Barbieri v. Swing-N-Slide Corp

1997 Del.Ch. Lexis 9 (1997)

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Nature of the Case

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Facts

Ds, a director and several officers of Swing-N-Slide (D) formed a limited liability company to act as one of two general partners in a general partnership that made a tender offer for the corporation. P brought this action in April 1995 to challenge the terms and disclosure of a self-tender by Swing-N-Slide (D), a Delaware corporation in which he holds shares. P's claims for breach of fiduciary duty against Greengrass Holdings (D) and Greengrass Management, LLC (D) are based upon a transaction agreement between Swing-N-Slide (D) and Greengrass Holdings (D). The terms of the agreement provide for Holdings to offer to purchase up to sixty percent of Swing common stock at $6.50 per share in cash. Completion of the tender offer portion will thus give Holdings a majority stake in Swing and entitle it to nominate a majority of the Swing directors. The second step of the transaction is a commitment by Holdings to purchase several million dollars of its choice of either preferred shares or debentures, both convertible into Swing common on a $4.80 per share basis in the event of a change of control at Swing. Holdings also agreed to use its best efforts to file a registration statement covering the same security as it chose to purchase in order to allow Swing shareholders to purchase a pro rata portion on the same terms. The transaction agreement also contained a 'no-shop' and several fee payment provisions. Holdings is a Delaware general partnership. There are two partners in the partnership, Management and Greengrass Capital (D). Capital is a Delaware LLC, owned and controlled by parties unrelated and unaffiliated with Swing. Management, however, was 'organized by Mueller (D) and other members of Swing-N-Slide's (D) senior management.' Mueller (D) was a Swing director, as well as its president and chief executive. The duties inherent in his position and that of the other senior officers of SNS on both sides of the transaction agreement form the basis of the claims against Holdings and Management. P claims that because the actual people who own the entities are on both sides of the transaction, Greengrass Management and Greengrass Holdings owe fiduciary duties to the Swing-N-Slide stockholders. Holdings and Management moved to dismiss.