In Re: Pattern Energy Group Inc. Stockholders Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE PATTERN ENERGY GROUP ) C.A. No. 2020-0357-MTZ
INC. STOCKHOLDERS LITIGATION )

MEMORANDUM OPINION
Date Submitted: December 10, 2020
Date Decided: May 6, 2021

Ned Weinberger and Mark Richardson, LABATON SUCHAROW LLP,
Wilmington, Delaware; David MacIsaac and John Vielandi, LABATON
SUCHAROW LLP, New York, New York; Chad Johnson, Noam Mandel, and
Desiree Cummings, ROBBINS GELLER RUDMAN & DOWD LLP, New York,
New York; Brian Schall and Rina Restaino, THE SCHALL LAW FIRM,
Los Angeles, California, Attorneys for Lead Plaintiff Jody Britt.

A. Thompson Bayliss and April M. Kirby, ABRAMS & BAYLISS LLP,
Wilmington, Delaware; Alan S. Goudiss, K. Mallory Brennan, and Deke Shearon
SHEARMAN & STERLING LLP; Christina Urhausen, SHEARMAN &
STERLING LLP, San Francisco, California; Attorneys for Defendants Alan R.
Batkin, Edmund John Philip Browne, Richard A. Goodman, Douglas G. Hall,
Patricia M. Newson, Mona K. Sutphen, Michael Garland, Hunter Armistead, Daniel
Elkort, Michael Lyon, and Esben Pedersen.

Rudolf Koch, Matthew D. Perri, and Andrew L. Milam, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Matthew A. Schwartz, Y. Carson Zhou,
John-Francis S. Flynn, SULLIVAN & CROMWELL LLP, New York, New York;
Attorneys for Defendants Riverstone Holdings LLC, Riverstone Pattern Energy II
Holdings, L.P., and Pattern Energy Group, Holdings 2 LP.

ZURN, Vice Chancellor.
 The sales process of Pattern Energy Group Inc. (the “Company”) was run by

an undisputedly disinterested and independent special committee that recognized

and nominally managed conflicts, proceeded with advice from an unconflicted

banker and counsel, and conducted a lengthy process attracting tens of suitors that

the special committee pressed for value. But, even having acknowledged that one

eager bidder offered superior value, the special committee ultimately selected a

different bidder as the buyer. The buyer was preferred by a private equity investor,

who formed the Company and its upstream supplier, which the investor controlled;

appointed the Company’s management team; and held a consent right over Company

changes of control. The investor favored the buyer because its proposal, as shaped

by the investor, accomplished the investor’s goals of taking the Company private

and consolidating it with the upstream supplier, while permitting the investor to

retain its equity stake in the new company.

In apportioning fault for the selection of the buyer’s inferior bid, the plaintiff

primarily points to three forces: (1) the investor’s control over the Company together

with the upstream supplier and management; (2) the Company’s CEO, who was

conflicted in favor of the investor yet ran point on the sales process to stockholders’

detriment; and (3) the special committee’s prioritization of the investor’s goals over

stockholder value and inability to say “no.” In her post-closing class action

complaint, the plaintiff seeks entire fairness review due to the investor’s alleged

1
control group standing on both sides of the transaction, or due to the CEO’s alleged

fraud on the board. She claims the special committee and management breached

their fiduciary duties in a cash-out merger, and that the investor and supplier either

controlled that process or participated as third-party tortfeasors. The defendants—

the investor, the supplier, the conflicted directors, the special committee, and

conflicted management—contend that the cash-out merger with Buyer was cleansed

by an informed stockholder vote; that the directors were exculpated; and that no

breaches of fiduciary duty or third-party liability torts have been pled.

On the defendants’ motion to dismiss, the plaintiff prevails on most of her

arguments. Recognizing that neither the investor nor the supplier owned Company

stock, I leave open the possibility that the plaintiff may establish the investor,

supplier, and management stockholders formed a control group, given the investor’s

consent right and other pervasive sources of soft power over the Company and its

sales process. Thus, it remains possible that the transaction may be subject to the

entire fairness standard of review under a controller theory—but not a fraud on the

board theory.

At a minimum, the plaintiff has pled the special committee and management

failed to manage conflicts and prioritized the investor’s goals over stockholder value

in bad faith (as distinguished from dereliction of duty), and so states nonexculpated

claims for breach of fiduciary duty that will be reviewed under enhanced scrutiny.

2
All but two management defendants allegedly contributed to flaws in the process.

The sales process is not presumptively subject to the business judgment rule: the

votes in favor fall below a majority of disinterested stockholders because the block

at the tipping point was subject to a voting agreement that compelled favorable votes

that were not informed, disinterested, or voluntary. Plaintiff has also pled the special

committee improperly and completely delegated drafting the merger proxy

(the “Proxy”) to conflicted management, and that the Proxy was inadequate.

I. BACKGROUND1

The Verified Stockholder Class Action Complaint, filed on May 28, 2020

(the “Complaint”), challenges the March 16, 2020 all-cash acquisition

(the “Merger”) of Pattern Energy Group Inc. by Canada Pension Plan Investment

1
I draw the following facts from the Verified Consolidated Stockholder Class Action
Complaint, available at Docket Item (“D.I.”) 101 [hereinafter “Compl.”], as well as the
documents attached and integral to it. See, e.g., Himawan v. Cephalon, Inc., 2018 WL
6822708, at *2 (Del. Ch. Dec. 28, 2018); In re Gardner Denver, Inc. S’holders Litig., 2014
WL 715705, at *2 (Del. Ch. Feb. 21, 2014). Citations in the form of “Kirby Decl. ––” refer
to the exhibits attached to the Declaration of April M. Kirby, Esq. in Support of the
Opening Brief in Support of Defendants’ Motion to Dismiss, available at D.I. 75 and D.I.
76. Citations in the form of “Weinberger Decl. ––” refer to the exhibits attached to the
Transmittal Declaration of Ned Weinberger in Support of Plaintiff’s Answering Brief in
Opposition to Defendants’ Motions to Dismiss, available at D.I. 82. Citations in the form
of “Proxy ––” refer to the Company’s Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934, filed February 4, 2020, attached as Exhibit 1 to the Kirby
Declaration and available at D.I. 75. On the Motion, the Court may consider the Proxy, as
well as other publicly filed documents regarding the Merger. See Orman v. Cullman, 794
A.2d 5, 15–16 (Del. Ch. 2002); In re Lukens Inc. S’holders Litig., 757 A.2d 720, 727 (Del.
Ch. 1999), aff’d sub nom. Walker v. Lukens, Inc., 757 A.2d 1278 (Del. 2000); Omnicare,
Inc. v. NCS Healthcare, Inc., 809 A.2d 1163, 1168 n.3 (Del. Ch. 2002).

3
Board (“Buyer”).2 Lead Plaintiff Jody Britt (“Plaintiff”) was a Company

stockholder at all relevant times, and brings her claims on behalf of all other similarly

situated former public Company stockholders.3

A. The Company’s Longstanding Relationship To Riverstone
Contextualizes And Bears On The Sales Process At Issue.

The Company was formed by Riverstone to operate energy projects developed

by another Riverstone entity.4 Riverstone “is a private equity fund investing

primarily in energy, power, and infrastructure,” including renewable energy. The

developer entity’s structure and ties to the Company changed with the energy

market. The chronology of those changes is helpful background to this matter, as

the Company’s ties to Riverstone and the developer loom large in the Company’s

sales process.

Riverstone has owned and controlled Pattern Energy Group LP

(“Developer 1”) at all times.5 In October 2012, Riverstone, via Developer 1,

incorporated the Company and thereafter controlled the Company through

Riverstone’s stake in Developer 1.6 Riverstone arranged the Company and

2
See generally Compl.
3
Id. ¶ 23.
4
Id. ¶¶ 37, 43. Riverstone Pattern Energy II Holdings, L.P. is an affiliate of Riverstone
Holdings LLC; this opinion refers to those entities collectively as “Riverstone.” Id. ¶ 39.
5
Id. ¶¶ 42, 46.
6
Id. ¶ 47.

4
Developer 1 in a symbiotic business relationship, in which Developer 1 created and

constructed renewable energy projects, but did not operate them, and the Company

had a right of first offer to purchase and operate Developer 1’s projects. 7

Developer 1 and the Company were run as a single entity out of the same offices,

and Developer 1 enjoyed the benefits of a management services agreement with the

Company.8

In 2013, Developer 1 took the Company public via an initial public offering

(the “IPO”).9 After the IPO, Riverstone still indirectly controlled the Company via

Developer 1, which retained a 67.9% majority interest; public investors and

Company management held the other third.10 Developer 1 also executed a

shareholder agreement with the Company in connection with the IPO. That

agreement gave Developer 1, and therefore Riverstone, a consent right over the

Company’s major corporate transactions, including sales and acquisitions worth

more than 10% of the Company’s market capitalization, so long as Developer 1

owned at least one third of the Company’s shares.11 Developer 1 continued to

7
Id. ¶ 46 n.2.
8
Id. ¶¶ 51–52.
9
Id. ¶ 47.
10
Id. ¶¶ 47, 49.
11
Id. ¶ 50. By February 2015, Developer 1’s ownership had dipped below the one-third
threshold, so its consent right lapsed. Id.

5
develop new projects.12 The Company paid steady dividends and attracted long-

term investors, but its share price remained flat.13

In 2017, inspired by record demand for renewable energy,14 Riverstone

restructured its relationship with the Company, as Developer 1 seemingly lacked the

capital resources needed to develop projects to keep up with demand.15 Developer 1

was replaced with a Riverstone-sponsored and controlled private equity fund,

Pattern Energy Group Holdings 2, LP (together with any subsidiaries,

“Developer 2”). Developer 2 was funded and owned by Riverstone, the Company,

and Company management, with total capital commitments of nearly $1 billion.16

The Company became Developer 2’s limited partner with the goal of “[c]reat[ing]

strong, lasting alignment between [Developer 2] and [the Company].”17 Developer 2

acquired Developer 1’s assets and replaced Developer 1 as the Company’s symbiotic

counterpart.18 The Company primarily acquired its operating assets from

Developer 2, while Developer 2 retained development assets,19 and the Company

12
Id. ¶¶ 2, 38, 43–44, 46.
13
Id. ¶ 53.
14
Id. ¶ 54.
15
Id. ¶ 55.
16
Id. ¶¶ 2, 38, 57, 58.
17
Id. ¶ 60.
18
Id. ¶¶ 2, 38, 57.
19
Proxy at 36.

6
held a downstream right of first offer on all projects Developer 2 sold.20 Crucially,

Developer 2 acquired a consent right over the Company’s transfer of its Developer 2

stake (the “Consent Right”); in view of its domination over Developer 2, Riverstone

ultimately controlled the Consent Right.21

As Developer 2 took the stage, Developer 1 wound down, selling its equity in

the Company between late 2017 and October 2018 such that Riverstone no longer

held any direct interest in the Company at the time of the Merger.22 Still, Riverstone

and the Company remained intertwined operationally (as the Company bought and

operated the projects Riverstone’s Developer 2 operated) and structurally (as the

Company and its management were minority owners in Developer 2, and as

Riverstone controlled the Consent Right over a transfer of the Company’s minority

interest). Their investments also aligned: at the time of the Merger, Riverstone held

approximately 71% of Developer 2’s equity; the Company held 29%; and Company

management held the remaining 1% interest.23

Riverstone and the Company also had a great number of overlapping

fiduciaries, including Michael Garland, Hunter Armistead, Daniel Elkort, Michael

20
Compl. ¶¶ 57, 62.
21
Id. ¶¶ 62–63.
22
See id. ¶¶ 76–80.
23
Id. ¶¶ 58–59; Proxy at 36.

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Lyon, and Esben Pedersen (collectively, the “Officer Defendants”).24 The Officer

Defendants have a long history with Riverstone: “[f]or over a decade Riverstone

has been their co-investor, partner, employer, sponsor, and financial patron.”25

Riverstone and the Officer Defendants formed Developer 1 together, buying

Developer 1’s portfolio from the Officer Defendants’ previous employer.26

Riverstone and the Officer Defendants also co-created the Company and

Developer 2.27

Garland served as Developer 2’s President, as well as Developer 1’s President

and director.28 Armistead took over as Developer 2’s President in April 2019, after

having served as Developer 1’s Executive Director.29 Garland and Armistead would

24
See Compl. ¶¶ 32–36, 51.
25
Id. ¶ 45; see also id. ¶¶ 32–36.
26
Id. ¶¶ 44–45. Riverstone purchased the portfolio from Babcock & Brown LLP, a now-
defunct Australian global investment and advisory firm. Id. ¶ 44. In 2009, Riverstone and
the management team of Babcock & Brown’s North American Energy Group, which
included the Officer Defendants, acquired Babcock & Brown’s wind development
portfolio to form Developer 1. Id. Defendant Hunter Armistead touted Riverstone’s
acquisition, stating that Babcock & Brown’s management team, including the Officer
Defendants, was “free of Babcock, which is a great thing[.]” Id. ¶ 45 (emphasis omitted).
Armistead stated “[i]t was clear we needed to find another party that was interested in
investing in renewables and valued our team . . . . We found the perfect partner in
Riverstone—we have a new backer.” Id.
27
See id. ¶¶ 42, 46, 57.
28
Id. ¶ 24.
29
Id. ¶ 32.

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also serve as Company officers, alongside Elkort, Lyon, and Pedersen.30 Garland

was the Company’s first Chief Executive Officer, and Armistead was the Company’s

Executive Vice President, Business Development.31 Elkort has held multiple roles

at the Company, but most recently acted as its Executive Vice President and Chief

Legal Officer.32 Lyon was the Company’s Chief Financial Officer since 2012, and

he took over as Company President in April 2019.33 Pedersen assumed the Chief

Financial Officer role at that time, after having served as the Company’s Chief

Investment Officer.34 In addition to their roles at the Company, Elkort, Lyon, and

Pedersen served Developer 1 and Developer 2. Elkort served as Developer 1’s

Director of Legal Services and Co-Head of Finance since June 2009 and also served

as a Developer 2 officer.35 Lyon served as Developer 1’s Head of Structured Finance

since May 2010.36 And Pedersen served as Developer 2’s Chief Financial Officer

since May 2018 and Developer 1’s Co-Head of Finance since June 2009.37

30
Id. ¶¶ 24, 32, 51.
31
Id. ¶¶ 24, 32.
32
Id. ¶ 33. Elkort also served as the Company’s General Counsel and Chief Compliance
Officer. Id.
33
Id. ¶ 34.
34
Id. ¶ 35.
35
Id. ¶ 33.
36
Id. ¶ 34.
37
Id. ¶ 35.

9
 Thus, the Officer Defendants were simultaneously tethered to Riverstone,

Developer 1 and then Developer 2, and the Company, facing potential conflicts of

interest as dual fiduciaries of the Company and Developer 1 or 2. 38 The Company

repeatedly noted in public filings these potential conflicts and the likelihood that

they would manifest.39

The entities also had overlapping directors. Of Developer 2’s five directors,

Riverstone appointed three,40 and the Company appointed two: Garland and

Armistead.41 As for the Company’s directors, Riverstone, via Developer 1,

appointed at least four of the initial directors on the Company’s seven-member board

of directors (the “Board”), including Garland.42 Riverstone itself appointed Edmund

John Philip Browne, The Lord Browne of Madingley, who was hired as a Riverstone

Managing Director and Partner in 2007 to help expand its existing energy practice

and identify Company opportunities in the alternative and renewable energy

markets.43 Browne served as a director through the Merger and was involved in the

38
Id. ¶ 52 & n.5.
39
Id. ¶ 52.
40
Id. ¶ 38. Riverstone appointed longtime colleagues of Company director Edmund John
Philip Browne, The Lord Browne of Madingley: Chris Hunt, Robin Duggan, and Alfredo
Marti. Id. ¶ 37.
41
Id. ¶¶ 58–59, 63.
42
Id. ¶¶ 47, 323.
43
Id. ¶ 37.

