OTK ASSOCIATES, LLC v. FRIEDMAN

C.A. No. 8447-VCL.

85 A.3d 696 (2014)

OTK ASSOCIATES, LLC, directly on its own behalf and derivatively on behalf of Morgans Hotel Group Co., Plaintiff, v. Robert FRIEDMAN, Thomas L. Harrison, Michael D. Malone, Michael J. Gross, Ronald W. Burkle, Jeffrey M. Gault, Andrew Sasson, Yucaipa American Alliance Fund II, L.P., Yucaipa American Alliance (Parallel) Fund II, L.P., Yucaipa Aggregator Holdings, LLC, and The Yucaipa Companies LLC, Defendants, and Morgans Hotel Group Co., Nominal Defendant.

Court of Chancery of Delaware.

Decided: February 5, 2014.


Attorney(s) appearing for the Case

David J. Margules , Joel Friedlander , Albert J. Carroll , Jaclyn Levy , Bouchard Margules & Friedlander, P.A., Wilmington, Delaware; Peter J. Welsh , Jesse M. Boodoo , Aliza F. Goren , Ropes & Gray LLP, Boston, Massachusetts; Attorneys for Plaintiff.

Kenneth J. Nachbar , Shannon E. German , Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware; Greg A. Danilow , John A. Neuwirth , Stefania D. Venezia , Matthew S. Connors , Weil, Gotshal & Manges LLP, New York, New York; Attorneys for Defendant Robert Friedman.

Edmond D. Johnson , James G. McMillan, III , Pepper Hamilton LLP, Wilmington, Delaware; William A. Brewer III , Catherine Pastrikos , Bickel & Brewer, New York, New York; Attorneys for Defendant Thomas L. Harrison.

Richard D. Heins , Toni-Ann Platia , Ashby & Geddes, P.A., Wilmington, Delaware; Irving M. Brenner , William O.L. Hutchinson , R. Locke Beatty , McGuirewoods LLP, Charlotte, North Carolina; Attorneys for Defendant Michael D. Malone.

Collins J. Seitz, Jr. , David E. Ross , Eric D. Selden , Seitz Ross Aronstam & Moritz LLP, Wilmington, Delaware; Attorneys for Defendants Michael J. Gross and Andrew Sasson.

Stephen B. Brauerman , Vanessa R. Tiradentes , Sara E. Bussiere , Bayard, P.A., Wilmington, Delaware; Robert L. Clarkson , Clarkson/Riley, LLP, Los Angeles, California; Attorneys for Defendant Jeffrey M. Gault.

Bruce L. Silverstein , Kathaleen St. J. McCormick , James M. Yoch, Jr. , Nicholas J. Rohrer , Paul J. Loughman , Young Conaway Stargatt & Taylor, LLP, Wilmington, Delaware; George M. Garvey , Mark H. Epstein , Munger Tolles & Olson, Los Angeles, California; Attorneys for Defendants Ronald W. Burkle, Yucaipa American Alliance Fund II, L.P., Yucaipa American Alliance (Parallel) Fund II, L.P., Yucaipa Aggregator Holdings, LLC, and The Yucaipa Companies LLC.

Michael A. Pittenger , Timothy R. Dudderar , T. Brad Davey , Matthew F. Davis , Ryan T. Costa , Potter Anderson & Corroon LLP, Wilmington, Delaware; Attorneys for Nominal Defendant Morgans Hotel Group Co.


OPINION

LASTER, Vice Chancellor.

In March 2013, the board of directors (the "Board") of Morgans Hotel Group Co. ("Morgans" or the "Company") approved a two-part recapitalization involving The Yucaipa Companies, LLC ("Yucaipa"), an entity controlled by prominent investor Ronald W. Burkle. Despite not owning a mathematical majority of the Company's common stock, Yucaipa held a combination of securities and contract rights that, together with Yucaipa's board...

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