In Air Products & Chemicals, Inc. v. Airgas, Inc., et al., Del. Ch., C. A. No. 5249-CC, read letter ruling here, the Court of Chancery on January 20, 2011 addressed: (i) Air Products’ motion to compel Airgas’s compliance with the Court’s July 13, 2010 Amended Order Governing the Protection and Exchange of Confidential Information; and (ii) Airgas’s motion in limine to preclude Air Products from offering evidence to support the position that $70 is its “best and final” offer.  A supplemental evidentiary hearing is scheduled to start on January 25, 2011. Prior blog posts regarding the many Delaware rulings and related developments in this case over the last year or more are available here.

This summary was prepared by Kevin F. Brady of Connolly Bove Lodge & Hutz LLP.


In its motion to compel, which related to supplemental discovery regarding Air Products’ increased $70 offer for Airgas and the Airgas board’s rejection of that offer, Air Products argued that Airgas’s use of the “Litigators’ Eyes Only” (“LEO”) designation at depositions and on documents produced was overbroad and prejudicial to Air Products.  Air Products asked the Court to order Airgas to immediately: (i) review the recently-taken deposition transcripts of all Airgas witnesses and remove the LEO designation on testimony relating to non-LEO topics; (ii) produce non-LEO versions of the minutes of Airgas board meetings that took place between October 21, 2010,  and December 21, 2010 redacting only such information that was properly designated as LEO under the Protective Order; and (iii) re-review any documents produced in response to the Court’s recent orders and make good faith confidentiality re-designations. 

The Court noted that as a general matter, while Airgas had the burden to show that their LEO designations were appropriate and should be sustained, as a practical matter, because of Air Products’ behavior of asking questions about LEO material throughout the depositions, Airgas was forced to designate large sections of transcripts as LEO.  The Court ordered Air Products to send to Airgas the deposition transcripts it wanted reviewed with notations to show what sections it believed were properly designated LEO and Airgas would get 5 hours to respond.  With respect to the second request, Airgas agreed that it would review the appropriate minutes and produce non-LEO versions of the minutes. The Court ordered that done by 5 p.m. on January 22, 2011.

With respect to third request, the Court ordered Airgas to produce a non-LEO version of a letter from an Airgas institutional investor shareholder to the Airgas board, expressing its view as to Airgas’s value.  Airgas argued that the letter was “a confidential communication with a large shareholder of Airgas regarding the shareholder’s view of value in a sale transaction, the disclosure of which would give Air Products information that could unfairly assist it in the formulation of its takeover strategy in approaching that shareholder with respect to the shareholder’s investment decision.” Airgas further argued that it was “properly designated LEO because it reflect[ed] a shareholder’s privately held views of the value of Airgas in a sale transaction—information that bears on the value of Airgas and on Airgas’s strategy in a proxy contest.”  The Court stated that it did not think that that document should be designated as LEO and that the letter was “irrelevant to the core issue” before the Court.  The Court also noted that “[a]n institutional shareholder’s privately held views and non-exhaustive analyses on the “fair value” of Airgas based on publicly-available information, though, are just that—privately held views by a shareholder based on information that can be accessed by others. The letter in no way provides a fairness opinion or is ‘even intended to be a substitute for a full fairness review,’ nor does it purport to provide the type of valuation of Airgas that a financial advisor would provide.”


Airgas moved to preclude Air Products from offering evidence in support of its assertion that $70 per share is its “best and final” offer. Because Air Products had refused to produce internal analyses or valuations that the Air Products board relied upon in reaching the decision to make the $70 offer, Airgas argued that Delaware law precludes Air Products from offering any evidence supporting its determination to make this its “best and final” offer.

The Court noted that it was “the Airgas board’s burden to defend the decision to maintain the rights plan—a defense that will require the board to demonstrate the existence of a threat to corporate policy or effectiveness and the reasonableness of the board’s response to that threat. Delaware decisions involving the “sword and shield” concept have precluded a party from shielding evidence from an opposing party and then relying on the evidence at trial to meet its burden of proof on an issue central to the resolution of the parties’ dispute.”  In denying the Airgas motion, the Court stated:

Air Products’ internal views and assumptions about (or analyses of) the value of Airgas, whether on a standalone basis or in combination with Air Products, are not central to any question that I must resolve in the context of this litigation. Whether the Airgas board honestly and in good faith believed the $70 offer presented a “threat” depends upon what the Airgas board knew at the time it made that determination; it cannot be based upon what the Air Products board knew about Air Products’ own internal valuations of Airgas, either alone or in combination with Air Products. …. Air Products is not required to demonstrate the fairness of its offer; nor is it required to demonstrate that its offer is less than, equal to, or greater than what it has independently and internally determined is the value of Airgas. Having publicly announced that its $70 offer is its “final” offer, however, Air Products has now effectively and irrevocably represented to this Court that there will be no further requests for judicial relief with respect to any other offer (should there ever be one).