The Cirillo Family Trust v. Moezinia

IN THE SUPREME COURT OF THE STATE OF DELAWARE
THE CIRILLO FAMILY TRUST, §
§
Plaintiff-Below, § No. 130, 2019
Appellant, §
§
v. § Court Below:
§ Court of Chancery
ARAM MOEZINIA, LEWIS TEPPER, § of the State of Delaware
MARK WALTER and DAVA §
PHARMACEUTICALS, INC., § C.A. No. 10116-CB
§
Defendants-Below, §
Appellees. §
§
Submitted: September 25, 2019
Decided: October 14, 2019
Before VALIHURA, VAUGHN and SEITZ, Justices.
ORDER
(1) This action arises out of the acquisition of DAVA Pharmaceuticals, Inc.
(“DAVA”) by an affiliate of Endo Pharmaceuticals, Inc. in August 2014. The Cirillo
Family Trust (“Appellant” or “the Trust”) held approximately 0.27% of DAVA’s shares
as of the date of the merger. The Trust asserted two claims in the court below: rescissory
damages against DAVA and its directors (the “Director-Defendants,” and with DAVA,
the “Defendants”) for defective written consents in connection with the merger, and
fiduciary duty claims against the Director-Defendants for failure to include material
information in the Section 2621 notice of appraisal rights (the “Notice”). After discovery,
the Defendants moved for summary judgment, and the Trust filed a motion to amend its
1
8 Del. C. § 262.
complaint to assert four new claims. The Court of Chancery, in its July 11, 2018
Memorandum Opinion (the “Memorandum Opinion”),2 ruled in favor of Defendants on
the motion for summary judgment and denied the Trust’s motion to amend as to all but
one proposed claim. The Trust filed its notice of appeal on March 22, 2019.
(2) Having considered this matter on the briefs and oral arguments of the
parties and the record below, this Court concludes that the same should be affirmed on
the basis of, and for the reasons assigned by the Court of Chancery in its well-reasoned
Memorandum Opinion, Stipulation and Order Entering Summary Judgment dated
December 3, 2018, and Stipulation and Final Order dated February 22, 2019.
(3) As for the two issues raised on appeal which Appellant claims the Court of
Chancery failed to consider, we reject Appellant’s claims of error as to those as well.
First, Appellant asserts that the Court of Chancery failed to consider its argument that the
Director-Defendants were self-interested in delivering an indisputably deficient Notice in
connection with the acquisition of DAVA (the “Interested Director Claim”). The
Interested Director Claim was not part of the operative complaint that was before the
Court of Chancery on summary judgment.3 Although the complaint does allege that the
Notice was deficient, it does not allege that the Director-Defendants were self-interested
in providing the deficient Notice. In the context of the Trust’s motion to amend its
complaint, the Court of Chancery expressly considered, but rejected, Appellant’s
proposed Interested Director Claim and deemed the claim to be futile and unable to
2
Cirillo Family Trust v. Moezinia, 2018 WL 3388398 (Del. Ch. July 11, 2018).
3
See Verified Amended Class Action Complaint filed on February 23, 2015.
2
withstand summary judgment.4 Specifically, it found that the Director-Defendants were
exculpated from monetary liability for duty of care breaches, and that there was no bad
faith on their part with respect to the contents of the Notice.5 It also held that omission of
the information related to the Interested Director Claim “would not be material to a
DAVA stockholder’s decision whether to approve the Merger or seek appraisal.” 6 In this
sense, the court did consider the Director-Defendants’ alleged self-interest with respect to
the Notice. Further, Appellant has not argued on appeal that the Court of Chancery erred
in denying its motion to amend its complaint.7 In fact, it admits that it did not appeal the
denial of its motion to amend.8 Because the trial court explicitly rejected the Interested
Director Claim in the context of the motion to amend, we reject the claim that the court
failed to consider it.
4
Cirillo, 2018 WL 3388398, at *17.