10
sales process.44 Riverstone also appointed Patricia Bellinger, who had previously

worked under Browne from 2000 through 2007 and left the Board by the time of the

Merger.45 Finally, Developer 1 initially appointed Michael Hoffman, who left the

Board by the time of the Merger.46 In addition to Garland and Browne, Alan R.

Batkin, Richard A. Goodman, Douglas G. Hall, Patricia M. Newson, and Mona K.

Sutphen (collectively, the “Director Defendants,” and together with the Officer

Defendants, the “Individual Defendants”) served as Company directors at the time

of the Merger.47 Batkin, Goodman, Hall, Newson, and Sutphen never held and do

not currently hold positions at Riverstone, Developer 1, or Developer 2.48

The interconnectedness of Riverstone, Developers 1 and 2, and the Company

significantly influenced the Merger process, which lasted from June 2018 through

November 2019. In the end, the two competing bidders were Brookfield Asset

Management Inc. (“Brookfield”) and Buyer, Riverstone’s preferred bidder. Buyer,

a pension fund that had previously invested over $700 million in Riverstone funds,

was a financial acquirer offering cash that would not disturb Riverstone and

44
Id. ¶ 47.
45
Id. Bellinger resigned from the Board on December 28, 2018. Id. ¶ 47 n.4.
46
Id. ¶ 47. Hoffman resigned from the Board on August 6, 2018. He founded one of the
bidders that would go on to express interest in the Company and participate in the Merger
process. Id. ¶ 47 n.3.
47
Id. ¶¶ 24–31. Because of Garland’s dual role as director and officer, he is included in
references to both the Director and Officer Defendants. See id. ¶¶ 31, 36.
48
See id. ¶¶ 25, 27–30.

11
Developer’s operational and structural relationship with the Company. Rather,

Buyer funded Riverstone’s goals of taking the Company private, internalizing

Developer 2, and maintaining the roles of Riverstone, the Officer Defendants, and

the and Director Defendants—all for a low price.

Brookfield, a strategic acquirer, offered a stock-for-stock combination with

its subsidiary, a successful business in the energy sector.49 This offered superior

value to Company stockholders, but nothing for Riverstone and Developer 2. While

Brookfield contemplated internalizing Developer 2 and meeting Riverstone’s other

wants, in the end, Brookfield envisioned and specifically offered the Company and

its public stockholders a clean break from Riverstone and its affiliates.

In the end, Brookfield walked away and Buyer emerged victorious.

According to Plaintiff, Buyer prevailed because Riverstone, armed with insider

Individual Defendants, a conflicted advisor, and the Consent Right, put the Company

up for sale; partnered with Buyer to present a bid for both the Company and

Developer 2 that would cash out the Company’s public stockholders (except for

certain preferred and interested stockholders) at an inadequate price, while capturing

a premium for Developer 2; tilted the scale in favor of Buyer’s bid and against

Brookfield’s premium bid; and failed to adequately disclose material conflicts and

process flaws to Company stockholders. Plaintiff disputes the fairness of the Merger

49
See, e.g., id. ¶ 194.

12
consideration received from the all-cash transaction; contends that Company

fiduciaries breached their duties to stockholders by agreeing to the Merger,

prioritizing Riverstone over Company stockholders, and issuing a supposedly false

and misleading proxy statement; and alleges that the Company’s non-stockholder

affiliates, Riverstone and Developer 2, influenced and controlled the Merger process

to steer the Company toward Buyer and away from more favorable bidders.

With this overview of the Company’s relationship with Riverstone and the

allegedly resultant outcome of the sales process, our story begins in 2017 with the

details of Developer 2’s creation.

B. The Company Launches Pattern Vision 2020 To Meet
Record Demand; Riverstone Obtains The Consent Right
Over Transfers Of The Company’s Stake In Developer 2;
And Company Fiduciaries Tout Excellent Performance.

Riverstone and the Company leveraged the public focus on renewable energy

to improve the Company’s supply chain and capital structure.50 In June 2017, the

Officer Defendants announced “Pattern Vision 2020,” a strategic initiative to double

the Company’s size and revamp its capital structure within three years, with positive

results beginning in 2020.51 The first part of the plan was to wind down

Developer 1’s operational relationship with the Company, replacing Developer 1

50
See id. ¶¶ 53–54.
51
Id. ¶ 56.

13
with Developer 2.52 The Company pitched its investment in Developer 2 as aligning

the Company’s interests with Developer 2 based, at least in part, on the Company’s

rights of first offer.53

Riverstone and the Company became Developer 2 limited partners under its

Second Amended and Restated Limited Partnership Agreement (the “Partnership

Agreement”).54 Section 12.01 of the Partnership Agreement gave Developer 2 the

Consent Right over transfers of any limited partner’s interests in Developer 2 by a

limited partner other than Riverstone—such as the Company.55 Developer 2’s board

could withhold its consent in its “sole discretion”; was “entitled to consider only

such interests and factors as it desires and shall have no duty or obligation to give

any consideration to any interest of, or factors affecting, the Partnership, any Partner

or any Transferee”; and could exercise its discretion without being “subject to any

52
Id. ¶¶ 2, 38, 57–59.
53
Id. ¶ 60.
54
Id.
55
Riverstone is the only limited partner exempted from the Consent Right. Id. ¶ 62. The
Company also had substantial leverage over Developer 2 under the Partnership Agreement.
Under Section 3.2, if Developer 2 proposed to “Transfer any material portion of the Equity
Interests or all or substantially all of the assets of [Developer 2],” the Company had a right
to receive notice and offer to purchase those equity interests or assets within 45 days.
Id. ¶ 69. If the Company’s offer was rejected, Developer 2 could only sell the equity
interests or assets within six months for an amount greater than or equal to 110% of the
Company’s offer price. Id. And under Section 9.06(g), Developer 2 was required to obtain
the Company’s consent before initiating or settling litigation concerning over $10 million.
Id. ¶ 70 (emphasis omitted).

14
other or different standards imposed by this Agreement or any other agreement

contemplated hereby or under the Act or any other law, rule or regulation.”56 The

Consent Right restricted transfers only if the Company sold its stake via merger or

consolidation. It did not restrict the Company’s right to acquire a third party, and

therefore left an opportunity to structure a potential Company merger to avoid

triggering the Consent Right.57 Because Riverstone dominated over Developer 2

and its board, Developer 2’s Consent Right effectively gave Riverstone power over

any third-party acquisition of the Company, even if Riverstone liquidated its

Company stake.58

The second part of Pattern Vision 2020 involved selling a significant stake in

the enterprise to a third party, Public Sector Pension Investment Board (“PSP”).59

PSP purchased 9.9% of the Company directly from Developer 1. 60 PSP also

indirectly acquired 22% of Developer 2 through Riverstone funds, which was not

publicly disclosed at the time of the acquisition or later in connection with the

56
Id. ¶ 63 (emphasis omitted).
57
Id. ¶¶ 62, 67–68; Proxy at 36.
58
Compl. ¶¶ 62–64. The Company and Developer 2 acknowledged this reality in the
Amended and Restated Purchase Rights Agreement dated as of June 16, 2017 (the
“Purchase Rights Agreement”). Id. ¶ 66. At this time, Developer 1’s consent right lapsed
under the shareholder agreement Developer 1 and the Company executed in connection
with the IPO, and therefore Riverstone could not use Developer 1 as a vehicle to block the
Company mergers. Id. ¶ 64.
59
Id. ¶ 71.
60
Id. ¶¶ 71–72.

15
Merger.61 Thus, PSP became both the Company’s largest individual stockholder and

a significant undisclosed Developer 2 stakeholder alongside Riverstone.62

The Company assured investors that Pattern Vision 2020 was progressing as

planned.63 In November 2017, Garland told public investors that the Company had

“a plan for creating long-term value for investors.”64 Garland pressed that the

Company’s June 2017 Developer 2 investment, along with an October 2017 equity

raise, “allows us to begin the next phase of our growth strategy” with “excellent

growth opportunities,” including “the near-term iROFO [identified right of first

refusal] assets . . . , our investment in [Developer 2], and the expanded development

pipeline of more than 10 gigawatts at [Developer 2].”65

Garland made similar assurances to Company investors throughout 2018,

repeating that the Company continued to execute on Pattern Vision 2020 and

expected resultant and substantial benefits as early as 2020. 66 Among those

61
Id. ¶¶ 71–75, 277.
62
Id. ¶ 71. PSP also entered into a joint venture agreement with the Company where it
received the right to co-invest in renewable energy projects alongside the Company up to
an aggregate amount of $500 million. Id. ¶ 72. The joint venture agreement contained a
twelve-month standstill provision. Id. ¶ 73. Thus, despite the fact that the Company’s
strategic plan was a three-year plan and forecasted positive results beginning in 2020, PSP
was free to facilitate a sale of the Company by June 16, 2018. Id.
63
Id. ¶ 76.
64
Id. ¶ 78 (emphasis omitted).
65
Id. (first alteration in original).
66
Id. ¶ 79.

16
assurances was the representation that “that the operating portfolio can sustain the

existing level without raising common equity any time soon.”67

Company management continued to crow about Pattern Vision 2020 and its

trajectory through 2019.68 In particular, on March 1, May 10, and August 6, Garland

and Pederson told investors there was limited risk that the Company would need to

access additional capital to keep its asset portfolio operating; that the Company did

not intend to raise common equity capital; that even so, the Company had ample

liquidity and financing options for future growth, including ready access to outside

capital; and that the Company’s investment in Developer 2 would break even and

net positive by 2020.69 In August, Garland projected that gains realized from

Developer 2’s third-party sales would come to subsidize future development projects

and reduce the Company’s future capital contributions to Developer 2 and concluded

that the Company’s investment in Developer 2 “secure[d] [the Company] access to

continued growth opportunities as well as material and durable returns that [the

Company] anticipate[d] [would] begin next year.”70

67
Id.
68
Id. ¶¶ 81–90.
69
Id. ¶¶ 81–89.
70
Id. ¶ 89 (four of five alterations in original). The projections that formed the basis of the
Merger’s fairness opinion projected hundreds of millions of dollars in distributions from
Developer 2 and only $11 million of future investments from the Company into
Developer 2. Id. ¶ 82 n.9.

17
 Thus, throughout 2018 and 2019, Company investors repeatedly heard about

the Company’s stable and promising liquidity and growth as a standalone entity

under Pattern Vision 2020, with no need to raise common equity capital through

acquisition. Peddling these upward projections, the Company did not face an exigent

need to be acquired. But, unbeknownst to the investors, in June 2018, Riverstone

and the Officer Defendants had commenced a sales process with the Board’s full

cooperation.71

C. The Company Commences A Sales Process With
Riverstone’s Involvement.

At some time prior to June 2018, Riverstone considered taking the Company

private, retaining Goldman Sachs & Co. (“Goldman”) and using the Company’s

confidential information in the process.72 Riverstone did not follow through on

taking the Company private. Rather, on June 5, 2018, the Board held its annual

meeting, during which it resolved to commence a sales process, despite the

Company’s strong independent performance.73 Without raising the issue to the

Board’s disinterested and independent members, Garland and Riverstone-affiliated

management had contacted an advisor, Evercore Group LLC (“Evercore”), in time

to get a complete presentation that “included preliminary potential valuations for

71
Id. ¶ 90.
72
Id. ¶ 93; Proxy at 36.
73
Compl. ¶¶ 98, 106–07.

18
various strategic options.”74 Before the June 5 meeting, management circulated

Evercore’s presentation, together with a memo outlining its view on the Company’s

strategic alternatives.75

Garland led the meeting, and advocated that the Board “consider a potential

sale of the business.”76 The Board discussed “the value which investors and

potential buyers ascribed to development activities” and “the assumptions made in

the Evercore valuation materials[.]”77 Chris Hunt, a Developer 2 director and

Riverstone partner, but not a Company fiduciary, attended the meeting and accessed

Evercore’s evaluation.78 The Board solicited Riverstone’s views on a potential

transaction, while simultaneously identifying Riverstone as a prospective acquirer

that “may be interested in participating in a potential transaction.” 79 Despite having

the opportunity to speak, Riverstone did not disclose to the Board that it had tinkered

with the idea of a take-private before the June 5 meeting. The Board concluded that

the Company should begin to engage in negotiations with interested parties.80 The

74
Id. ¶ 95 (emphasis omitted).
75
Id. The Company refused to produce both the management memo and the Evercore
presentation in response to Plaintiff’s Section 220 Demand.
76
Id. ¶ 94.
77
Id. ¶ 96 (emphasis omitted) (alteration in original).
78
Id. ¶¶ 93, 97. Hunt’s attendance at the June 5 meeting was not disclosed in the Proxy.
Id. ¶ 93.
79
Id. ¶ 97 (emphasis omitted).
80
Id. ¶ 92; Proxy at 36–37.

19
Board recognized at the outset that Riverstone was conflicted with respect to any

sale, including because Riverstone was a potential acquirer.81

D. The Board Forms The Special Committee, Which Kicks Off
The Sales Process.

On June 5, the Board adopted a resolution creating a special committee (the

“Special Committee”) comprised of Bellinger, Batkin (chairperson), Hall, and

Newson.82 The resolution stated that the Board “determined that it is in the best

interests of the Company and its shareholders to conduct a strategic review and

consider and evaluate possible strategic transactions outside of the ordinary course

of business with the potential to increase value to the Company’s shareholders,” and

that “the Board believes that it is in the best interests of the Company and its

shareholders to establish a special committee of the Board comprised solely of

disinterested and independent directors . . . to consider and evaluate Strategic

Transactions and all matters pertaining thereto on behalf of the Company.”83 The

Board exclusively delegated to the Special Committee “all the power and authority

of the Board to consider and evaluate Strategic Transactions and all matters

81
Compl. ¶ 105.
82
Id. ¶¶ 99–100; Weinberger Decl. Ex. 1; Proxy at 37.
83
Weinberger Decl. Ex. 1 at PEGI-00000472.

20
pertaining thereto on behalf of the Company,” as well as the authority to appoint

advisors and Company officers to assist in the process.84

In December 2018, Bellinger resigned from the Board, and Goodman and

Sutphen were appointed to the Board.85 Goodman and Sutphen were then appointed

to the Special Committee.86 Accordingly, the Special Committee that ultimately

oversaw the sales process from December 2018 until the Merger’s closing consisted

of Batkin as chairperson, Hall, Newson, Goodman, and Sutphen, all of whom the

Company characterized as disinterested and independent.87

Garland and Browne were disqualified from serving on the Special

Committee because they harbored obvious conflicts arising out of their relationships

with Riverstone: Garland was a Developer 2 officer, director, and investor, and

Browne was a longtime Riverstone partner and managing director.88 Even so, the

Special Committee allowed Browne to attend the majority of Special Committee

meetings in his capacity as Riverstone’s representative and to attend the Special

Committee’s executive sessions where Company management was specifically

84
Id. at PEGI-00000472, -73.
85
Compl. ¶ 100.
86
Id.
87
Id. ¶¶ 99–100; Proxy at 36, 38.
88
Compl. ¶¶ 101–02.

21
excluded due to conflicts.89 The Special Committee also permitted Garland to have

substantial involvement in its process.90 The Special Committee delegated primary

responsibility for engaging with the Company’s potential suitors to Garland, despite

his status as a Riverstone fiduciary and the risk he would disclose material sales

process information to Riverstone.91

The Special Committee met for the first time on July 13, 2018 and considered

retaining financial advisors.92 Before that meeting, Batkin and Hall discussed

potential advisors with Garland and Lyon.93 Garland and Lyon preferred Goldman,

which had a longstanding relationship with Riverstone.94 Riverstone was founded

and operated by Goldman alumni; Goldman owned at least a 12% stake in

Riverstone that entitled certain Goldman funds to a proportional cut of management

fees and profits; and in the years before the Merger, Goldman received tens of

millions of dollars in fees from Riverstone.95 Furthermore, Goldman had advised

89
Id. ¶¶ 102–04. The Proxy does not disclose Browne’s attendance at any Special
Committee meeting. Id. ¶ 104.
90
Id. ¶ 103.
91
Id. ¶ 105.
92
Id. ¶ 106.
93
Id.
94
Id. ¶¶ 98, 106–07.
95
Id. ¶ 107.

