In the case of In Re Tyson Foods, Inc. Consolidated Shareholder Litig., (Del. Ch., August 15, 2007), read opinion here, the Chancery Court once again allowed the claim in this case involving spring-loading of stock options to proceed. (Hat Tip: Kurt Heyman). This decision denied a Motion for Judgment on the Pleadings under Chancery Court Rule 12(c). The previous decision in this same case denied a motion to dismiss, and allowed the same claim to proceed under that different procedural standard. In Re Tyson Foods, Inc. Consol. S’holder Litig., 919 A.2d. 563 (Del. Ch. 2007)(copy of earlier Feb. 2007 decision available at short blog post here where I also discussed a related case.)
The court discusses the different standard of review for a Motion to Dismiss as opposed to a Rule 12(c) Motion, and what documents outside the pleadings are appropriately considered under Chancery Court Rule 12(c).
There are many “money quotes” in this opinion. I will include some now and later will add more. One that is especially memorable deals with the court ‘s criticism of the proxy statements at issue, which the court described as displaying “an uncanny parsimony with the truth…[and] raised an inference that directors engaged in later dissembling to hide earlier subterfuge.”
The court emphasized that the fiduciary duties of loyalty, good faith and candor were not adorned by the Delaware Supreme Court with half-hearted adjectives. Instead:
“Directors should not take a seat at the board table prepared to offer only conditional loyalty, tolerable good faith, reasonable disinterest or formalistic candor.”
In sum, the court concluded that the “pleadings support an inference not only that the defendants engaged in self-dealing, but that they attempted to hide their conduct from their stockholders.”
Here is an insightful, perceptive analysis of the case from Kevin LaCroix on his D & O Diary blog.