and there is less tolerance for slack by the directors."). Director liability for breaching the duty of care outside of the enhanced scrutiny context is predicated upon concepts of gross negligence. McMullin v. Beran, 765 A.2d 910, 921 (Del. 2000) (citing Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984)). . . .To support an inference of gross negligence, “the decision has to be so grossly off-the-mark as to amount to reckless indifference or a gross abuse of discretion." Solash v. Telex Corp., 1988 WL 3587, at *9 (Del. Ch. 1988) (internal citations omitted). Arguably, the Board‘s actions as to [Zale’s Financial Advisor] in this case constitute a breach of the duty of care under a gross negligence standard as well.


Corwin v KKR Financial, No. 629, 2014 (Del. Oct. 2, 2015)

Delaware Supreme Court Opinion on Appeal of Chancery Court Decision by C Bouchard In a well-reasoned opinion, the Court of Chancery held that the business judgment rule is

invoked as the appropriate standard of review for a post-closing damages action when a merger that is not subject to the entire fairness standard of review has been approved by a fully informed, uncoerced majority of the disinterested stockholders. For that and other reasons, the Court of Chancery dismissed the plaintiffs‘ complaint. In this decision, we find that the Chancellor was correct in finding that the voluntary judgment of the disinterested stockholders to approve the merger invoked the business judgment rule standard of review and that the plaintiffs‘ complaint should be dismissed. For sound policy reasons, Delaware corporate law has long been reluctant to second-guess the judgment of a disinterested stockholder majority that determines that a transaction with a party other than a controlling stockholder is in their best interests.

Implications for In re Zale As a result of KKR Financial, on Monday, October 5, 2015, Zale’s financial advisor filed a motion

for reconsideration of its motion to dismiss the aiding and abetting breach of fiduciary duty claims against it that the Court of Chancery had previously denied.


In re Zale Corp. S’holder Lit., CA No. 9388-VCP (Del. Ch. Oct. 29, 2015)(Ruling on Motions For Reconsideration)

Basis for Reconsideration In the [earlier ] Opinion, I found, based on the allegations in the Complaint, that the Merger was

approved by a majority of disinterested stockholders in a fully informed vote. Despite acknowledging the strength of the reasoning in KKR, I declined to follow this Court‘s holding in that case because I interpreted the Supreme Court‘s decision in Gantler v. Stephens as “holding that an enhanced standard of review cannot be pared down to the business judgment rule as a result of a statutorily required stockholder vote, even one rendered by a fully informed, disinterested majority of stockholders.” As [Zale’s financial advisor] notes, however, the Supreme Court in Corwin interpreted Gantler “as a narrow decision focused on defining a specific legal term,” ratification,‘ and not on the question of what standard of review applies if a transaction not subject to the entire fairness standard is approved by an informed, voluntary vote of disinterested stockholders.”


In re Zale Corp. S’holder Lit., CA No. 9388-VCP (Del. Ch. Oct. 29, 2015)(Ruling on Motions For Reconsideration) (cont’d)

Holding I have reconsidered my Opinion in the context of this request for reargument. The Complaint

provides no basis for a showing of waste. Assuming that under Corwin the gross negligence standard for a duty of care breach under BJR would apply, Plaintiffs have not alleged sufficient facts to make it reasonably conceivable that the Director Defendants breached their duty of care. As a result, I dismiss the Complaint with prejudice as to the aiding and abetting claim against [Zale’s financial advisor]. The Opinion is hereby amended in a manner consistent with this Letter Opinion.

Key Quotes I therefore grant [Zale’s financial advisor]‘s motion for reargument as to my interpretation of Gantler

because, in the Opinion, I misapprehended the law regarding the cleansing effect of a fully informed, statutorily required vote by a disinterested majority of stockholders in the circumstances of the Zale case. This misapprehension was both material and potentially outcome-determinative as to [Zale’s financial advisor]‘s aiding and abetting liability because I incorrectly applied Revlon rather than BJR when I reviewed the Complaint to determine whether it adequately alleged that the Director Defendants breached their fiduciary duties. . . .



Key Quotes (cont’d) Having granted in part [Zale’s financial advisor]‘s motion for reargument and decided that BJR is

the appropriate standard of review, my final task is to determine whether the Opinion‘s conclusion as to [Zale’s financial advisor]‘s motion to dismiss should change. As an initial matter, I must ascertain whether: (1) the cleansing effect of the stockholder vote requires Plaintiffs to state a claim for waste regarding the Director Defendants‘ actions in order to defeat [Zale’s financial advisor]‘s motion to dismiss; or (2) whether Plaintiffs may rebut the BJR presumption as to the Director Defendants‘ duty of care and defeat [Zale’s financial advisor]‘s motion to dismiss by showing that it is reasonably conceivable that the Director Defendants‘ actions were grossly negligent. [Zale’s financial advisor] argues that “[u]nder the business judgment rule, plaintiffs must “show that the board‘s decision cannot be attributed to any rational business purpose—which, in effect, is the standard for waste under Delaware law.’”

Further, in KKR, Chancellor Bouchard stated, “the legal effect of a fully-informed stockholder vote of a transaction with a non-controlling stockholder is that the business judgment rule applies and insulates the transaction from all attacks other than on the grounds of waste.” In Corwin, however, although the Supreme Court generally affirmed KKR, the Court also suggested that “the gross negligence standard for director due care liability under Van Gorkom” is the proper standard for evaluating “post-closing money damages claims.”