22
Riverstone on its exploration of taking the Company private, which was disclosed

in a July 2, 2018 letter to the Special Committee.96

Despite Garland and Lyon’s push for Goldman, the Special Committee

decided to retain only Evercore and to revisit the possibility of retaining Goldman

at a later time.97 The Special Committee also engaged Paul, Weiss, Rifkind,

Wharton & Garrison LLP (“Paul Weiss”) as independent legal counsel.98

The Special Committee met again on August 2.99 Batkin proposed the

Special Committee approach “both Riverstone and [PSP] . . . at the outset, given

their current investments in the Company and the Pattern Development Companies,

. . . their knowledge of potential partners and their familiarity with management.”100

In accordance with Batkin’s suggestion, when the Special Committee met next on

October 29, a PSP representative attended, as well as Browne, as Riverstone’s

representative.101 At that meeting, an Evercore presentation reviewed the

Company’s projections and valuations under different strategic alternatives.102

With Riverstone and PSP at the table, meeting participants also discussed the

96
Id. ¶ 98.
97
Id. ¶ 108; Proxy at 37.
98
Proxy at 37.
99
Compl. ¶ 109; Proxy at 37.
100
Compl. ¶ 109.
101
Id. ¶ 110; Proxy at 37.
102
Compl. ¶ 111.

23
“potential for a transaction with PSP, Riverstone, or another party.”103 Garland also

explained that he had been approached by both Brookfield and Party B about a

potential transaction.104 Paul Weiss outlined a number of process.105

The Special Committee, plus Browne, met again the following day, October

30.106 The Special Committee authorized Garland to meet with both Brookfield and

Party B and solicit their interest in making a strategic proposal for the Company.107

In early November 2018, the Special Committee established conduct

guidelines for management and Board members who were not members of the

Special Committee “in order to help ensure that the Special Committee would be

able to function independently and effectively execute its mandate.”108 These

guidelines prohibited Company management from engaging with any potential

parties to a strategic transaction without the Special Committee’s express

consent.109

103
Id. (alteration omitted).
104
Id. This opinion and the Proxy refer to other bidders as “Party —” for confidentiality
purposes. See D.I. 69 at 13–17.
105
Proxy at 37.
106
Id.; Compl. ¶ 112.
107
Compl. ¶ 112.
108
Proxy at 37.
109
Id. at 37–38.

24
 On November 19, the Board met, and Garland informed the Board that

meetings and negotiations were progressing with Brookfield, but Party B was not

interested in pursuing a transaction at that time.110

E. The Special Committee Engages With Numerous Bidders.

Over the next year, the Special Committee would engage with several bidders,

gaining momentum in the summer of 2019. While the Complaint’s allegations focus

primarily on the tale of two bidders—Buyer and Brookfield—other bidders’

indications of interest and the Special Committee’s response are important to a full

understanding of the sale process. The Special Committee’s engagement with these

other bidders, referred to in the Proxy as Party B and Party D, was interspersed with
111
its engagement with Brookfield and Buyer. Each bidder was pressed for a

premium, and Party B and Party D received confidential information and executed

confidentiality agreements with both the Company and Riverstone, just as

Brookfield and Buyer would do.112

And, just as Brookfield and Buyer would, Party B and Party D demonstrated

an understanding that any transaction needed to include Developer 2 and to satisfy

110
Id. at 38.
111
See id. at 37–53. Buyer, Brookfield, Party B, and Party D emerged as the primary
prospects, but other bidders also expressed interest and were considered.
112
See, e.g., id. at 43, 48. After the Special Committee noted it could not give competitively
sensitive due diligence to Party B because Party B was a significant competitor, on
September 6, Party B and the Company entered into a confidentiality agreement; the

25
Riverstone. Party D’s first offer, on July 8, 2019, was to acquire the Company for

$25 in cash and Developer 2 at a multiple of 1.6x invested capital in either cash or

equity.113 On July 15, Party D revised its offer for Developer 2 to 1.8x invested

capital plus a potential earn-out, in response to feedback that an attractive and

competitive offer would offer a premium for Developer 2.114 On August 15,

reaffirming its interest to cash out the Company’s public stockholders and merge the

Company with Developer 2 in an equity-based transaction, Party D noted that, “[a]s

you are aware, we are engaged in productive discussions with [Riverstone] on the

terms under which we would govern the new combined company.”115 Bidders were

under the impression that any post-closing entity would be subjected to Riverstone’s

continued presence.

On August 19, the Special Committee discussed Party D’s offer and

authorized Evercore and Goldman to request written proposals based on publicly

available information.116 At an August 26 Special Committee meeting, Evercore

reported Party D orally raised its offer for the Company to $26.50 per share.117 The

Company, Party B, and a Riverstone affiliate entered into a side letter. See Compl. ¶¶ 170;
Proxy at 47, 48.
113
Compl. ¶ 149; Proxy at 38.
114
Compl. ¶ 149; see also Proxy at 43.
115
Compl. ¶ 160.
116
Proxy at 45.
117
Compl. ¶ 168 n.20.

26
next day, August 27, Party B submitted to a non-binding letter of interest to acquire

the Company in an all-cash transaction for $25 to $28 per share, and 100% of

Developer 2 at an unspecified price.118

On September 20, Party D upped its cash offer for the Company to $26.75 per

share, which included Developer 2 at a valuation of approximately $800 million plus

an earnout for the 71% not owned by the Company.119 Party D would have allowed

Riverstone to hold equity in the combined entity.120 Party D stated it had reached an

agreement on all key terms with Riverstone, describing Riverstone as one of “the

three legs of the stool that are critical to accomplishing our objective of acquiring

and combining [the Company] and [Developer 2].”121 On September 23, Evercore

sent Party D a draft merger agreement, and eventually arranged a meeting with

Party D, the Company, and Riverstone to discuss the transaction.122

In the final weeks of the process, the Special Committee was considering

Brookfield, Buyer, Party B, and Party D. On September 29, the Special Committee

determined to proceed cautiously with Party B, given that Party B was a competitor

118
Id. ¶ 169; Proxy at 46.
119
Compl. ¶ 181.
120
Id.
121
Id.
122
Proxy at 49; see also id. at 50 (noting the Company met with Party B and Riverstone on
September 25).

27
and its “indicative price did not exceed prices offered by other potential buyers.”123

By mid-October, Party B had determined it was not willing to move forward.124 On

October 17, Evercore instructed Brookfield, Buyer, and Party D to submit their “best

and final” offers by October 28.125 Party D did not submit a best and final offer and

ultimately withdrew.126

F. Brookfield Proposes A Merger With The Company; The
Special Committee Seeks A Premium; And The Parties Begin
Due Diligence.

Throughout January and February 2019, Garland and other members of

Company management continued discussions with Brookfield.127 On January 14

and January 15, management met with Brookfield representatives.128

On January 16, the Board met with Company management.129 Garland

informed the Board that at the Special Committee’s direction, he and other members

of Company management had met with Brookfield and engaged in initial discussions

regarding a potential strategic transaction involving the Company, Brookfield, and

123
Id. at 50.
124
Id. at 51.
125
Id.; Compl. ¶ 191.
126
Proxy at 52.
127
Compl. ¶ 113.
128
Proxy at 38.
129
Id.

28
TerraForm Power, Inc. (“TerraForm”).130 TerraForm is publicly traded and

Brookfield-controlled.131 At that time, none of the Company’s material confidential

information had been shared with Brookfield and TerraForm.132

On January 25, the Special Committee met for an update on management’s

discussions with Brookfield.133 Management developed and summarized a stock-

for-stock combination of the Company and TerraForm at an at-market exchange

ratio (i.e., no premium).134 The Special Committee excused management from the

meeting and held an executive session to further evaluate the TerraForm proposal

and consider next steps.135 The Special Committee asked its advisors, Paul Weiss

and Evercore, to evaluate an at-market share exchange as a potential transaction.136

On February 7, Garland revisited Brookfield and TerraForm.137 On February

15, at the Special Committee’s direction, Batkin, Garland and Evercore

representatives met with Brookfield representatives, and Brookfield proposed an at-

130
Id.
131
Id.
132
Id.
133
Id.; Compl. ¶ 113.
134
Proxy at 38.
135
Id.
136
Id.
137
Id.

29
market all-stock merger of the Company and TerraForm.138 On February 21,

Brookfield submitted a term sheet. Brookfield expressly indicated that its offer was

not conditioned an acquisition of Developer 2: under the proposal as submitted,

Riverstone could be excluded from the transaction.139

That same day, after receiving Brookfield’s proposal, the Special Committee

met.140 At that meeting, Garland flagged Developer 2’s Consent Right, telling the

Special Committee that Brookfield’s proposed transaction could “trigger existing

consent rights held by” Riverstone.141 The Special Committee also considered that

Brookfield’s offer did not include a premium, but decided to respond to the offer. It

directed Paul Weiss and Evercore “to analyze the proposed transaction’s structure

and terms, including with respect to issues relating to [the Company’s] relationship

with [Developer 2] and the absence of any premium to be offered to holders of

Company Common Stock,”142 and to prepare a response.143 The Special Committee

also authorized mutual due diligence, subject to a confidentiality agreement.144

138
Id.
139
Compl. ¶ 114.
140
Id. ¶ 116; Proxy at 39.
141
Compl. ¶ 116.
142
Proxy at 39.
143
Compl. ¶ 118.
144
Proxy at 39.

30
Accordingly, on February 28, the Company executed a confidentiality agreement

with Brookfield and TerraForm that included standstill provisions.145

The Special Committee met again on March 9 to review Brookfield’s term

sheet, joined by Paul Weiss, Evercore, Garland, Browne, and Elkort, Chief Legal

Officer for the Company and Developer 2.146 Batkin and Garland updated the

Special Committee regarding recent discussions with Brookfield. Garland told the

Special Committee that it would need to evaluate the Consent Right.147 Elkort was

even more explicit.148 The meeting minutes state that Elkort “emphasized” to the

Special Committee that “the need for [Riverstone’s] support for any potential . . .

transaction should not be underestimated because [Riverstone’s] rights to consent

that would likely be implicated by the proposed transaction appeared to be very

broad.”149 Nonetheless, based on Evercore’s advice, the Special Committee

determined to seek from Brookfield a 15% premium to the trading price of Company

common stock.150

145
Id.
146
Compl. ¶¶ 116–17; Proxy at 39.
147
Compl. ¶ 116.
148
Id. ¶ 117.
149
Id.
150
Proxy at 39.

31
 At the meeting’s conclusion, the Special Committee met in executive session,

with management “excused from the meeting,” but with Browne still in

attendance.151 During that session, the Special Committee directed Paul Weiss and

Evercore to revise Brookfield’s term sheet.152 The Special Committee also

established “guidelines for management’s discussions with the various parties.”153

The Special Committee determined that the Company would deliver the revised term

sheet to Brookfield; Batkin would continue to coordinate, and have the option to be

involved in, discussions with Brookfield and any other potential transaction parties;

and Batkin would continue to serve as the Special Committee’s representative.154

The Special Committee authorized Garland to “notify” Developer 2 and Riverstone

about the Company’s discussions with Brookfield, but directed that Garland was not

to “divulg[e] any specific terms” to Developer 2 or Riverstone.155 At the close of

the executive session, the Special Committee instructed Paul Weiss to inform

management of the following:

151
Compl. ¶ 117; Proxy at 39.
152
Compl. ¶ 118.
153
Id.
154
Proxy at 39.
155
Compl. ¶ 119.

32
 The Committee noted that it shall continue to be informed of
developments arising from any of the discussions that it had authorized,
that management and the advisors shall refrain from taking any further
steps or engaging in any further discussions without the express
authorization of the Committee and that the Committee shall retain final
decision-making authority with respect to [the sales process].156

These instructions bolstered the instructions the Special Committee provided

management and Browne in November 2018. The Special Committee did not

formally meet again until May.157

Paul Weiss and Evercore revised the Brookfield term sheet as instructed;

management did not assist.158 On March 11, the Company provided Brookfield with

a revised term sheet that contemplated a Company-TerraForm merger with a 15%

premium for Company stockholders.159 The revised term sheet recognized the

Consent Right was readily circumvented, stating that the parties would “need to

structure the transaction as a merger of [TerraForm] into a subsidiary of [the

Company] due to” the Consent Right and that that the “structure” would “not affect

the economic terms of the transaction.”160 On March 20—with the Special

Committee’s authorization—Batkin, Company management, Evercore, and Paul

156
Id. ¶ 120 (emphasis omitted).
157
Id. ¶ 122.
158
Id. ¶ 121.
159
Id.; Proxy at 39.
160
Compl. ¶ 121 (emphasis omitted).

33
Weiss met with Brookfield to discuss the potential Company-TerraForm merger.161

They decided to move forward with due diligence.162

After it became evident that a Company-Terraform merger could be

accomplished without including Developer 2 or triggering the Consent Right,

Garland engaged in discussions with Brookfield, Riverstone, and Buyer that were

not sanctioned by the Special Committee.163 On March 12, Garland had an

unauthorized communication with representatives of Brookfield and TerraForm

about a potential transaction involving the Company, Brookfield, and TerraForm.164

And on April 11, the Company, Brookfield, and a Riverstone affiliate entered into a

three-party side letter to the Company-Brookfield confidentiality agreement to

facilitate Brookfield’s due diligence review of Developer 2.165 The Company and

Riverstone’s affiliate entered into a mutual confidentiality agreement.166 From this

timeline, it is reasonable to infer that Company representatives revealed to

161
Proxy at 39–40.
162
See id. at 40.
163
Compl. ¶¶ 120, 123–24.
164
Compl. ¶ 123; compare Proxy at 39 (“On March 12, 2019, Mr. Garland spoke with
representatives of [Brookfield] and [TerraForm] about a potential transaction involving
Pattern, [Brookfield] and [TerraForm].”), with Compl. ¶ 123 (“On March 20, 2019, as
authorized by the Special Committee, Mr. Batkin, [Company] management and
representatives of Evercore and Paul Weiss met with representatives of Party A to discuss
the terms of a potential transaction involving [the Company] and Company A.” (emphasis
added)).
165
Proxy at 40.
166
Id.

