McMILLAN v. INTERCARGO CORP.
768 A.2d 492 (2000)
Scott McMILLAN, John Norberg, James M. Wilson Trust, Peggy Wilson Trustee, Castillian Ventures, Inc., individually, and on behalf of all others similarly situated, Plaintiffs,
INTERCARGO CORPORATION, a Delaware Corporation, and Arthur J. Fritz, Jr., Kenneth A. Bodenstein, Arthur L. Litman, Albert J. Gallegos, Robert B. Sanborn, Michael L. Sklar, George J. Weise and Stanley A. Galanski, Defendants.
Civil Action No. 16963.
Court of Chancery of Delaware, New Castle County.
Submitted: March 3, 2000.
Decided: April 20, 2000.
Ronald A. Brown, Jr., Esquire, Bruce E. Jameson, Esquire, and Sheldon K. Rennie, Esquire, of Prickett, Jones & Elliott, Wilmington, Delaware; and R. Bruce McNew, Esquire, of Taylor Gruver & McNew, Greenville, Delaware, Attorneys for Plaintiffs.
David C. McBride, Esquire, Danielle Gibbs, Esquire, of Young, Conaway, Stargatt & Taylor, Wilmington, Delaware; of Counsel: David L. Schiavone, Esquire, Christopher Q. King, Esquire, Elena B. Gobeyn, Esquire, and Jason L. Rubin, Esquire, of Sonnenschein Nath & Rosenthal, Chicago, Illinois, Attorneys for Defendants.
STRINE, Vice Chancellor.
Several stockholders of Intercargo Corporation have sued the (now former) directors of Intercargo (the "defendant directors") for breach of fiduciary duty in connection with the acquisition of Intercargo by XL America, Inc. for $12.00 a share (the "XL merger"). Earlier in this litigation, the plaintiffs sought a preliminary injunction against the consummation of the XL merger. That request was denied by Vice Chancellor Jacobs,1 and the XL merger was approved by a vote of the Intercargo stockholders on April 29, 1999. Thereafter, the XL merger was consummated on May 7, 1999. In their amended complaint,2 the plaintiffs allege that the defendant directors breached their fiduciary duties of loyalty and care in two distinct ways. First, the plaintiffs allege that in connection with the XL merger, which was a change of control transaction,3 the defendant directors failed to ensure that the Intercargo stockholders received the highest value reasonably attainable and thus did not live up to their so-called Revlon4 duties (the plaintiffs' "Revlon claim"). Second, the plaintiffs allege that the defendant directors failed to disclose material information to the Intercargo stockholders that bore on the stockholders' decision whether to approve the XL merger (the plaintiffs' "disclosure claims").
The defendant directors have moved for judgment on the pleadings. In this opinion, I grant the defendant directors' motion for the following reasons.
The XL merger has been consummated and rescission is not a practicable remedy. Therefore, the plaintiffs are left with a claim for damages against the defendant directors. Because Intercargo's certificate of incorporation contained an exculpatory provision immunizing its directors from liability for due care violations, the plaintiffs may survive this motion only if the complaint contains well-pleaded allegations that the defendant directors breached their duty of loyalty by engaging in intentional, bad faith, or self-interested conduct that is not immunized by the exculpatory charter provision.
After according the plaintiffs the favorable inferences owed to them in this procedural posture, I conclude that the complaint fails to allege such a breach of the duty of loyalty. The plaintiffs concede that a majority of Intercargo's board was disinterested and independent, and the plaintiffs have failed to allege facts that, if true, support a reasonable inference that the loyalties of two of the other three directors were conflicted. And even if one or more of those three directors were interested in the merger, the plaintiffs have failed to allege that those directors dominated or controlled, or otherwise influenced in any improper way, the concededly disinterested board majority.