Sjunde AP-fonden v. Activision Blizzard, Inc.

DCOURT OF CHANCERY
OF THE
STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER
CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734
February 29, 2024
Michael Hanrahan Edward B. Micheletti
Stacey A. Greenspan Lauren N. Rosenello
Corinne Elise Amato Michelle L. Davis
Kevin H. Davenport Peyton V. Carper
Christine N. Chapplear Claire K. Atwood
Prickett, Jones, & Elliott, P.A. Skadden, Arps, Slate, Meagher & Flom LLP
1310 N. King Street 920 N. King Street
Wilmington, DE 19801 Wilmington, DE, 19801
Re: Sjunde AP-fonden v. Activision Blizzard, Inc., et al.
C.A. No. 2022-1001-KSJM
Dear Counsel:
This letter addresses Defendants’ motion to dismiss Plaintiff’s claim under 8
Del. C. § 251(c)(7) for a copy of the Merger Agreement, the Microsoft Defendants’
motion to dismiss, and Plaintiff’s motion for partial summary judgment. 1
Plaintiff’s Section 251(c)(7) Claim
Section 251(c)(7) provides that “in lieu of filing the agreement of merger . . .
the surviving or resulting corporation may file a certificate of merger or consolidation
. . . which states . . . that a copy of the agreement of consolidation of merger will be
1 This letter uses the defined terms set forth in the Memorandum Opinion resolving
Defendants’ motion to dismiss. C.A. No. 2022-1001-KSJM, Docket (“Dkt.”) 125.
C.A. No. 2022-1001-KSJM
February 29, 2024
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furnished by the surviving or resulting corporation, on request and without cost, to
any stockholder of any constituent corporation.” 2
Plaintiff claims that Defendants failed to produce an agreement of merger to
plaintiff as required by Section 251(c)(7). 3 Plaintiff asserted this claim before the
merger closed. 4 Defendants argue that Section 251(c)(7) does not “require a
constituent corporation in a merger . . . to provide a stockholder with a copy of the
merger before the merger closes.” 5
On this point, my reading of Section 251(c) is consistent with Defendants’
interpretation. When the surviving corporation opts to file a certificate of merger in
lieu of the agreement of merger, 6 then the surviving corporation must provide a
stockholder with a copy of the agreement of merger on request under Section
251(c)(7). 7 That obligation does not arise until after the surviving corporation files
the certificate of merger, which is after the merger closes.
Before that time, the corporation can provide a “brief summary” of the merger
agreement in lieu of the merger agreement for the purpose of seeking stockholder
2 8 Del. C. § 251(c)(7).
3 Dkt. 87 at 46–47.
4 Dkt. 97.
5 Dkt. 102 at 34.
6 8 Del. C. § 251(c) (sixth sentence).
7 8 Del. C. § 251(c)(7).
C.A. No. 2022-1001-KSJM
February 29, 2024
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approval. 8 Perhaps a stockholder could obtain a full copy of the merger agreement
through other mechanisms, like Section 220 of the DGCL. 9 Plaintiff did not do that.
Plaintiff’s Section 251(c)(7) claim, asserted before the merger closed, was not
ripe. It should be dismissed. It could be re-pled. But is seems pretty obvious that
Plaintiff should be provided a copy of the Merger Agreement—the full agreement with
all of its attachments. 10 Defendants argue that Plaintiff’s construction of Section
251(c)(7) is commercially unreasonable because it would “require the disclosure of
proprietary of confidential information” and “immaterial information[.]” 11 This court
has held, however, that “the certificate of merger alternative was not designed to
avoid disclosure of all merger terms to the stockholders of the constituent
corporations.” 12 Rather, it was intended to “serve the dual purpose of avoiding the
expense of filing a lengthy merger agreement and avoiding public disclosure of all the
merger terms.” 13
Given this clear directive of Delaware law, Defendants have probably already
mooted the issue, obviating the need to resolve this aspect of the motion to dismiss or
8 8 Del. C. § 251(c) (third sentence).
9 8 Del. C. § 220.
10 See generally Jackson v. Turnbull, 1994 WL 174668, at *5 (Del. Ch. Feb. 8, 1994)
(“[W]hen a certificate of merger is filed instead of the merger agreement itself, the
surviving corporation must, among other things, furnish a copy of the agreement
without charge to any stockholder upon request.”).
11 Activision Defs.’ Opening Br. at 38.
12 Jackson, 1994 WL 174668, at *5.
13 Id.C.A. No. 2022-1001-KSJM
February 29, 2024
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for Plaintiff to replead anything; it is unclear based on the record before me. Please
report on the status of this issue at your convenience. Meet and confer first, of course.
