Wayne County Employees’ Retirement System v. Corti, (Del. Ch., July 1, 2008), read opinion here, is a Delaware Chancery Court decision involving a request for a preliminary injunction to stop a shareholders meeting (at which a merger would be voted on), due to alleged disclosure violations. In sum, the Court denied the PI request based on a finding that the plaintiff did not establish the materiality necessary to establish the disclosure violation.
The Wall Street Journal’s Law Blog highlights the decision here. The WSJ’s Law Blog quoted the following passage from the court’s opinion in which a comparison is made between disclosure litigation in the M & A world and a video game called World of Warcraft:
World of Warcraft, the market-leading massively multiplayer online role playing game, entices millions of paying subscribers to immerse themselves in a virtual online world. These subscribers create their own characters, and through these avatars they interact with other players, develop skills, create a unique jargon, join guilds and alliances, engage in battles, and embark on quests. . . . In some ways, perhaps, the world of Mergers and Acquisitions is a massively multiplayer role playing game as well. Like in World of Warcraft and other games, the participants in the M&A field take on certain roles, interact in their own community, hone specialized skills, and even develop a unique, somewhat curious vernacular. One particular quest in the world of M&A is disclosure litigation. In the instance of disclosure litigation presently pending before this Court, the world of M&A meets the World of Warcraft.
In denying the plaintiffs’ request for a preliminary injunction, [Chancellor] Chandler concludes that, “In the role-playing game that is this disclosure litigation, both sides have played their respective roles well.” He continues: “Like any game, this one has rules, and the most essential rule of disclosure is materiality. Because the plaintiff could not establish the materiality of its final three disclosure claims, the motion for a preliminary injunction is denied. . . .GAME OVER.”
The Court explained its reasoning about materiality thusly:
" Materiality is the essence of a successful disclosure claim, and plaintiff has failed to demonstrate how any of the alleged omissions would significantly alter the total mix of information that is already available in the nearly 300-page definitive proxy released by the Company. As a result, plaintiff has failed to demonstrate a reasonable likelihood of success on the merits and has, therefore, failed to earn the preliminary injunction it seeks."
UPDATE: Professor Bainbridge has an insightful analysis of the case here.