Chancery Addresses Disclosure Obligations in Connection with Directors’ Elections

Red Oak Fund, L.P. v. Digirad Corp., C.A. No. 8559-VCN (Del. Ch. Aug. 5, 2013).

Issue Addressed: In the context of a challenge to the election of directors, the Court of Chancery considered claims that the disclosure obligations of the directors were breached.

Short overview: This short letter opinion in the context of a Section 225 summary proceeding, considered a motion to dismiss. Initially as a procedural matter, the court observed that pre-hearing dispositive motions are often contrary to the goal of having a prompt hearing held in a summary proceeding matter.

The court reasoned that for purposes of a Rule 12(b)(6) motion, it was “reasonably conceivable” that, in the aggregate, the statements of the defendants during the meeting and while voting was taking place, might be proven to be materially misleading or coercive.

In a footnote, the difference was discussed between Court of Chancery Rule 15(a) regarding motions to amend complaints, and Rule 15(d)  relating to supplemental pleadings.