Key Quotes (cont’d) While the Court in Corwin quotes KKR and a law review article for the proposition that a fully

informed majority vote of disinterested stockholders insulates directors from all claims except waste in the explanatory parentheticals of two footnotes, the Court itself does not hold that anywhere in its opinion. And, in In re TIBCO Software, Inc. Stockholders Litigation, which was issued after Corwin, Chancellor Bouchard, the author of KKR, denied a motion to dismiss after finding it reasonably conceivable that the directors had breached their duty of care by acting in a grossly negligent manner, despite the absence of any indication that the merger was not approved by a majority of disinterested stockholders in a fully informed vote. Based on the language in Corwin and the approach taken by this Court in TIBCO, I conclude that when reviewing a board of directors‘ actions during a merger process after the merger has been approved by a majority of disinterested stockholders in a fully informed vote, the standard for finding a breach of the duty of care under BJR is gross negligence. Thus, although I concluded in the Opinion that it was reasonably conceivable that the Director Defendants breached their duty of care under a Revlon reasonableness standard, I have reexamined in the context of the pending Motion the Director Defendants‘ actions to determine whether it is reasonably conceivable that they were grossly negligent.



Key Quotes (cont’d) If it is reasonably conceivable that the Director Defendants breached their duty of care by acting

in a grossly negligent manner, then my conclusion in the Opinion as to [Zale’s financial advisor]‘s aiding and abetting liability would not change. If, however, it is not reasonably conceivable that the Director Defendants were grossly negligent, then there would be no predicate fiduciary duty breach for [Zale’s financial advisor] to have aided and abetted, and [Zale’s financial advisor]‘s motion to dismiss would be granted.

To support an inference of gross negligence, “the decision has to be so grossly off-the-mark as to amount to reckless indifference or a gross abuse of discretion.” Delaware law instructs that the core inquiry in this regard is whether there was a real effort to be informed and exercise judgment. “Judicial inquiry into whether directors have exercised ‘due care‘ in the decision-making context . . . involves an examination of whether the directors informed themselves, before making a business decision, of all material information reasonably available to them.’” In the context of a motion to dismiss, then-Vice Chancellor Strine explained that gross negligence “requires the articulation of facts that suggest a wide disparity between the process the directors used . . . and [a process] which would have been rational.’”



Key Quotes (cont’d) In this case, I noted in the Opinion that “[a]rguably, the Board‘s actions as to [Zale’s financial

advisor] in this case constitute a breach of the duty of care under a gross negligence standard as well.” Interestingly, in their opposition to the Motion, Plaintiffs made no argument that the Director Defendants breached their duty of care under a gross negligence standard. Unlike the Court in TIBCO, I conclude that it is not reasonably conceivable that the Zale Director Defendants breached their duty of care by acting in a grossly negligent manner as to their engagement of [Zale’s financial advisor]. My finding of reasonable conceivability as to the Director Defendants‘ duty of care breach in the Opinion was based on Plaintiffs‘ allegations that the Director Defendants, in examining whether [Zale’s financial advisor] would be an appropriate financial advisor, did no more than: (1) consider internally the possibility that [Zale’s financial advisor] may be conflicted; and (2) rely, without question, on [Zale’s financial advisor]‘s representations that it had “limited prior relationships [with Signet] and no conflicts.” “Because of the central role played by investment banks in the evaluation, exploration, selection, and implementation of strategic alternatives, directors must act reasonably to identify and consider the implications of the investment banker‘s compensation structure, relationships, and potential conflicts.”



Key Quotes (cont’d) Whereas in TIBCO the Court focused on the board‘s duty to investigate and inquire further after

the disclosure of the share count error, the focus of the inquiry in this case was on whether the Director Defendants discharged their duty of care when they first engaged [Zale’s financial advisor]. The key issues in evaluating a duty of care claim under the gross negligence standard are “whether there was a real effort to be informed and exercise judgment” and “whether the directors informed themselves . . . of all material information reasonably available to them.” The conduct of [Zale’s financial advisor] in this case is troubling, and it was disclosed only belatedly to the Zale Board. I noted in the Opinion that it is reasonable to expect directors to take additional steps to obtain information material to the evaluation of their financial advisors‘ independence, such as by “negotiating for representations and warranties in the engagement letter as well as asking probing questions to determine what sorts of past interactions the advisor has had with known potential buyers.” Based on [Zale’s financial advisor]‘s conduct, I am not inclined to modify that statement. In addition, had [Zale’s financial advisor] disclosed the Signet presentation to the Board up front, it would have better served the Zale stockholders and probably still could have obtained the engagement.


Corwin v KKR Financial (cont’d)

Potential Implications for Rural/Metro “Unocal and Revlon are primarily designed to give stockholders and the Court of Chancery the

tool of injunctive relief to address important M & A decisions in real time, before closing. They were not tools designed with post-closing money damages claims in mind, the standards they articulate do not match the gross negligence standard for director due care liability under Van Gorkom. . .”

[T]he doctrine [that a fully informed, uncoerced stockholder vote invokes the business judgment rule ] applies only to fully informed, uncoerced stockholder votes, and if troubling facts regarding director behavior were not disclosed that would have been material to a voting stockholder, then the business judgment rule is not invoked.27

________________________27 See . . . In re Rural Metro Corp., 88 A.3d 54, 84 n.10 (Del. Ch. 2014) (“Because the Proxy Statement contained materially misleading disclosures and omissions, this case does not provide any opportunity to consider whether a fully informed stockholder vote would lower the standard of review from enhanced scrutiny to the business judgment rule.”) . . .