The Microsoft Defendants’ Motion To Dismiss
The Microsoft Defendants argue that they are not the right defendants for any
of the statutory claims (except maybe the Section 251(c)(7) claim, which this letter
decision discusses separately). They advance a standing challenge. They further
argue that Delaware law does not recognize a claim for aiding and abetting the
statutory violations at issue. These are all interesting arguments that find various
levels of support in Delaware law. But Plaintiff’s statutory claims as to the Microsoft
Defendants fails for the simple reason that Plaintiff did not allege that the Microsoft
Defendants did anything at all in connection with the Section 251 and Section 141
issues, much less something wrong. That is because Section 251(b), the first three
sentences of Section 251(c) at issue, and Section 141 all impose obligations on a board
of directors or merging corporation to its own stockholders. 14 Although a merger sub
is an actionable defendant for purposes of Plaintiff’s Section 251 claim, Plaintiff is
not a stockholder of the merger sub here. Plaintiff’s claims under Section 251(b),
14 See generally City of N. Miami Beach Gen. Empls.’ Ret. Plan v. Dr. Pepper Snapple
Gp., Inc., 189 A.3d 188, 197 (Del. Ch. 2018) (“[T]his court has interpreted the term
‘constituent corporations’ to mean only those legal entities actually being combined
in a transaction.” (citing In re Inergy L.P., 2010 WL 4273197, at *10–11 (Del. Ch. Oct.
29, 2010) (finding that parent company was not a constituent corporation when the
parent acquired the target through a merging subsidiary))); see also Lewis v. Ward,
2003 WL 22461894, at *4 n.18 (Del. Ch. Oct. 29, 2003) (stating that the stockholders
of a parent corporation of a merging subsidiary in a triangular merger “generally do
not have the right to vote on the merger”), aff’d, 852 A.2d 896 (Del. 2004).
C.A. No. 2022-1001-KSJM
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Section 251(c) (other than Section 251(c)(7)), and Section 141 as to the Microsoft
Defendants are dismissed.
Plaintiff’s conversion claim, though predicated on the statutory provisions, has
greater traction against the Microsoft Defendants. 15 The Microsoft Defendants argue
that Plaintiff failed to adequately plead conversion, 16 but I disagree. They also argue
that Plaintiff failed to plead a predicate statutory violation, 17 but I rejected that
argument in the Memorandum Opinion addressing the other aspects of the parties’
motion to dismiss. The Microsoft Defendants’ motion to dismiss Plaintiff’s claim for
conversion is denied.
Plaintiff’s Motion For Partial Summary Judgment
Plaintiff moved for summary judgment on its claims under Section 251(b),
Section 251(c), and Section 251(d). I dismissed the claim under Section 251(d) and
stated my view on Plaintiff’s claim under Section 251(c)(7) in this decision. That
leaves Plaintiff’s motion as to Section 251(b) and the first three sentences of Section
251(c). The motion is denied.
15 See generally Tansey v. Trade Show News Networks, Inc., 2001 WL 1526306, at *7
(Del. Ch. Nov. 27, 2001) (entering summary judgment in favor of stockholder against
all defendants, including the acquirer, on conversion claim due to statutory
violations).
16 Microsoft Defs.’ Reply Br. at 12–14.
17 Id.C.A. No. 2022-1001-KSJM
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“There is no right to a summary judgment.” 18 This court has refused requests
for leave to file motions for summary judgment where such proceedings “are apt to
waste, rather than conserve, the resources of the parties and the court.” 19 A trial
court’s decision to deny summary judgment is afforded great deference. 20
I usually deny summary judgment, or leave to move for summary judgment,
due to material disputed facts. Here, I find the legal issues raised by the parties so
nettlesome as to defy resolution on a cold paper record. The parties did a good job
briefing and arguing these issues, but I could benefit from further briefing argument
on this topic, and potentially expert reports. Plus, there is a lot left to litigate in this
action; keeping these issues in the mix will result in only a minor incremental and
not an undue burden.
IT IS SO ORDERED.
Sincerely,
/s/ Kathaleen St. Jude McCormick
Chancellor
cc: All counsel of record (by File & ServeXpress)
18 Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002) (cleaned up); Stone & Paper
Invs., LLC v. Blanch, 2020 WL 6373167, at *1 (Del. Ch. Oct. 30, 2020) (same).
19 Orloff v. Shulman, 2007 WL 1862742, at *1 (Del. Ch. June 20, 2007).
20 Telxon, 802 A.2d at 262 (“A trial court’s denial of summary judgment is entitled to
a high level of deference and is, therefore, rarely disturbed.” (internal citations
omitted)).