34
Brookfield the sales process’ goal of internalizing Developer 2 and including

Riverstone. This conclusion is consistent with Brookfield’s later statement that “it

had been told early in the process that [the Company] believed it was desirable for

[Company]’s senior management to maintain their positions in the combined

company, including their dual positions at [Developer] 2” and “that it was a priority

for [the Company] to internalize [Developer] 2 as part of a transaction.”167

Aware that Developer 2 was in play, on April 16, Brookfield met with Batkin,

Company management met, and the “Riverstone Representatives”—specifically,

two Developer 2 directors168—“to discuss how [Developer 2] would be affected by

a transaction.”169 The Riverstone Representatives indicated Riverstone would be

open to considering any proposals from Brookfield involving Developer 2 and the

Company.170 Brookfield responded that would be potentially interested in a

combination of the Company and TerraForm, with the surviving company directly

acquiring Developer 2.171 Throughout April 2019, at the direction of the Special

Committee, the Company continued due diligence into Brookfield’s proposal.172

167
Compl. ¶ 174.
168
Id. ¶ 124.
169
Proxy at 40.
170
Id.
171
Id.
172
Id.

35
 G. The Special Committee Hires Goldman; Garland Identifies
Buyer As A Potential Bidder.

As due diligence progressed with Brookfield, Goldman resurfaced. In early

April, the Special Committee retained Goldman as “a second financial advisor” with

respect to evaluating proposals for a potential transaction, notwithstanding the fact

that Goldman had long-term and lucrative relationships with Buyer and

Riverstone,173 and had advised Riverstone on a potential take-private of the

Company using confidential information provided by Riverstone shortly before the

sales process began.174 The Special Committee never requested access to the

materials Goldman prepared for Riverstone, even after Goldman offered to provide

them.175

Interestingly, the Special Committee retained Goldman only informally in

April and, as alleged, involved Goldman in the sales process throughout April and

May.176 It did not formally engage Goldman to evaluate a potential transaction and

173
Compl. ¶ 271 & n.26.
174
Id. ¶¶ 107, 134, 136; Proxy at 40.
175
Compl. ¶ 107. The Partnership Agreement restricted Riverstone from using any
confidential information relating to, among others, the Company, which had been entrusted
to Developer 2 with the expectation that the information be kept confidential. Kirby Decl.
Ex. 25 § 15.06. Plaintiff alleges that the Board did nothing to prevent Riverstone from
leveraging its access to the Company’s confidential information and that no information
regarding Riverstone’s allegedly impermissible information sharing with Goldman was
disclosed in the Proxy. Compl. ¶ 98.
176
Compare Proxy at 40 (“In early April 2019, the members of the Special Committee
determined to continue to engage Evercore with respect to evaluating proposals with
respect to a potential transaction. The Special Committee also determined to retain

36
execute an engagement letter until May 24.177 Goldman’s engagement letter

provided it stood to receive $2 million upon the announcement of a Merger and an

additional $4 million upon the execution of the Merger.178 The Company,

Riverstone, and Buyer also retained the right to provide Goldman with an additional

$3 million following the execution of the merger if they saw fit.179 This information

was not disclosed in the Proxy, and neither the Proxy nor the Section 220 production

explain why the Special Committee decided to belatedly retain Goldman.180

Throughout April, the push to satisfy Riverstone and Developer 2 continued.

In addition to expanding the scope of the potential Brookfield transaction to include

Developer 2, Garland turned his attentions to another potential bidder: Buyer, which

had established investment ties to Riverstone investment funds and would ultimately

prevail in purchasing the Company and Developer 2.181 On April 15, Garland had

an unauthorized meeting with the Riverstone Representatives and Buyer

Goldman . . . .”), with id. at 41 (stating that “[o]n May 24, 2019,” Goldman attended a
Special Committee meeting, and after being excused from that meeting, the Special
Committee “considered amending its formal engagement of Evercore and formally
engaging Goldman Sachs” and ultimately “adopted resolutions to amend its formal
engagement letter with Evercore and to execute an engagement letter with Goldman Sachs
with respect to evaluating a potential transaction”).
177
Id. at 41.
178
Compl. ¶ 271.
179
Id.
180
Id.
181
Id. ¶ 124.

37
(the “April 15 Meeting”).182 There, Buyer “indicated that [it] was potentially

interested in acquiring [the Company].”183 According to Merger disclosures, while

Garland eventually disclosed the April 15 Meeting to Batkin and the Special

Committee, it took him a month to do so.184

The Special Committee met on May 2 with Company management, Paul

Weiss, Evercore, and Goldman.185 While the Proxy states Garland disclosed the

April 15 Meeting at the May 2 Special Committee meeting, this is unsupported by

the meeting minutes.186 The meeting minutes do not mention Buyer, let alone that

Garland had met with Riverstone and Buyer weeks earlier to discuss Buyer

potentially acquiring the Company.187 In another wrinkle, the minutes state Garland

told the Special Committee that Riverstone had suggested taking the Company

private, but “dropped the suggestion following consideration of conflicts and certain

contractual obligations.”188 According to Plaintiff, Riverstone had not “dropped the

suggestion” as Garland represented.189 Rather, Riverstone, with Garland’s active

182
Id.
183
Id.; Proxy at 40.
184
Proxy at 40.
185
Compl. ¶¶ 126–27; Proxy at 40.
186
Compare Compl. ¶¶ 125–27, 137, with Proxy at 40.
187
Compl. ¶ 126.
188
Id. ¶ 127.
189
Id.

38
involvement, sought a deal by which it would take the Company private along with

Buyer.190

On May 15, a month after Garland’s April 15 Meeting, Batkin informed the

Special Committee that Garland had spoken to Buyer via a memo

(the “Batkin Memo”).191 The Batkin Memo stated that Garland had discussions with

Riverstone and Buyer concerning a potential acquisition by Buyer and that Garland

“spoke to” a Buyer representative who Garland “knew when this person worked at

General Electric.”192 The Batkin Memo did not disclose to the Special Committee

that Garland’s unauthorized discussions had occurred a full month earlier.193 It also

gave the impression that Garland spoke to Buyer independently, while the Proxy

discloses Garland met with Buyer and Riverstone together.194 This was the only

memo Batkin sent to the Special Committee throughout the sales process.

A May 24 Special Committee meeting focused on Buyer’s arrival.195 The

meeting minutes state that Garland “noted that in addition to meeting with

[Brookfield], there would also be meetings the following week with [Buyer] and

190
Id.
191
Id. ¶ 128.
192
Id.
193
Id.
194
Compare id., with Proxy at 40.
195
Compl. ¶ 139.

39
[Riverstone], as [Buyer] had expressed interest in potentially structuring a strategic

transaction,” and that Buyer’s “approach to the Company . . . had come about

indirectly.”196 Garland still did not fully disclose to the Special Committee that he

had met with Buyer and Riverstone together over a month earlier, and that Buyer’s

interest as a potential bidder was piqued more directly than Garland suggested.197

On May 28, Buyer and the Company entered into a confidentiality agreement,

and Riverstone entered into a side letter to facilitate sharing Developer 2

information.198 By June, Buyer and Riverstone were believed to be working together

on a proposal.199 At some point, without the Special Committee’s approval,

Goldman joined these discussions which included talk of a take-private action.200

After receiving the Batkin Memo and learning of Garland’s unauthorized

communications, the Special Committee took no steps to reestablish control of the

merger process; rather, it continued delegating substantial authority and

responsibility to Garland.201 The Special Committee permitted Garland to continue

meeting alone with Brookfield, Buyer, and Riverstone.202 And he continued

196
Id. ¶ 140.
197
Id.
198
Proxy at 41.
199
Compl. ¶ 143.
200
See id. ¶¶ 306, 311(a)–(b).
201
Id. ¶ 133.
202
Id. ¶ 141.

40
wielding authority in the sales process.203 Plaintiff alleges this passivity suspiciously

followed Brookfield’s expression of interest in proceeding with a transaction that

might exclude Developer 2, as well as the tension between (1) Garland and Elkort’s

insistence to the Special Committee that Riverstone had a “broad” Consent Right

such that Riverstone would have to approve of any merger, and (3) Paul Weiss and

Evercore’s statements that the Consent Right was easily circumvented. 204

H. The Special Committee Continues Considering Brookfield.

The Special Committee continued to court Brookfield. At the May 2 meeting,

Batkin and Garland summarized recent discussions with Brookfield and Riverstone,

and Garland detailed the ongoing due diligence process.205 The meeting minutes

indicate that Brookfield remained interested, regardless of whether the transaction

included Developer 2.206 But Garland noted that Riverstone preferred any merger to

involve Developer 2.207 The Special Committee excused management and

commenced an executive session to evaluate potential issues with Brookfield,

including the Consent Right.208 The Special Committee reiterated the “potential

203
Id. ¶ 133.
204
Id. ¶ 130.
205
Proxy at 40.
206
Compl. ¶ 138.
207
Id.
208
Proxy at 40.

41
conflicts involving certain members of senior management.”209 Yet the minutes

show Browne attended the entire meeting, including the executive session.210

Brookfield was also considered at the May 24 meeting. Goldman and

Evercore noted that Brookfield had “indicated a desire to seek” Riverstone’s consent

to any transaction with the Company, but that a “[Company]-on-top triangular

merger may not trigger [Riverstone’s] consent right.”211 Goldman and Evercore also

listed the benefits of a Brookfield transaction: the creation of a leading renewables

platform with enhanced scale and diversification; a strong sponsor in Brookfield that

would team with best-in-class management at the Company; synergies that would

drive cash flow and support dividend growth; an expanded project development

portfolio; a reduced reliance on external financing with no need to raise common

equity through 2023; a stronger credit profile; and a better governance structure that

aligns the incentives of the sponsor and public stockholders.212

On May 29, at the Special Committee’s direction, Garland met again with

Brookfield; Riverstone attended that meeting, despite having started working with

Buyer on a potential acquisition.213 Garland and Riverstone “provide[d] an overview

209
Compl. ¶ 138.
210
Id. ¶ 134 n.14.
211
Id. ¶ 139.
212
Id.
213
Id. ¶ 141.

42
of [Developer 2] and its business plan to [Brookfield]” and answered questions.214

That same day, at the Special Committee’s direction, Garland met with

representatives of Buyer and Riverstone to do the same.215

On May 30, Batkin met with Company management, Paul Weiss, Evercore,

and Brookfield “to discuss key open issues identified by the Special Committee with

respect to a combination of [the Company] and [TerraForm], including price and the

need to insulate holders of Company Common Stock from the risks associated with”

litigation TerraForm was embroiled in.216 Those conversations proved productive.

On May 31, Brookfield submitted a revised term sheet reflecting not only

TerraForm’s all-stock acquisition at the 15% premium that the Company had

contemplated back in March, but also a concurrent acquisition of Developer 2 for a

cash price to be negotiated by the Company and Riverstone, such that Riverstone

would be cashed out and no longer have any ownership interest in the Company or

Developer 2 post-closing.217

The Special Committee met on the next day to review Brookfield’s

submission and “discuss[] next steps with respect to [Brookfield]’s recent

214
Proxy at 41.
215
Id.
216
Id.
217
Compl. ¶ 142; Proxy at 41.

43
proposal”;218 consistent with ongoing practice, Browne was present for the entire

meeting.219 Garland reported to the Special Committee that “[Riverstone] had

indicated it would work with all parties potentially interested in [Developer 2] to

provide information,” but that “it also appeared that [Buyer and Riverstone] may be

working with each other regarding a potential proposal.”220 As alleged, this

statement was a half-truth: Garland had known since at least mid-April that Buyer

and Riverstone were working together.221

Nonetheless, the Special Committee pressed forward with Brookfield.222 On

June 4, at the Special Committee’s direction, Paul Weiss sent Brookfield a marked-

up term sheet, along with a request that Brookfield confirm that the 15% premium

was not subject to continued due diligence.223 The revised term sheet reflected

certain structural changes designed to insulate the Company’s common stockholders

from potential liabilities associated with ongoing litigation involving TerraForm.224

218
Proxy at 41.
219
Compl. ¶ 143 & n.16.
220
Id. ¶ 143 (emphasis omitted); Proxy at 41 (“The Special Committee also discussed
[Buyer]’s interest in a potential transaction.”).
221
Compl. ¶ 143.
222
Proxy at 41.
223
Id.
224
Id.

44
On June 5, Paul Weiss and Company management met with Brookfield and its

outside counsel; they met again on June 7.225

I. The Special Committee Entertains Competitive Bids From
Brookfield, Buyer, And Others.

Between May and October 2019, Brookfield presented “several updated and

enhanced offers” to the Special Committee and Riverstone.226 The terms of

Brookfield’s offers were economically superior to Buyer’s.227 But Buyer stayed in

the running with Riverstone’s vote of confidence, Garland’s support, and the Special

Committee’s active interest.228

On June 12, the Special Committee and Browne reconvened.229 The Special

Committee noted that, among other things, Buyer and Riverstone had been

negotiating directly without the Special Committee’s involvement.230 Yet, to the

extent those negotiations were relevant to acquiring the Company, the Special

Committee did not attempt to intervene.231

225
Id. at 41–42.
226
D.I. 82 at 20; see Compl. ¶¶ 142–97.
227
See Compl. ¶¶ 142–97.
228
D.I. 82 at 20.
229
Compl. ¶ 144 & n.17.
230
Id. ¶ 144.
231
Id.

45
 The Special Committee met again on June 18.232 Batkin reported that

Riverstone contacted Garland and stated that Buyer had offered to purchase

Developer 2 for a 2x multiple of Riverstone’s invested capital.233 But Buyer had not

yet made an offer to acquire the Company: it was focused on Developer 2.234

The Special Committee consulted with its advisors and, on June 27, gave

management instructions and guidelines regarding next steps.235 Management was

authorized and requested to seek written proposals from Buyer and Brookfield.236

Management could not discuss “role or compensation arrangements in connection

with any potential transaction without specific authorization from the Special

Committee, except for limited non-compensation related discussions regarding

potential key personnel, operational integration, or staffing in the event a transaction

were to occur.”237

On June 28, Buyer finally submitted a nonbinding proposal to purchase the

Company for $25.50 per share, a 14% premium over the volume weighted average

price (“VWAP”) for the three month period ending June 27, 2019.238 Buyer

232
Id. ¶ 145.
233
Id.
234
Id.
235
Proxy at 42.
236
Id.
237
Id.
238
Id.; Compl. ¶ 147.

46
contemplated merging the Company and Developer 2 and allowing Riverstone and

the Officer Defendants to maintain or receive an equity interest in the combined

company.239 Buyer’s offer specifically assumed it would reach a separate agreement

with Riverstone with respect to Developer 2, as well as separate agreements with

the Company’s senior management.240 Buyer also stressed that it needed to continue

its discussions with Riverstone and to discuss the matter with PSP.241

On July 1, Brookfield submitted a competitive bid, disclosing it had

completed its due diligence and proposing that TerraForm acquire the Company in

an all stock merger representing a 15% premium based on trading prices leading up

to the time of the announcement.242 The offer contemplated that the combined entity

concurrently acquire Developer 2 for cash at a 1.75x multiple of invested capital,

cashing Riverstone out.243 Brookfield also disclosed it was open to providing

Company stockholders with a cash option.244 The offer hedged that Brookfield

needed to reach an agreement with the Company and Riverstone on Developer 2’s

239
Compl. ¶ 147.
240
Id.
241
Id.
242
Id. ¶ 148.
243
Id.
244
Id. ¶ 148 n.18.

47
valuation.245 With competitive offers on the table, the Special Committee began

probing other bidders, and received interest as described above.

On July 12, Brookfield’s counsel sent Paul Weiss a draft merger agreement,

which provided that Brookfield, but not the Company, would have a termination

right in the event that a proposed Developer 2 acquisition failed to close with or

before the proposed Company-TerraForm merger.246 And on July 15, Batkin met

with Buyer, which reiterated its interest.247

On July 16, Batkin, Paul Weiss, Company management, Evercore, and

Brookfield met.248 They reviewed specifics of the pro forma business plan of the

combined company that would result from any Company-TerraForm merger.249 The

parties met again on July 17.250 On July 16 and 17, Brookfield and the Company

exchanged revised term sheets that reflected the same economic terms as

Brookfield’s July 1 offer, and additionally addressed the “governance of the pro

forma combined company.”251

245
Id. ¶ 148.
246
Proxy at 43.
247
Id.
248
Id.
249
Id.
250
Id.
251
Id.; Compl. ¶ 150.

48
 Brookfield submitted a new offer on July 23.252 Acknowledging Riverstone’s

influence, Brookfield noted that the Company’s “Board and management wish to

also internalize [Developer 2] as part of this transaction” and reiterated that it was

open to buying Developer 2 for partial cash in a deal that included a 15% premium

to Company stockholders.253 Brookfield also stated that it would be willing to offer

a 20% premium to Company stockholders in a simpler transaction that did not

include acquiring Developer 2.254 This laid bare that including Developer 2 in a

transaction would result in less consideration for the Company’s public

stockholders, and that Riverstone and the Officer Defendants, as Developer 2

stockholders, were competing with Company stockholders for value.255

The Special Committee met on July 31 and August 1 to discuss the pending

offers, including Brookfield’s offer to pay more for the Company alone, without

Developer 2.256 The Special Committee noted that the two offers internalizing

Developer 2 provided similar value to Company stockholders; but in a key

difference, Brookfield would cash out Riverstone, while Buyer would allow

252
Compl. ¶ 151.
253
Id.
254
Id.
255
Id.
256
Id. ¶ 152. The July 31 meeting was unusual in that Paul Weiss and Evercore did not
attend the meeting, but Goldman did. Id.

