International Brotherhood Of Electrical Workers Local No.

129 BENEFIT FUND V. TUCCI 70 N.E.3d 918 (2017)

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Nature of the Case

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Facts

EMC is a Massachusetts corporation providing information technology products and services in a global market. EMC acts as parent company to numerous related but independently functioning businesses. Tucci (D), the longtime chief executive officer of EMC and the architect of this federated structure, wanted to keep the federation of companies together. EMC's shares to trade at a “conglomerate discount” because investors valued the large company less than they would its individual components. Elliott Management (Elliott), began advocating for EMC to sell off the most valuable subsidiaries to provide maximum value to EMC's shareholders. Tucci (D) reached an agreement with Elliott in January 2015, by which Elliott was permitted to participate in the appointment of new directors but agreed to a limit on stock it could buy for a period of time. Tucci (D) and EMC used this period to strategize the sale of the company to Dell. Tucci (D) was to receive approximately $27 million in “change-in-control” benefits as a result of selling the entire company. Dell would be able to shelter significant tax liability and to retain the value locked in the subsidiaries through a potential break-up of the EMC federation in the future. Tucci (D) announced that Dell agreed to acquire all of EMC for approximately $67 billion. The transaction was unanimously approved by the board and announced on October 12, 2015. The board also agreed to termination fees that further dissuaded competing companies from placing a higher bid. EMC shareholders are to receive $24.05 in cash per share and an estimated 0.111 shares of “tracking stock” of VMware. According to Elliott, selling EMC's interest in VMware separately would have yielded a total value for EMC's shareholders of over forty dollars per share. Just before the transaction was announced, VMware announced a new business venture with an expected revenue of several hundreds of millions of dollars in 2016. This value would have been realized by EMC shareholders but, as a result of the transaction, will be realized by Dell. P sued Ds on a direct action. Ds moved to dismiss. The court ruled that the board owed no fiduciary duty directly to the shareholders in this case and that the action was necessarily derivative because any alleged harm to shareholders was not distinct from harm to the corporation. Ps appealed. The principal question raised is whether Ps, as shareholders challenging the fairness or validity of a proposed merger on the ground that it will effectively result in the sale of EMC and for them a loss of personal property - their EMC stock holdings - for an inadequate price, must bring their claim against the directors as a derivative action on behalf of the corporation, or may bring it directly on their own behalf.