Tooley v. Donaldson, Lufkin & Jenrette, Inc.

845 A.2d 1031 (Del.Supr.2004)

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Nature of the Case

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Facts

Ps were minority stockholders of D. D was acquired by Credit Suisse Group (Credit Suisse) in the Fall of 2000. AXA Financial, Inc.(AXA), owned 71% of D and agreed to exchange with Credit Suisse its D stockholdings for a mix of stock and cash. Credit Suisse intended to acquire the remaining minority interests of publicly-held D stock through a cash tender offer, followed by a merger of D into a Credit Suisse subsidiary. The tender offer price was set at $90 per share in cash. The tender offer was to expire 20 days after its commencement. The merger agreement allowed Credit Suisse to unilaterally extend the tender offer if certain conditions were not met, such as SEC regulatory approvals or certain payment obligations. Also, both D and Credit Suisse could agree to postpone acceptance by Credit Suisse of D stock tendered by the minority stockholders. Credit Suisse availed itself of both types of extensions to postpone the closing of the tender offer. Ps challenge the second extension that resulted in a 22-day delay. They sued seeking the time value of the monies. The Court of Chancery dismissed the complaint on Ps' lack of standing to bring the claims asserted therein. Ps had lost standing under Court of Chancery Rule 23.1, the contemporaneous holding rule because they had tendered their shares. Ps' also claimed their suit is derivative and brought on behalf of D. The Court of Chancery, relying upon our confusing jurisprudence on the direct/derivative dichotomy, based its dismissal on the following ground: 'Because this delay affected all D shareholders equally, Ps' injury was not a special injury, and this action is, thus, a derivative action, at most.' Fundamentally Ps had no contractual right that has ripened when the extensions were taken. Also, no other individual right of these stockholder-plaintiffs was alleged to have been violated by the extensions. The Court of Chancery then determined the standing issue and based its decision on the concept of special injury as the test for determining whether a claim is derivative or direct. Ps appealed the dismissal of their suit.