49
Riverstone to continue to own an equity interest.257 In addition, the Special

Committee weighed “the complexity of [Brookfield]’s proposal” against the

proposals from Buyer and Party D, as well as “the certainty of value of [Buyer]’s

and [Party D]’s all-cash proposals relative to [Brookfield]’s proposed all-stock

transaction with an option to include up to $750 million in cash.”258 The Special

Committee recognized that Brookfield’s offers exceeded Buyer’s then-current offer,

estimating that Brookfield’s offer at a 15% premium equated to a 1.8413 exchange

ratio, or approximately $28.25 per share, based on a 90-day VWAP.259

But Evercore flagged that Buyer was already in “advanced stages of

negotiation” with Riverstone, and that a combination of the Company and

Developer 2 was “in line with management’s vision.”260 The Special Committee

also discussed PSP’s conflicts of interests in any transaction, allegedly recognizing

that PSP was not similarly situated to the Company’s public stockholders.261

According to Plaintiff, at the August 1 meeting, the Special Committee

decided to see if Buyer would increase its offer, while holding off on further

257
Id. ¶ 154; Proxy at 44.
258
Proxy at 44.
259
Compl. ¶ 158.
260
Id. ¶ 157.
261
Id. ¶ 153.

50
substantive negotiations with Brookfield.262 The Special Committee determined

that, when it did re-engage with Brookfield, it would convey the importance of

reaching an agreement with Riverstone that included Developer 2 and was therefore

consistent with management’s expectations.263

Even so, between August 1 and August 12, the Special Committee directed

Evercore and Goldman to encourage Buyer, Brookfield, and Party D to improve their

previous proposals.264 Around this time, Buyer asked for exclusivity.265 Evercore

and Goldman indicated to Buyer that the Special Committee would consider

exclusivity only if Buyer raised its offer price for the Company.266 Buyer

declined.267

The market soon caught wind of the Company’s suitors. On August 12,

Bloomberg reported that Brookfield and TerraForm were in merger discussions with

262
Id. ¶ 156.
263
Id. ¶ 157.
264
Proxy at 44 (providing the Special Committee determined that Evercore and Goldman
should encourage each bidder to “improve their offers and to accelerate their work”); id.
(“Between August 1 and August 12, 2019, at the direction of the Special Committee,
representatives of Evercore and Goldman Sachs contacted representatives of [Brookfield],
[Buyer] and [Party D] to encourage each potential buyer to improve its previous
proposal.”).
265
Id.
266
Id.
267
Id.

51
the Company.268 That day Company stock closed at $25.15 per share, representing

an increase of $1.85 per share over the closing price on August 9—the last full

trading day prior to the Bloomberg report.269 The next day, as requested by Canadian

regulators, the Company issued a press release stating that “it had responded to

inquiries from third parties, but that no definitive agreement had been reached with

respect to a strategic transaction with any party and that there was no assurance that

[the Company] would agree to any strategic transaction.”270

That same day, August 13, Batkin met with Company management, Paul

Weiss, Evercore, and Goldman to discuss structuring a Company-TerraForm

transaction, including excluding Developer 2.271 They met again on August 16.272

Garland reported that, since August 12, the Company received indications of interest

from at least seven new potential buyers.273 After Evercore and Goldman’s

consideration, Batkin authorized Garland and the advisors to contact these parties.274

Later that day, Buyer submitted an updated offer to purchase both the

Company and Developer 2 in a transaction that valued the Company in range of

268
Id.; Compl. ¶ 159.
269
Proxy at 44.
270
Id.
271
Id. at 45.
272
Id.
273
Id.
274
Id.

52
$26.25 to $26.50 per share.275 At that time, this reflected a 15.8% premium over the

three-month weighted average price for the Company, which was lower than the

20% premium Brookfield offered to pay in a deal that did not include Developer 2.276

Buyer did not indicate its valuation of Developer 2.277 But Buyer expressed its

confidence that it could negotiate a definitive price with Riverstone, as they had

already engaged in productive discussions.278 Buyer’s offer also assumed that it

would reach satisfactory agreements with Company management for their roles in

the post-closing entity.279 In conjunction with the offer and these assumptions,

Buyer reiterated its desire to discuss the proposed transaction with PSP.280

The Special Committee met on August 19.281 Buyer had offered to acquire

Developer 2 at a price equal to 1.8x of Riverstone’s invested capital, subject to an

earn-out that could increase the total purchase price to up to 2.25x Riverstone’s

invested capital; Riverstone believed this offer acceptable.282 The Special

Committee recognized that an integrated offer for both the Company and

275
Id.; Compl. ¶ 161.
276
Compl. ¶ 161.
277
Id.
278
Id.
279
Id.
280
Id.
281
Id. ¶ 162.
282
Id. ¶ 163.

53
Developer 2 meant an increase in consideration for the Company would result in a

decrease in consideration for Developer 2 and vice versa, requiring the companies

to compete for value.283 Specifically, the Special Committee noted that the

Developer 2 earn-out made it less likely Buyer would pay more for the Company,

acknowledging that the Company’s public stockholders were competing with

Developer 2’s owners (including Riverstone, PSP, and management) for merger

consideration.284

Despite this tension, the Special Committee decided to progress with Buyer,

authorizing a meeting between Buyer and PSP and instructing Paul Weiss to send

Buyer a draft merger agreement.285 The Special Committee authorized Company

management to begin discussing their compensation and post-transaction roles with

Buyer “provided that representatives of financial advisors to the Special Committee

were in attendance.”286

As instructed, Paul Weiss sent the draft merger agreement to Buyer’s outside

counsel.287 The draft provided that the closing would not be conditioned upon

283
Id. ¶ 162.
284
Id. ¶ 163.
285
Id.; Proxy at 45.
286
Proxy at 45; Compl. ¶ 163.
287
Proxy at 46.

54
closing a Developer 2 acquisition; it also included a go-shop provision.288 Paul

Weiss also brought Riverstone into the fold, contacting Riverstone’s outside counsel

to discuss a transaction with Buyer, the Company, and Developer 2.289 Paul Weiss

pressed that any Company-Buyer transaction should not be cross-conditioned with

any potential transaction involving Developer 2.290 In addition, Company

management, Evercore, Goldman and Buyer engaged in “high-level discussions

regarding arrangements relating to compensation and post-transaction roles for

[Company] management.”291 Buyer requested exclusivity, but the Special

Committee, in consultation with its advisors, declined to grant exclusivity to any

party at that time.292

In mid- to late-August, the Company’s advisors reached out to all interested

parties, including Brookfield.293 Of those bidders that came forward after the August

12 Bloomberg article, one requested to pursue a transaction and negotiate a

confidentiality agreement; six others decided to forego a transaction with the

Company.294

288
Id.
289
Id.
290
Id.
291
Id.
292
Id.
293
Id. at 45.
294
Id.

55
 J. Brookfield Attempts To Accommodate The Company’s
Shifting Goals And Riverstone’s Demands, But The Special
Committee Proceeds With Buyer.

Brookfield submitted an updated offer letter on August 26.295 Brookfield

revealed that, on August 20, the Special Committee’s advisors had indicated an

unwillingness to move forward with Brookfield. Curiously, the advisors had told

Brookfield that (1) the Board no longer supported a transaction that internalized

Developer 2, which was inconsistent with their representations to Buyer in the same

time period; (2) Riverstone would use the Consent Right to block a TerraForm

acquisition; and (3) the Board prioritized deal certainty and price.296

Undeterred, Brookfield proposed a Company-on-top transaction in which the

Company would acquire TerraForm, “so that no Riverstone consent is required in

connection with the transaction,” at a ratio of two TerraForm shares for each

Company share.297 Brookfield’s proposal did not include Developer 2 or any side

benefits for Riverstone or the Officer Defendants; nor did it require any concessions

from Riverstone or amendments to the Company’s contractual agreements with

Developer 2.298 Special Committee meeting minutes provide that Brookfield’s

295
Compl. ¶ 164; see Weinberger Decl. Ex. 5.
296
Compl. ¶¶ 164–65, 174, 209.
297
Id. ¶ 166.
298
Id. ¶¶ 166, 168.

56
updated proposal “was not dependent upon any transaction with [Developer 2.]”299

But the Proxy stated that Brookfield said it would require concessions from

Developer 2.300

Brookfield’s offer valued the Company at $33.38 per share, representing a

45% premium—far above Buyer’s offer and the final Merger price.301 As Brookfield

indicated, this strategic transaction would allow Company stockholders “the

opportunity to continue to participate in the upside embedded in the shares of a world

class renewable power leader that will have a dividend payout ratio,” which “is [a]

more compelling opportunity than having their upside capped in a privatization

transaction.”302 Brookfield stated its offer would expire if it were not granted

exclusivity by August 30.303

On August 26, the Special Committee discussed Brookfield’s revised

proposal.304 The Special Committee and Browne met again on August 28.305 The

Special Committee noted Brookfield’s offer represented a 45% premium,306 and

299
Id. ¶ 168.
300
Proxy at 46.
301
Compl. ¶¶ 167, 171.
302
Id. ¶ 167 (emphasis omitted).
303
Proxy at 46.
304
Id.
305
Compl. ¶¶ 170–71.
306
Id. ¶ 171.

57
contemplated potential litigation risks from TerraForm, as well as “the uncertain

value of the all-stock consideration offered by [Brookfield] as compared to the all-

cash offers received from other bidders.”307 In view of these concerns, the Special

Committee determined that it needed to further evaluate Brookfield’s offer and that

it would be “premature” to grant exclusivity.308

On August 29, at the Special Committee’s direction, Evercore asked

Brookfield to clarify its proposal with respect to Developer 2 and what Brookfield

envisioned for the combined company’s relationship with Developer 2.309 In

response to those discussions, on August 30, Brookfield submitted an updated offer

letter.310 It recapped the changing messages it had received about Developer 2.

Brookfield stated that it had been told early in the process that the Company believed

it was desirable for senior management to maintain their positions in the combined

company, including their dual positions at Developer 2.311 The Company had also

been telling Brookfield that it prioritized internalizing Developer 2. 312 But by

August 20, the Company flipped the script, and Brookfield responded by

307
Proxy at 47.
308
Id.
309
Id.
310
Id.; Compl. ¶¶ 173–74; Kirby Decl. Ex. 27.
311
Compl. ¶ 174.
312
Id.

58
restructuring its proposal to make the Company the acquirer and surviving parent

company to avoid the Consent Right, and to address the Board’s supposed disinterest

in internalizing Developer 2.313 Brookfield emphasized its willingness to move

forward, stating that its due diligence was complete so that it could sign final deal

documents in September, but stated its offer would expire unless the Company

granted exclusivity by September 4.314 It is reasonable to infer that contrary to its

representations to Brookfield, the Special Committee and management (and

Riverstone) supported an internalization of Developer 2; they just did not support a

deal that cashed out Riverstone.

The Special Committee decided “to progress the transaction” with Buyer, and

authorized management to obtain their own legal counsel with respect to the

proposed Buyer transactions, including their interest in Developer 2, and to engage

in further discussions with Buyer relating to such interests and post-closing

management arrangements.315

Batkin discussed the competing offers with management and the Company’s

advisors on September 1.316 On September 2, Paul Weiss received a revised draft

313
Id. ¶¶ 173–74; Proxy at 47; Kirby Decl. Ex. 27 at PEGI-00000982.
314
Compl. ¶ 175; Proxy at 47.
315
Proxy at 47.
316
Id.

59
merger agreement from Buyer.317 Among other things, the draft removed the go-

shop provision and capped damages in the event of termination, but did not condition

the proposed merger on involving Developer 2.318 That same day, Batkin spoke with

Brookfield to discuss the possibility of adding downside protection for Company

stockholders in the form of a cash option or exchange ratio collar; the implications

for Brookfield’s proposal if Riverstone did not support the transaction; and

Brookfield’s request for exclusivity.319

On September 3, Paul Weiss sent a draft merger agreement to Brookfield’s

counsel, by which closing would not be conditioned on a transaction with

Developer 2.320 Batkin suggested that Brookfield arrange a meeting with Company

management and Riverstone to discuss Developer 2.321 Accordingly, the next day,

September 4, Brookfield’s CEO, Sachin Shah, met with Garland and Riverstone’s

representative, Hunt.322 Riverstone insisted that its consent was required for the

Company to acquire TerraForm and that it would require amendments to the

contracts between the Company and Developer 2 before providing such consent.323

317
Id.
318
Id.
319
Id.
320
Id. at 47–48.
321
Id. at 48.
322
Id.; Compl. ¶ 176.
323
Compl. ¶ 177.

60
 Brookfield indicated that it did not intend to proceed with a transaction that

Riverstone did not support, and offered to consider Riverstone’s proposed

amendments.324 Shah emailed Batkin later that day, noting that “Riverstone needed

to consider matters to see if there was a path forward on a potential deal” and that

“the ball was in Riverstone’s court on the issue, not Brookfield’s, as Brookfield still

believed in the merits of a transaction.”325

Batkin followed up with Brookfield and Riverstone.326 Brookfield flagged

that its August 30 offer letter had expired and that Brookfield planned to terminate

discussions unless and until it received acceptable proposals regarding the

Company’s relationship with Developer 2.327 Batkin and the Special Committee’s

advisors considered granting Brookfield exclusivity, but declined.328

On September 10, Brookfield sent a revised proposal, addressed to the full

Board, to Batkin and the Special Committee.329 Brookfield recognized the complex

relationship between the Company, Developer 2, and Riverstone and its bearing on

the sales process:

324
Proxy at 48.
325
Compl. ¶ 178.
326
Proxy at 48.
327
Id.
328
Id.
329
Id.; Compl. ¶¶ 179–80; Weinberger Decl. Ex. 6.

61
 Our understanding is that the relationship between the [Company]
Board and Riverstone is complex. The Board has a fiduciary duty to
shareholders of [Company] but is not free to accept certain types of
transactions without prior Riverstone consent or, as we understand, any
transaction not supported by Riverstone without attracting Riverstone
litigation risk. We also understand that Riverstone is not necessarily
economically aligned with [Company] shareholders given that it holds
no (or negligible) equity in [Company]. Further, given the interrelated
nature of the arrangements between [Company], its management, and
Riverstone, there could be potential multiple competing interests. This
is a unique and difficult scenario.330

Brookfield went on to say that “we do not believe it is in anyone’s best interests to

engage with Riverstone in a manner that creates animosity or material litigation

risk.”331 Brookfield was willing to resume discussions if Riverstone consented to

the deal and if the parties agreed to Riverstone’s requested amendments to the

entities’ existing contractual, operational, and structural arrangements.332

Brookfield was also willing to negotiate with Riverstone and Developer 2 if it was

granted exclusivity by both entities.333

On September 12, Riverstone and Developer 2 informed Batkin that they were

willing to resume talks with Brookfield and present Brookfield with suggested

amendments to the documents governing the relationship between the Company and

330
Compl. ¶ 179 (emphasis omitted); Weinberger Decl. Ex. 6 at PEGI-00000881.
331
Compl. ¶ 180.
332
Id.; Proxy at 48.
333
Compl. ¶ 180; Proxy at 48.

