In re Zhongpin Inc. Stockholders Litigation ( 2014 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
417 SOUTH STATE STREET
JOHN W. NOBLE DOVER, DELAWARE 19901
VICE CHANCELLOR TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
December 23, 2014
Seth D. Rigrodsky, Esquire S. Mark Hurd, Esquire
Rigrodsky & Long, P.A. Morris, Nichols, Arsht & Tunnell LLP
2 Righter Parkway, Suite 120 1201 North Market Street
Wilmington, DE 19803 Wilmington, DE 19801
Re: In re Zhongpin Inc. Stockholders Litigation
C.A. No. 7393-VCN
Date Submitted: December 18, 2014
Dear Counsel:
Defendants Raymond Leal, Yaoguo Pan, and Xiaosong Hu (collectively, the
“Special Committee Defendants”) seek certification of an interlocutory appeal of
this Court’s Memorandum Opinion1 of November 26, 2014 (the “Memorandum
Opinion”) and its implementing order. The Special Committee Defendants had
argued that claims against them should be denied because of the exculpatory
provision in Zhongpin Inc.’s charter adopted pursuant to 8 Del. C. § 102(b)(7).
The Court rejected that argument in the context of this entire fairness case and
1
In re Zhongpin Inc. S’holders Litig., 2014 WL 6735457 (Del. Ch. Nov. 26, 2014).
In re Zhongpin Inc. Stockholders Litigation
C.A. No. 7393-VCN
December 23, 2014
Page 2
relied upon In re Cornerstone Therapeutics Inc. Stockholders Litigation.2 The
defendants in Cornerstone, who are in substantially the same position as the
Special Committee Defendants, sought an interlocutory appeal, which this Court
certified3 and which the Supreme Court accepted.4
The trial court’s decision to certify an interlocutory appeal is governed by
Supreme Court Rule 42. The grounds for certifying Cornerstone I for appeal and
for certifying the Memorandum Opinion for interlocutory appeal are substantially
the same. Briefly, the decision not to dismiss the claims against the Special
Committee Defendants determines a substantial issue because, if reversed, the
Special Committee Defendants may extricate themselves from this litigation as
parties. Second, the Memorandum Opinion establishes a legal right in that it
requires the Special Committee Defendants to remain as parties to this litigation
without the ability to assert currently their Section 102(b)(7) defense. Finally, the
Memorandum Opinion satisfies the requirements of Supreme Court Rule 42(b)(i)
2
2014 WL 4418169 (Del. Ch. Sept. 10, 2014) (“Cornerstone I”).
3
In re Cornerstone Therapeutics Inc. S’holders Litig., 2014 WL 4784250 (Del.
Ch. Sept. 26, 2014) (“Cornerstone II”).
4
In re Cornerstone Therapeutics Inc. S’holders Litig., No. 564, 2014 (Del. Oct. 9,
2014) (ORDER).
In re Zhongpin Inc. Stockholders Litigation
C.A. No. 7393-VCN
December 23, 2014
Page 3
by meeting the “conflicting decisions” criterion for certification of questions of law
as provided in Supreme Court Rule 41(b)(ii).
In addition, as a practical matter, resolution of whether a 102(b)(7) defense
is currently available would serve the considerations of justice5 and, potentially,
might significantly limit litigation costs and burdens for the Special Committee
Defendants.6 In sum, it is appropriate to certify the Special Committee
Defendants’ interlocutory appeal, despite the fact that, even if the Special
Committee Defendants are successful, this litigation will not be fully concluded.
An implementing order will be entered.7
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Robert S. Saunders, Esquire
Register in Chancery-K
5
See Del. Supr. Ct. R. 42(b)(v).
6
In short, the Court follows the reasoning of Cornerstone II in certifying an
appeal.
7
With the granting of the Special Committee Defendants’ motion, it is unnecessary
to address their motion to stay this proceeding pending resolution by the Supreme
Court of the appeal in Cornerstone. The application to stay was presented as an
alternative to the motion to certify an appeal.