5
Id. (finding that the Director-Defendants would be entitled to summary judgment on a claim
that the Notice improperly failed to disclose information, because “they are exculpated from
monetary liability for breaches of the duty of care” and “their actions with respect to the contents
of the Notice did not amount to bad faith because they reasonably relied on their outside
corporate counsel (Dechert) to prepare the Notice in accordance with the requirements of
Delaware law . . .”); see also id. at *1 (in granting Defendants’ motion for summary judgment,
holding that, “the undisputed factual record shows that DAVA’s directors reasonably relied, in
good faith, on the advice of outside legal counsel with respect to the preparation of the notice
even though, unbeknownst to the directors, that advice was seriously flawed,” and denying the
Trust’s motion to add the Interest Director Claim “[f]or essentially the same reasons.”).
6
Id. at *17.
7
The Appellant does not address in its Opening Brief Court of Chancery Rule 15(a) or the
standard of review applicable to the denial of a motion to amend. No further citations were
provided when questioned at oral argument. See Oral Argument Video at 6:00–9:45,
https://livestream.com/accounts/5969852/events/8821648/videos/196852882. See Del. Sup. Ct.
R. 14(b)(vi)(A)(3) (“The merits of any argument that is not raised in the body of the opening
brief shall be deemed waived and will not be considered by the Court on appeal.”).
8
Reply Br. at 4.
3
(4) We reject the claim for an additional reason. As the trial court found, the
Director-Defendants did not assert any control over the Notice’s form or content.9
Rather, the court found that the Notice was prepared by outside counsel Dechert LLP, a
sophisticated law firm.10 It is not alleged that the Director-Defendants knew or should
have known what was required in the Notice. Nor is there any suggestion in the record
before this Court that the Chancellor erred in finding that the Director-Defendants did not
act in bad faith with regard to the Notice. The Director-Defendants were immunized by
the stockholders due to the exculpation provision contained in DAVA’s Certificate of
Incorporation, as authorized by 8 Del. C. § 102(b)(7), and we agree with the Chancellor
that the claim was appropriately excluded from the amended complaint.
(5) Secondly, Appellant claims that the Court of Chancery should have ruled
on the question of whether a corporation’s obligations to supply a complete and accurate
notice of appraisal rights under Delaware law are the same as those of its fiduciaries.
Specifically, the Trust argued that, through the operation of 8 Del. C. § 262(d)(2), the
corporation surviving the merger, in addition to DAVA’s board of directors, owes a duty
to disclose all material information to its stockholders so that they can make an informed
decision on whether to seek appraisal. But this novel question was not ripe for review.
9
Cirillo, 2018 WL 3388398, at *4–5 (noting that “Dechert had been working internally to draft
the Notice,” the “Director Defendants never discussed the contents of the Notice among
themselves,” and the Director-Defendants “relied entirely on Dechert with respect to the form
and content of the Notice.”).
10
Id. at *5 (“Apparently mimicking Dechert’s precedents, the Notice failed to include, among
other things, any financial information relating to DAVA, any description of DAVA's business
and its future prospects, and any information about how the Merger price was determined or
whether the price was fair to stockholders.”).
4
Appellant conceded in its Opening Brief that it did not attempt to add such a claim
against DAVA or its successor.11 That is why the Court of Chancery declined to rule on
the issue.12 We find no error with the trial court’s refusal to render what would have been
a purely advisory opinion.13
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of
Chancery be, and the same hereby is, AFFIRMED.
BY THE COURT:
/s/ Karen L. Valihura
Justice
11
Opening Br. at 34 n.11.
12
See Cirillo, 2018 WL 3388398, at *17 n.168 (“Because the Trust has not attempted to assert a
claim against the successor entity under Section 262, however, the court expresses no definitive
conclusion on this issue, which appears to be one of first impression.”).
13
Stroud v. Milliken Enters., Inc., 552 A.2d 476, 480 (Del. 1989) (“The law is well settled that
our courts will not lend themselves ‘to decide cases which have become moot, or to render
advisory opinions.’” (citation omitted)).
5