62
Developer 2.334 Batkin asked Riverstone to send Brookfield a written proposal of

preferred terms, which Riverstone did on September 18.335

As for Buyer, on September 8, the Special Committee directed Paul Weiss to

send a revised draft merger agreement to Buyer’s counsel.336 Buyer returned a

marked-up agreement on September 19; it included a 35-day go-shop period subject

to carve-outs for specific parties, including Brookfield.337 Thereafter, the parties

discussed open issues, including the go-shop provision, developments with

Developer 2, and financing.338 The Special Committee also continued probing the

Company’s remaining bidders, advancing discussions, and denying any particular

bidder exclusivity.339

On September 23, Batkin met with the Special Committee’s advisors and

Company management to discuss Riverstone’s demanded and “fairly expansive”

contract amendments.340 Brookfield indicated that “there were realistic options to

resolve the issues presented in Riverstone’s recent proposal, but that [Brookfield]

would only continue discussions regarding a transaction if granted exclusivity by

334
Proxy at 48.
335
Id. at 49; Compl. ¶ 180.
336
Proxy at 48.
337
Id. at 49.
338
Id.
339
Id. at 49–50.
340
Compl. ¶ 183.

63
[the Company].”341 Batkin denied exclusivity, but offered to pay Brookfield’s

going-forward expenses “to entice [Brookfield] to advance discussions with

Riverstone.”342

Over the next three days, the Special Committee strategized to keep

Brookfield in the running.343 Batkin and the Special Committee’s advisors sought

to arrange a meeting between Brookfield and Riverstone “to ensure that there was a

shared understanding of the terms in Riverstone’s September 18, 2019 proposal.”344

Batkin contacted Brookfield on September 25, and Brookfield agreed to the

meeting.345 With Batkin’s assistance, Brookfield and Riverstone scheduled a

meeting for October 1.346 But on September 27, Brookfield cancelled the meeting.347

On September 29, the Special Committee met to evaluate the remaining

bidders: Brookfield, Buyer, Party B, and Party D.348 The Special Committee

considered Brookfield’s offer and Riverstone’s demand, which included a right to

341
Proxy at 49.
342
Id.
343
Id. at 49–50.
344
Id. at 50.
345
Id.
346
Id.
347
Id.
348
Id.

64
buy back the Company’s 29% stake in Developer 2.349 Batkin advised the Special

Committee that Brookfield was willing to agree to Riverstone’s demanded terms

“as-is.”350 But Garland warned that a Company-TerraForm merger would alter the

Company’s relationship with Developer 2,351 even if those changes were the result

of Riverstone’s demands. Given Brookfield’s potentially higher bid, the Special

Committee noted its duty to “maximize value for shareholders.”352 It ultimately

determined that it would grant neither Buyer or Brookfield exclusivity, “given the

continued interest in [the Company] expressed by multiple credible parties.”353

K. Garland Drives Issuance Of Preferred Stock That Must Vote
In Favor Of The Merger.

Also at the Special Committee’s September 29 meeting, with all directors in

attendance, Garland pressured the Board to authorize the issuance of a new class of

voting preferred shares, purportedly to fund the purchase of two renewable energy

projects.354 In June 2019, while the sales process was underway, the Board had laid

the groundwork for a potential preferred issuance and formed a transaction

349
Compl. ¶ 183.
350
Id. ¶¶ 183–85.
351
Id. ¶ 186.
352
Id. ¶ 188.
353
Proxy at 50.
354
Compl. ¶ 187.

65
committee.355 Despite having no apparent relationship to the sales process and a

specifically-designated committee to carry out any such issuance, Garland told the

Board to move quickly, noting his “concern that the Preferred Issuance had already

been delayed for months” due to the sales process “and indicated that it had reached

a point where it could not be delayed any further without risk of the Company’s

counterparty walking away from the proposed deal.”356 Garland “reminded the

Committee of the importance to the Company of consummating the Preferred

Issuance.”357

On September 30, the transaction committee approved the preferred stock

(the “Preferred Issuance”).358 Thereafter, on October 10, the Company sold

10,400,000 preferred shares with a par value of $260 million for $256.1 million, or

$24.625 per share, to CBRE Caledon Capital Management Inc. affiliates (“CBRE”)

in a private placement pursuant to a Securities Purchase and Rights Agreement

(the “Purchase Agreement”).359 The CBRE sale closed on October 25, raising

355
See D.I. 94, Ex. A ¶ 5 (noting that on June 12, 2019, the Board appointed a transaction
committee to authorize and approve a new series of preferred stock).
356
Compl. ¶ 187.
357
Id.
358
Id. ¶¶ 190, 235.
359
Id. ¶ 235.

66
roughly $75 million more than Garland claimed the Company needed to fund the

cited projects.360

The preferred shares entitled CBRE to favorable dividends and distributions

in the years following the merger of the two entities.361 They entitled CBRE to one

vote per share, subject to a cap, such that they represented 9.99% of the vote on the

Merger, which occurred shortly after the sale closed.362 Importantly, the Securities

Purchase and Rights Agreement required CBRE’s preferred shares to be voted in

favor of the Merger—which had not yet been guaranteed, finalized, or signed at the

time the CBRE sale closed.363

L. The Special Committee Accepts Buyer’s Offer And Rejects
Brookfield’s Premium.

By October, Brookfield and Buyer emerged as the Company’s remaining

serious bidders.364 Since late August 2019, Brookfield labored to secure the Special

Committee’s and Riverstone’s approval of its premium bid, continuing to entertain

Company management’s and Riverstone’s demands. In contrast, Buyer’s offer

360
Id. ¶ 244.
361
Id. ¶ 242.
362
Id. ¶ 236.
363
Id. ¶ 237. The Purchase Agreement required the shares to be voted in accordance with
the recommendation of the Board so long as the special meeting took place on or before
May 10, 2021.
364
See id. ¶¶ 188–96.

67
moved forward smoothly with little to no enhancement to its offer price.365 Despite

Brookfield’s efforts and the 45% premium, and with the preferred stock sale on the

horizon, Batkin and Company management determined that the Brookfield offer

would ultimately be inadequate for Riverstone.366

On October 3, Batkin again encouraged Brookfield to engage with

Riverstone.367 Brookfield once more demanded exclusivity and stood firm that,

without it, Brookfield “would not be willing to devote time and resources to

discussions with Riverstone.”368 Batkin told Brookfield that the Company could not

grant exclusivity, as the Special Committee was still in discussions with other

parties, including Buyer and Party D.369

Between October 13 and 16, Batkin and the Special Committee’s advisors

continued speaking with Brookfield.370 They recognized and reiterated that

Brookfield’s August 26 proposal was “competitive,” but to move forward,

Brookfield had to confirm that either (1) Brookfield’s proposal was not conditioned

on Brookfield entering into an agreement with Developer 2 or Riverstone, so that

365
See id.; Proxy at 52.
366
See Compl. ¶ 201.
367
Proxy at 51.
368
Id.
369
Id.; see also id. at 50.
370
Id. at 51.

68
those entities could not hold up a transaction; or (2) Brookfield had negotiated

definitive drafts of such agreements.371 The Special Committee warned Brookfield

that “other parties had entered more advanced stages of negotiations” and that the

Company “would be seeking definitive offers from all interested parties.”372

The Special Committee then pushed all remaining bidders.373 On October 17,

Evercore instructed Brookfield, Buyer, and Party D to submit their “best and final”

offers by October 28.374 On October 28, after months of negotiation that led to an

small increase of $1.25 per share from its original offer, Buyer submitted a definitive

all-cash offer to purchase the outstanding shares of Company Common Stock for

$26.75 per share.375 While still lower than Brookfield’s offer, Buyer also agreed to

simultaneously acquire Developer 2 and allow Riverstone to retain equity in the

combined company; it also offered the benefit of keeping the Company and

Developer 2’s management in place.376

That same day, Brookfield submitted a letter reaffirming its prior stock-

exchange proposal, noting that its “proposal has a clear path to execution” and that

371
Id.
372
Id.
373
Id.
374
Id.; Compl. ¶ 191.
375
Compl. ¶ 195; Proxy at 52.
376
Compl. ¶ 195.

69
“we have been advised by you and your advisors that our proposal is superior from

a value perspective to the others that you have received and that you will receive in

this sales process.”377 Brookfield reiterated that it could agree to Riverstone’s

demands,378 but acknowledged that “the situation vis-à-vis Riverstone continues to

be problematic for the [Company] Board and that Riverstone’s interests are likely

not aligned with those of the [Company] shareholders,” and expressed that it was

confident in its ability to grow the post-closing entity in the face of Riverstone’s

demands and consequent separation.379 Brookfield explained,

As requested, we have carefully reviewed Riverstone’s list of demands
to potentially support a merger of [the Company] with [TerraForm].
Those demands effectively require a separation of the Riverstone
business from [the Company]. The list from Riverstone, as you know,
requires that all of [the Company]’s development expertise, systems,
people and the Pattern name itself revert back to Riverstone, in
exchange for their support.

As we have stated, we could agree to these requests. Brookfield has
over 3,000 professionals focused on power operations, marketing,
investment, development, and finance around the world. Our bench
strength in management is deep. We have people and operations
globally with the capabilities to manage, operate, grow, fund and
deliver value to [the Company]’s shareholders, with a public track
record of over 20 years. We also have a demonstrated expertise in
carve-out transactions. . . . Therefore, we believe it would be possible
to successfully execute such a separation to achieve the proposed
merger at the value we have ascribed.

377
Id. ¶ 192 (emphasis omitted); accord Weinberger Decl. Ex. 7; see Proxy at 52.
378
Compl. ¶ 194; accord Weinberger Decl. Ex. 7.
379
Compl. ¶ 194; accord Weinberger Decl. Ex. 7.

70
 Further, we believe executing on certain of the Riverstone demands
may leave [the Company] as a far better company in the future than it
currently is. If we separate the inter-related management, systems and
eliminate the conflicts that Riverstone brings to [the Company] and
merge the Company with [TerraForm], we will leave the merged entity
with clear alignment between the Board, shareholders, management
and its sponsor, Brookfield. All constituents will then have a singular
focus on creating value for [the Company]. 380

The Company determined that Brookfield’s October 28 letter did not meet the

conditions set by the Special Committee, nor did it include a proposed merger

agreement.381 The Company extended the deadline for submitting definitive

transaction documentation to October 30, and requested that Brookfield confirm its

willingness to enter into and consummate a merger with the Company at the

proposed exchange ratio regardless of any agreement (or lack thereof) between

Brookfield and Riverstone.382

On October 30, Brookfield submitted a revised draft merger agreement,

which included a condition that Brookfield be permitted to engage in discussions

with Riverstone prior to executing it.383 It also conditioned closing on Riverstone’s

consent to certain amendments to Developer 2’s existing contractual relationships

380
Compl. ¶ 194 (emphasis omitted); accord Weinberger Decl. Ex. 7.
381
Proxy at 52.
382
Id.
383
Id.

71
with the Company.384 Brookfield did not submit definitive documentation or terms

relating to governance of the combined company or detail any requested

arrangements with Developer 2.385 The Special Committee extended its definitive

offer deadline again to November 2.386

On October 30 and 31, the Special Committee met to evaluate Buyer’s and

Brookfield’s final offers; Browne attended.387 Evercore presented an analysis

indicating that a Company-TerraForm merger would result in a combined company

with a stock valued in the range of at least $29.71 to $32.94 per share: well above

Buyer’s offer of $26.75 per share.388 Nonetheless, Evercore stressed that a

TerraForm transaction would undermine the “purpose and commercial viability” of

Developer 2.389 But management had projected that Developer 2 was on the cusp

of being self-funding, and nothing in the Company-TerraForm transaction

endangered Developer 2’s continued performance of its contractual obligations. 390

384
Id.
385
Id.
386
Id.
387
Id.; Compl. ¶¶ 196–97.
388
Compl. ¶¶ 198–99. Plaintiff alleges that even those values for the combined company
were depressed because Evercore did not use consistent or updated dividend yields across
its analyses, and if corrected, Evercore’s analysis would have shown the combined
company would trade in the range of $32.69 to $36.15 per share.
389
Id. ¶¶ 201–04.
390
Id. ¶¶ 82, 202–04.

72
Goldman contributed by describing Riverstone’s confidence in the Company-

Buyer-Developer 2 proposal.391

On November 1, Brookfield told Paul Weiss it could negotiate any necessary

amendments with Riverstone within thirty days.392 Paul Weiss demanded that

Brookfield submit definitive documents the next day, which Brookfield could not

do without Riverstone’s cooperation, which it did not believe it would receive.393

As a result, Brookfield decided its efforts were futile and withdrew its bid.394 Buyer

was the last bidder standing.

On November 3, the Special Committee voted to recommend that the Board

approve the all-cash Merger with Buyer at $26.75 per share, which was $1.05 less

than the $27.80 closing trading price of the Company’s stock the previous day, but

represented a 14.8% premium to the Company’s closing price on August 9, the last

trading day before rumors of a potential acquisition leaked.395 Under the Merger

agreement with Buyer (the “Merger Agreement”), Buyer’s offer of $26.75 per share

implied an enterprise value for the Company of $6.1 billion, including debt.396

391
Id. ¶ 197.
392
Id. ¶ 205; Proxy at 52.
393
Compl. ¶ 205; Proxy at 52.
394
Compl. ¶ 205; Proxy at 53.
395
Compl. ¶¶ 206–07, 222.
396
Id. ¶ 207.

73
Evercore issued a fairness opinion confirming that the Merger was fair from a

financial point of view; Goldman did not issue an opinion.397 The Board approved

the Merger that day.398

During the Merger Agreement’s go-shop period, the Special Committee’s

financial advisors contacted sixteen additional potential bidders.399 The contacted

parties either did not respond or declined to pursue a transaction.400 Plaintiff alleges

that the go-shop process was a sham in light of the Merger Agreement’s $52.7

million termination fee and the discretionary power of Riverstone, Buyer, and the

Company to award to or withhold from Goldman an additional $3 million dollars

upon consummation of the Merger.401 On November 4, the Company officially

announced that it had entered into the Merger Agreement with Buyer.402

Around this time, Buyer, Riverstone, the Officer Defendants, and

Developer 2 entered into a Contribution and Exchange Agreement (the

“Contribution Agreement”) pursuant to which the Company and Developer 2

would be united under common ownership.403 The Contribution Agreement valued

397
Proxy at A-24.
398
Compl. ¶ 206.
399
Proxy at 54.
400
Id.
401
Compl. ¶¶ 216, 271.
402
See D.I. 74 at 10 (citing Compl. ¶ 206).
403
Compl. ¶ 208.

74
Developer 2 at $1.06 billion.404 According to its terms, the parties would “make

certain contributions contemplated by the Contribution Agreement, including with

respect to their interests in [Developer 2] in exchange for equity interests in [the

surviving entity].”405

Each of Riverstone, the Officer Defendants, PSP, and CBRE continue to hold

equity in the new combined company, whereas the Company’s public stockholders

were cashed out.406 The Officer Defendants are also eligible to earn up to

$51 million in earnout payments and were given new employment agreements with

generous compensation for a minimum of three-year terms with automatic one-year

renewals.407

M. The Officer Defendants Prepare The Merger Disclosures.

Concurrently with approving the Merger, the Board adopted resolutions that

delegated full authority to prepare and disseminate the Proxy to Company

management.408 Management had unbridled discretion to include or omit

information as “deemed necessary, appropriate or advisable.”409 The Board did not

404
Id.
405
Proxy at 74.
406
Compl. ¶¶ 209–11.
407
Id. ¶¶ 209–10, 212–14.
408
Id. ¶¶ 231–32; Weinberger Decl. Ex. 8 at PEGI-00000388.
409
Compl. ¶ 231; Weinberger Decl. Ex. 8 at PEGI-00000388.

75
reserve authority to review, alter, or discuss the Proxy’s disclosures before filing.410

As a result of leaving the Merger disclosures in the hands of the Officer

Defendants—particularly Garland—Plaintiff contends that the Proxy omitted or

misrepresented numerous categories of material information.411

On February 4, 2020, the Company filed the Proxy recommending that

Company stockholders vote in favor of the Merger.412 Including annexes, the

Proxy spanned 231 pages and, among other things, disclosed a detailed summary

of the Merger process, including details about the bids by and negotiations with

competitive bidders;413 the valuation metrics employed; the Consent Right; the

concurrent Developer 2 acquisition and Contribution Agreement and that certain

members of Company management stood to benefit under the Contribution

Agreement; and that certain directors and officers had potential conflicts of

interest, and the Board was aware that these interests existed and considered them,

among other matters, when it approved the Merger Agreement.414 After negative

commentary by proxy advisory firms and disclosure suits by stockholders, 415 but

410
Compl. ¶ 232; see also Weinberger Decl. Ex. 8 at PEGI-00000388.
411
Compl. ¶¶ 253–82.
412
Proxy at 1.
413
Id. at 36–54.
414
Id. at 6–7, 69–79.
415
See, e.g., Compl. ¶¶ 223–25.

76
 before the stockholder vote, the Company issued further disclosures in a

supplemental definitive proxy statement filed on March 4, 2020

(the “Supplemental Proxy”).416

However, as alleged, the Proxy and Supplemental Proxy failed to disclose,

among other things, that Riverstone used the Consent Right to block a more

valuable deal with Brookfield and TerraForm; that Garland had unauthorized

discussions with potential bidders in violation of the Special Committee’s

instructions, including an unauthorized in-person meeting with Buyer and

representatives of Riverstone in April 2019; that Goldman faced conflicts of

interest, including that Goldman owns a substantial stake in Riverstone, had

advised Riverstone on a take-private of the Company, and had earned fees totaling

over $100 million from Riverstone and Buyer in recent years; that Browne, a

representative of Riverstone, attended a majority of the Special Committee’s

meetings and Executive Sessions; and that the Company’s largest stockholder,

PSP, held a 22% interest in Developer 2, and therefore was interested in the

Merger.417

416
See Kirby Decl. Ex. 2; D.I. 74 at 12.
417
See generally Compl.

77
 N. The Market Reacts, And Company Stockholders Marginally
Vote To Approve The Merger.

Following the Merger announcement, nine sets of plaintiffs filed pre-

merger lawsuits alleging that the Proxy made inadequate disclosures.418 All but

one of these lawsuits were voluntarily dismissed shortly after the Company filed

the Supplemental Proxy. The remaining lawsuit was filed by Water Island Capital,

LLC and its affiliates (“Water Island”), who also launched an aggressive public

campaign urging other stockholders to vote against the Merger based on the

themes pervading the Complaint.419

On February 18, Water Island issued an open letter to Company

stockholders, opposing the consideration paid for Company stock in the Merger as

“woefully inadequate.”420 Water Island claimed that the Merger “originally

offered at best a negligible premium,” and, at the time of Water Island’s letter, “a

significant discount” due to “the recent seismic shift in the value ascribed to

renewable energy companies.”421

418
See D.I. 74 at 12.
419
See id.; Compl. ¶¶ 224–25.
420
See D.I. 74 at 12 (quoting Water Island Capital, LLC Issues Open Letter to Shareholders
of PEGI Group, Inc., BUSINESSWIRE (Feb. 18, 2020),
https://www.businesswire.com/news/home/20200218005403/en/Water-Island-Capital-
LLC-Issues-Open-Letter).
421
Id.

78
 On February 19, the Company issued a press release responding to Water

Island’s claims and reiterating the Board’s position that the Merger was the best

path forward for the Company and its stockholders.422 Water Island then issued a

second letter on February 24, again urging stockholders to vote against the Merger

and detailing the same supposedly “misleading” aspects of the Proxy that Plaintiff

challenges in this litigation. Specifically, Water Island claimed that the Merger

consideration represented a “low-ball management-led buyout of [the Company]”;

that the Board “fail[ed] to restrain a conflicted management team from leveraging

a previously undisclosed [Developer] 2 ‘consent right’ in order to block any

merger that did not enrich their own self-interests”; and that “the Board’s claim of

a robust sales process couldn’t be further from the truth.”423

422
See id. at 13 (citing PEGI Board of Directors Reiterates Recommendation that
Stockholders Vote “FOR” Proposed Canada Pension Plan Investment Board Transaction
(Feb. 19, 2020), https://patternenergy.com/news/press-releases/pattern-energy-board-
directors-reiterates-recommendation).
423
See id. (quoting Water Island Capital, LLC Issues Open Letter to Shareholders in
Response to Misleading Claims Made by Pattern Energy Group, Inc. Board of Directors,
BUSINESSWIRE (Feb. 24, 2020),
https://www.businesswire.com/news/home/20200224005340/en/Water-Island-Capital-
LLC-Issues-Open-Letter). Water Island further suggested to stockholders that the
Company was “hiding the purchase price of [Developer] 2,” and that the Proxy did not
disclose that the PSP, which held 9.5% of the shares in [the Company], was a “conflicted
party who [should be] excluded from the majority-of-the-minority vote.” Id. PSP’s
holding in the Company, as well as the investment rights that accompanied it and the
potential that PSP might have interests that conflicted with the Company and its
stockholders, were all disclosed in the Company’s Form 10-K filings for each of 2018,
2019 and 2020. See Kirby Decl. Ex. 3; Kirby Decl. Ex. 4; Kirby Decl. Ex. 5.

79
 On February 26, the Company responded, noting that the Company faced

significant headwinds, including limited access to low-cost capital and a lack of

financial sponsors, which led to it consistently trading at a discount to its peers over

the last five years. The Company again reiterated that the Merger represented the

best path forward for stockholders.424

Following Water Island’s public criticism of the Merger, on February 28

and March 2, Institutional Shareholder Services (“ISS”) and Glass Lewis, the two

largest proxy advisory firms in the United States, both issued reports

recommending that stockholders reject the Merger.425 Glass Lewis expressed

concern that the Board and Special Committee did not run a sufficiently

independent process and believed the Company was worth more as a standalone

entity.426 While ISS also believed the Merger inadequate, it also acknowledged

that some Company stockholders may have preferred a cash offer, as opposed to

Brookfield’s potential all-stock transaction, because it provided “certainty of

value” in the face of “global pandemic fears,” and the recent surge in the value

424
See D.I. 74 at 14 (citing Pattern Energy Sets the Record Straight Regarding Water
Island’s False Assertions and Mischaracterizations (Feb. 26, 2020), previously available
at https://investors.patternenergy.com/news-releases/news-release-details/patternenergy-
sets-record-straight-regarding-water-islands).
425
Compl. ¶ 225; see also D.I. 74 at 14–15.
426
Compl. ¶ 225.

80
 attributed to renewable energy companies may not necessarily be a “resilient long-

term trend.”427

As of the Merger’s record date, the Company had 98,218,625 shares of

common stock outstanding and 10,400,000 shares of preferred stock outstanding,

with each common and preferred share receiving one vote for a total of

108,618,625 potential votes.428 Ultimately, on March 10, a total of 56,856,604 of

the Company’s outstanding shares voted in favor of the Merger by a slim majority

of 52%.429 PSP owned 9,341,035 (or approximately 8.6%) of the shares that voted

in favor of the Merger; because PSP owns 22% of Developer 2, Plaintiff alleges

PSP was interested.430 An additional 1,210,049 (or 1.1%) shares of those voted in

favor were held by members of Company management who received equity and

jobs in the post-closing company.431 CBRE’s 10,400,000 preferred shares, which

were rolled over into the post-closing company and remain outstanding, were

required to be voted in favor of the Merger.432 If these three blocks of votes were

excluded, only 41% of the disinterested shares voted in favor of the Merger.433

427
See D.I. 74 at 15; Compl. ¶ 225.
428
Compl. ¶ 247.
429
Id. ¶ 248.
430
Id. ¶ 249.
431
Id. An additional 50,872 shares were held by other Company insiders. Id. ¶ 249 n.23.
432
Id. ¶ 249.
433
Id. ¶ 250.

81
 O. This Litigation Ensues.

The Merger sparked litigation in this Court: two class action complaints

challenging the adequacy of the Merger process and its consideration were filed in

May 2020.434 Those actions were consolidated into the present case,435 and Britt was

appointed lead plaintiff.436 Her class action Complaint asserts six counts.437

Count I, for breach of fiduciary duty, asserts the Director Defendants

“consciously disregarded their fiduciary duties by, among other things, agreeing to

the unfair Merger, which failed to maximize stockholder value, but was the preferred

transaction for Riverstone and a conflicted management team”;438 “knowingly and

willfully allow[ed] numerous conflicted individuals/entities to participate in its

deliberations, including Browne, Garland, Goldman, and other members of

management”;439 “knowingly and intentionally failed to disclose all material

information to the Company’s stockholders”; and “consciously abdicated their

434
Plaintiff’s original complaint was filed under a different case number. See Britt v.
Garland, et al., C.A. No. 2020-0412-MTZ. The initial complaint under this case number
was filed by Gary Broz, Robert Long, Walter James Peters III, and Michael Richardson
(the “Broz Plaintiffs”). See D.I. 1. After the actions were consolidated under this caption
and Britt appointed lead plaintiff, the Broz Plaintiffs voluntarily dismissed. See D.I. 64.
435
D.I. 10.
436
D.I. 44.
437
Plaintiff’s initial Complaint is identical to the operative consolidated Complaint, which
Plaintiff filed on this docket belatedly after the parties completed briefing and argument on
the Motions. See D.I. 100; D.I. 101; D.I. 102.
438
Compl. ¶ 292.
439
Id. ¶ 293.

82
duties by granting conflicted management sole authority to exercise its discretion to

determine what material information should be included (or excluded) from the

Proxy and distribute the Proxy to stockholders without prior Board and/or Special

Committee review and approval.”440

Count II, for breach of fiduciary duty, asserts the Officer Defendants “were

interested in the Merger as a result of their employment with and/or substantial

equity holdings in [Developer 2] and their continued employment with and equity

interests in the post-closing combined entity”;441 and that they “advanc[ed] their own

self-interest and the interests of Riverstone to the detriment of [Company]

stockholders” by improperly wielding Riverstone’s narrow consent right to

improperly influence the Special Committee, manipulating their own projections,

and knowingly and intentionally disseminating a materially false and misleading

Proxy.442 Count II alleges that Garland in particular breached his duties by

disobeying the Special Committee’s instructions, meeting with Buyer and

Riverstone without the Special Committee’s authorization, and concealing that

meeting from the Special Committee, which Plaintiff contends “allowed

Riverstone’s preferred bidder, Buyer, to enter the sales process and propose a

440
Id. ¶ 294.
441
Id. ¶ 299.
442
Id. ¶ 300.

83
transaction that benefited management and Riverstone at the expense of the

Company stockholders.”443

Count III asserts the Entity Defendants aided and abetted Company

fiduciaries’ breaches by, among other things, having unauthorized meetings with

Goldman, Garland, and Buyer; infecting the process with conflicted individuals and

entities; wrongfully exploiting the Consent Right in favor of the Merger and

Riverstone; and threatening meritless litigation against Brookfield to block a

transaction with it.444 Count IV asserts the Entity Defendants tortiously interfered

with the Company stockholders’ prospective economic advantage in the superior

Brookfield-TerraForm offer.445 Count V asserts the Entity Defendants, Officer

Defendants and Browne conspired to defeat the Brookfield-TerraForm transaction

in favor of the unfair Merger and to ensure the Company did not disclose all material

information to its stockholders, thereby inducing them to approve the Merger.446

Count VI collects the Officer Defendants and the Entity Defendants into a group

referred to as the “Controller Defendants,” and asserts they owed and breached

fiduciary duties as controllers.

443
Id. ¶ 301.
444
Id. ¶¶ 304–07.
445
Id. ¶¶ 308–13.
446
Id. ¶¶ 314–19.

84
 As recourse for these alleged wrongs, Plaintiff seeks damages, fees, and

costs.447

On September 11, 2020, the Individual Defendants and Entity Defendants

moved to dismiss under Court of Chancery Rule 12(b)(6) (respectively, the

“Individual Defendants’ Motion” and the “Entity Defendants’ Motion,” and

together, the “Motions”).448 The parties briefed the Motions as of October 26.449 I

held argument on November 5, and requested that the parties submit supplemental

briefing.450 The parties completed supplemental briefing as of December 10, and

the matter was taken under advisement.451

II. ANALYSIS

The standards governing a motion to dismiss under Court of Chancery Rule

12(b)(6) for failure to state a claim for relief are well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are “well-pleaded” if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and ([iv]) dismissal is inappropriate
unless the “plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible to proof.”452

447
Id. ¶¶ (h)–(j).
448
D.I. 73; D.I. 74.
449
See D.I. 82; D.I. 84; D.I. 85.
450
See D.I. 88; D.I. 93.
451
See D.I. 91; D.I. 92; D.I. 94; D.I. 95; D.I. 96.
452
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citations omitted); accord
In re Baker Hughes Inc. Merger Litig., 2020 WL 6281427, at *5 (Del. Ch. Oct. 27, 2020).

85
Thus, the touchstone “to survive a motion to dismiss is reasonable

‘conceivability.’”453 This standard is “minimal”454 and plaintiff-friendly.455

“Indeed, it may, as a factual matter, ultimately prove impossible for the plaintiff to

prove his claims at a later stage of a proceeding, but that is not the test to survive a

motion to dismiss.”456 Despite this forgiving standard, the Court need not “accept

conclusory allegations unsupported by specific facts” or “draw unreasonable

inferences in favor of the non-moving party.”457 “Moreover, the court is not required

to accept every strained interpretation of the allegations proposed by the plaintiff.”458

A. Plaintiff Has Stated A Claim For Breach Of Fiduciary Duty
Against The Director Defendants.

The Director Defendants argue that Plaintiff’s breach of fiduciary duty claims

must be dismissed under Corwin v. KKR Financial Holdings LLC459 because holders

453
Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 537 (Del.
2011).
454
Id. at 536 (citing Savor, 812 A.2d at 896).
455
See, e.g., Clouser v. Doherty, 175 A.3d 86 (Del. 2017) (TABLE); In re USG Corp.
S’holder Litig., 2021 WL 930620, at *3–4 (Del. Ch. Mar. 11, 2021); In re Trados Inc.
S’holder Litig. (Trados I), 2009 WL 2225958, at *8 (Del. Ch. July 24, 2009).
456
Cent. Mortg. Co., 27 A.3d at 536.
457
Price v. E.I. du Pont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011) (citing Clinton
v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).
458
Trados I, 2009 WL 2225958, at *4 (internal quotation marks omitted) (quoting In re
Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006)).
459
125 A.3d 304 (Del. 2015).

86
of a majority of disinterested shares approved the Merger in a fully informed,

uncoerced vote, and, therefore, the business judgment rule unrebuttably applies.460

Even if Corwin is inapplicable, the Director Defendants argue that Plaintiff’s duty

of care claims against them are barred by the exculpation provision in the Company’s

Certificate of Incorporation, and that Plaintiff does not plead a nonexculpated duty

of loyalty claim.461

Plaintiff asserts that she has stated nonexculpated claims against the Director

Defendants for violating their duties in bad faith; that Corwin does not apply to

cleanse the transaction; and that the Court should review it under an entire fairness

standard because controllers stood on both sides of the transaction, and/or Garland

committed fraud on the Board.462

Plaintiff is correct that Corwin does not place the Merger under the ambit of

the business judgment rule. Because Company stockholders were cashed out, “the

merger is presumptively subject to enhanced scrutiny.”463 Through the lens of

enhanced scrutiny, Plaintiff’s allegations render it reasonably conceivable that the

Director Defendants violated their duty of loyalty. Accordingly, the Director

460
See D.I. 74 at 2.
461
Id. at 3.
462
D.I. 82 at 32, 58–60.
463
Chester Cty. Empls.’ Ret. Fund v. KCG Hldgs., Inc., 2019 WL 2564093, at *10 (Del.
Ch. June 21, 2019) (citing Revlon, Inc. v. MacAndrews & Forbes Hldgs., Inc., 506 A.2d
173, 184 (Del. 1986)).

87
Defendants’ Motion is denied as to Count I. Moreover, it remains possible that the

transaction will be subject to entire fairness because discovery may reveal that a

control group, consisting of the Entity and Officer Defendants, stood on both sides

of the transaction.

1. Revlon Enhanced Scrutiny Applies At The
Pleading Stage.

The board of directors has the ultimate responsibility for managing the

business and affairs of a corporation.464 “In discharging this function, the directors

owe fiduciary duties of care and loyalty to the corporation and its shareholders,” and

“[t]his unremitting obligation extends equally to board conduct in a sale of corporate

control.”465

“When determining whether corporate fiduciaries have breached their duties,

Delaware corporate law distinguishes between the standard of conduct and the

standard of review.”466 “The standard of conduct describes what directors are

expected to do and is defined by the content of the duties of loyalty and care. The

standard of review is the test that a court applies when evaluating whether directors

have met the standard of conduct.”467

464
8 Del. C. § 141(a).
465
Mills Acq. Co. v. Macmillan, Inc., 559 A.2d 1261, 1280 (Del. 1989) (citations omitted).
466
Chen v. Howard-Anderson, 87 A.3d 648, 666 (Del. Ch. 2014) (collecting authorities).
467
Id. (internal quotation marks omitted) (quoting In re Trados Inc. S’holder Litig.
(Trados II), 73 A.3d 17, 35–36 (Del. Ch. 2013)).

88
 “Delaware has three tiers of review for evaluating director decision-making:

the business judgment rule, enhanced scrutiny, and entire fairness.”468 Which of the

three standards applies depends initially on whether the board members

(i) were disinterested and independent (the business judgment rule), (ii)
faced potential conflicts of interest because of the decisional dynamics
present in particular recurring and recognizable situations (enhanced
scrutiny), or (iii) confronted actual conflicts of interest such that the
directors making the decision did not comprise a disinterested and
independent board majority (entire fairness). The standard of review
may change further depending on whether the directors took steps to
address the potential or actual conflict, such as by creating an
independent committee, conditioning the transaction on approval by
disinterested stockholders, or both.469

The business judgment rule, Delaware’s default standard of review, presumes

board members act “on an informed basis, in good faith and in the honest belief that

the action taken was in the best interests of the company.”470 “[W]here the business

judgment presumptions are applicable, the board’s decision will be upheld unless it

cannot be attributed to any rational purpose.”471

Revlon’s intermediate standard of enhanced scrutiny is applied when board

members face “potential conflicts of interest because of situational dynamics present

468
Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 457 (Del. Ch. 2011).
469
Chen, 87 A.3d at 666–67 (quoting Trados II, 73 A.3d at 36).
470
Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), rev’d on other grounds, Brehm v.
Eisner, 746 A.2d 244 (Del. 2000).
471
In re Walt Disney Co. Deriv. Litig. (Disney II), 906 A.2d 27, 74 (Del. 2006) (internal
quotation marks omitted) (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del.
1971)).

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in particular” transactions.472 “Revlon enhanced scrutiny applies to ‘final stage’

transactions, including a ‘cash sale, a break-up, or a transaction like a change of

control that fundamentally alters ownership rights’”473 because in these transactions,

directors may be more prone to pursue self-interest and engage in selfish action.474

In cash-out mergers presenting no “long run” for stockholders, “the board’s duty to

shareholders is inconsistent with acts not designed to maximize present share value,

acts which in other circumstances might be accounted for or justified by reference

to the long run interest of shareholders.”475

Here, Buyer cashed out the Company’s public stockholders in the transaction,

and thus “there [exist] sufficient dangers to merit employing enhanced scrutiny.” 476

Because Company stockholders “received cash for their shares, the merger is

presumptively subject to enhanced scrutiny.”477

472
Trados II, 73 A.3d at 36.
473
Huff Energy Fund, L.P. v. Gershen, 2016 WL 5462958, at *13 (Del. Ch. Sep. 29, 2016)
(quoting Lonergan v. EPE Hldgs., LLC, 5 A.3d 1008, 1019 (Del. Ch. 2010)).
474
Firefighters’ Pension Sys. of Kan. City, Mo. Tr. v. Presidio, Inc., 2021 WL 298141, at
*12 n.13 (Del. Ch. Jan. 29, 2021) (citing Reis, 28 A.3d at 458 (explaining that parties may
be more willing to cheat where they do not anticipate repeated transactions)).
475
TW Servs., Inc. v. SWT Acq. Corp., 1989 WL 20290 (Del. Ch. Mar. 2, 1989).
476
Lonergan, 5 A.3d at 1019.
477
KCG Hldgs., 2019 WL 2564093, at *10 (citing Revlon, 506 A.2d at 184); accord In re
Mindbody, Inc., 2020 WL 5870084, at *13 (Del. Ch. Oct. 2, 2020) (“The cash-for-stock
Merger was a final-stage transaction presumptively subject to enhanced scrutiny under
Revlon.”).

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 Plaintiff asks this Court to further elevate the standard of review to entire

fairness.478 Entire fairness, Delaware’s most stringent standard, applies to board

action where there exists “actual conflicts of interest.”479 Under the entire fairness

standard, the defendants must show that the transaction in question was “objectively

fair, independent of the board’s beliefs.”480 Entire fairness applies in certain discrete

circumstances, including (1) when a plaintiff pleads facts that “call[] into question

the disinterestedness and independence of a sufficient number of directors;”481

(2) when the transaction was effectuated “by a controlling or dominating

shareholder,”482 and (3) when a plaintiff pleads a fraud-on-the-board theory and the

attendant “illicit manipulation of a board’s deliberative processes by self-interested

corporate fiduciaries.”483

Plaintiff has not pled facts sufficient to indicate that the Special Committee

was interested and lacked independence such that its members would be presumably

478
D.I. 82 at 32.
479
Trados II, 73 A.3d at 36.
480
Presidio, 2021 WL 298141, at *17 (internal quotation marks omitted) (quoting
Gesoff v. IIC Indus., Inc., 902 A.2d 1130, 1145 (Del. Ch. 2006)).
481
Chen, 87 A.3d at 672.
482
Kahn v. Lynch Comms. Sys., Inc., 638 A.2d 1110, 1117 (Del. 1994).
483
Macmillan, 559 A.2d at 1279; see Mindbody, 2020 WL 5870084, at *25 n.229 (“[T]he
presumptive standard of review in Macmillan was Revlon . . . . Yet . . . the court elevated
the standard of review to entire fairness in view of the fraud-on-the-board theories
advanced by the plaintiffs.”).

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incapable of exercising their objective judgment in considering the merits of the

transaction. At the time of the Merger, the Board consisted of seven directors. Only

two, Garland and Browne, were allegedly conflicted with respect to the transaction;

that is why they were not appointed to the Special Committee.484 The remaining five

directors, Batkin, Goodman, Hall, Newson, and Sutphen, were disinterested and

independent with respect to the Merger, and were therefore appointed to the Special

Committee.485

Further, Plaintiff has not pled facts sufficient to support a fraud-on-the-board

theory. Still, this cash-out Merger may warrant entire fairness review under a

controller theory; time and discovery will tell. At a minimum, it warrants enhanced

scrutiny.

a. Plaintiff Has Failed To Plead Fraud On
The Board.

Plaintiff principally contends entire fairness is warranted under a fraud-on-

the-board theory. Plaintiff invokes Mills Acquisition Co. v. Macmillan, Inc.,486 in

which the Delaware Supreme Court elevated the standard of review to entire fairness

based on the conclusion that insider officers committed fraud on the board out of

484
See, e.g., Compl. ¶¶ 24, 26, 101. The allegations of Garland and Browne’s
interestedness and lack of independence are discussed further infra.
485
See id. ¶ 100.
486
559 A.2d 1261, 1279 (Del. 1989).

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self-interest. Macmillan’s officers “failed to disclose that they tipped off their

favored bidder in a way that tainted and manipulated the Board’s deliberative

process.”487 Here, Plaintiff theorizes:

[T]he Complaint alleges that Garland—in plain violation of the Special
Committee’s prohibition on members of [Company] management
engaging with any potential parties to a strategic transaction without
the express consent of the Special Committee—commenced
unauthorized sale discussions with Riverstone and [Buyer] in April
2019. Garland never informed the Committee of the actual substance
or circumstances of his improper outreach, which was part of Garland’s
and the other Officer Defendants’ disloyal effort to steer the Merger
process in favor of [Developer 2] and Riverstone. As a result of
Garland’s misconduct, Riverstone inserted [Buyer] into the Merger
process and ultimately blocked a more valuable transaction with
Brookfield. As a matter of Delaware law, Garland’s self-interested and
illicit manipulation of a board’s deliberative process requires the
Merger be subjected to rigorous judicial scrutiny under the exacting
standards of entire fairness.488

Plaintiff offers fraud on the board only in pursuit of entire fairness, while offering a

theory of director breach that tracks the paradigmatic Revlon narrative of an

overweening CEO and supine board.489 I question whether I should entertain fraud

487
City of Fort Myers Gen. Empls.’ Pension Fund v. Haley, 235 A.3d 702, 717 n.49 (Del.
2020) (citing Macmillan, 559 A.2d at 1279–81).
488
D.I. 82 at 32–33 (alteration, citations, footnote, and internal quotation marks omitted)
(citing Compl. ¶ 124, and then quoting Macmillan, 559 A.2d at 1279).
489
See infra Section II.A.2.a; see also Mindbody, 2020 WL 5870084, at *1 (“[T]he
paradigmatic claim under Revlon, Inc. v MacAndrews & Forbes Holdings, Inc. arises when
a supine board under the sway of an overweening CEO bent on a certain direction tilts the
sales process for reasons inimical to the stockholders’ desire for the best price.” (alteration,
footnote, and internal quotation marks omitted) (quoting In re Toys “R” Us, Inc. S’holder
Litig., 877 A.2d 975, 1002 (Del. Ch. 2005))).

93
on the board solely to set the standard of review, as the theory of breach should drive

the standard of review inquiry. Plaintiff’s theory of breach is not that Garland

deceived the Special Committee into favoring Buyer. Her theory is that the Special

Committee knowingly favored Buyer because they favored Riverstone and

Developer 2 over Company stockholders. For the sake of completeness, I consider

whether Plaintiff’s allegations can stretch to allege fraud on the board and conclude

they cannot.

In Mills, the board and special committee failed to engage in “planning and

oversight to insulate the self-interested management” in connection with a sale of

corporate control.490 Rather, the board placed “the entire process in the hands of [a

manager]” who chose the Committee’s financial advisors, and acted without board

oversight as the board looked on “with a blind eye.”491 “[T]he Macmillan board

completely relied on” interested management’s false portrayal of a potential bidder

that “served more to propagandize the board than to enlighten it.”492 Management

worked intensely and furtively with Macmillan’s Special Committee’s financial

advisor on restructuring proposals that would eventually reach the Special

Committee that largely benefitted management.493 Throughout negotiations and

490
Macmillan, 559 A.2d at 1282.
491
Id. at 1280.
492
Id. at 1267 (citation and internal quotation marks omitted).
493
Id. at 1268.

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restructuring, “the Board and the Special Committee followed [management] in

lockstep. Neither took reasonable efforts to uncover the facts.”494 Because of the

deception in the change-of-control process, and because the board’s oversight failure

“afforded management the opportunity to indulge in the misconduct which

occurred,” entire fairness review was warranted.495

In recent years, Delaware courts have honed the pleading-stage distinctions

between a paradigmatic Revlon claim and a Mills theory warranting entire fairness

review.496 First, the rogue fiduciary must be materially interested, as by seeking

control or benefit from the company post-merger.497 Second, the board must be

“inattentive or ineffective” and permit the fiduciary’s manipulation.498 Third, so

494
Id. at 1269 (emphasis omitted).
495
Id. at 1279.
496
Of course, fraud on the board can also be perpetuated by an advisor. See, e.g., RBC
Cap. Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015). My discussion here focuses on the
line between an overweening officer and a fraudster.
497
See Haley, 235 A.3d at 717, 719; City of Miami Gen. Empls.’ v. Comstock, 2016 WL
4464156, at *19 (Del. Ch. Aug. 24, 2016) (noting “plaintiff must allege that [the fiduciary]
was acting out of self-interest and that he deceived the rest of the board into approving the
transaction,” and declining to apply entire fairness because the fiduciary was not self-
interested), aff’d, 158 A.3d 885 (Del. 2017); City of Warren Gen. Empls.’ Ret. Sys. v.
Roche, 2020 WL 7023896, at *10 (Del. Ch. Nov. 30, 2020) (concluding the plaintiff failed
to plead that the defendant fiduciaries were tainted by self-interest with respect to the
buyout).
498
Roche, 2020 WL 7023896, at *15; see also Macmillan, 559 A.2d at 1279 (noting the
board’s lack of oversight afforded the opportunity for mismanagement); Mindbody, 2020
WL 5870084 at *25 (considering whether “the Board was the passive victim of a rogue
fiduciary” due to an informal, ill-equipped, and tardily-formed transaction committee);
Kahn v. Stern, 183 A.3d 715, n.4 (Del. 2018) (TABLE) (noting that a variant of Macmillan
claim exists where “impartial board members did not oversee conflicted members

95
enabled, the fiduciary must commit deception or manipulation, as by “deceiving an

independent board of directors into favoring a bidder”499 or “fail[ing] to disclose his

‘interest in the transaction to the board.’”500 Fourth, that deception must be

material.501 “[A]n omission is ‘material’ to a board if the undisclosed fact is relevant

and of a magnitude to be important to directors in carrying out their fiduciary duty

of care in decisionmaking.”502 Finally, the “key issue” is whether it is reasonably

conceivable that the deception “tainted the decisionmaking of [the] concededly

independent and disinterested directors[.]”503 The fiduciary’s allegedly deceptive or

sufficiently”); In re Xura, Inc. S’holder Litig., 2018 WL 6498677, at *4 (Del. Ch.
Dec. 10, 2018) (discussing allegations of an inert special committee formed to evaluate and
negotiate a transaction with a bidder, including an allegation that one of its members “did
not even realize that the Special Committee existed or that he was a member of the
committee until he learned about it at his deposition”).
499
Roche, 2020 WL 7023896, at *17 (citing Macmillan, 559 A.2d at 127, and also citing
Stern, 183 A.3d at n.4, and also citing Comstock, 2016 WL 4464156, at *19); accord
Comstock, 2016 WL 4464156, at *20.
500
Haley, 235 A.3d at 717 (quoting Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156,
1168 (Del. 1995)); accord Mindbody, 2020 WL 5870084, at *23–24.
501
Mindbody, 2020 WL 5870084, at *23–25.
502
Id. at *23 (internal quotation marks omitted) (quoting Haley, 235 A.3d at 718). “[T]he
term ‘material,’ when used in the context of a director’s obligation to be candid with the
other members of the Board, is distinct from the use of the term ‘material’ in the quite
different context of disclosure to stockholders in which an omitted fact is material if there
is a substantial likelihood that a reasonable shareholder would consider it important in
deciding how to vote.” Haley, 235 A.3d at 719 (alteration and internal quotation marks
omitted) (quoting Brehm, 746 A.2d at 259 n.49).
503
Roche, 2020 WL 7023896, at *15 (quoting Baker Hughes, 2020 WL 6281427, at *19).

96
manipulative conduct must cause the board to take action or inaction that was

outcome-determinative.

Thus, to elevate the standard of review for a paradigmatic Revlon claim, an

interested officer must be more than overweening; he must be fraudulent or outright

manipulative. The board must be more than supine; it must be deceived and permit

that deception. And the deception must affect the outcome. To raise the standard of

review on any less risks swallowing enhanced scrutiny in every paradigmatic Revlon

case.504

Garland was materially interested, and the Special Committee failed to

vigorously enforce its instructions or effectively manage conflicts. Garland misled

the Special Committee, failing to disclose that he met with Riverstone and Buyer

together, and saying instead that meetings with Buyer and Riverstone would occur

in the coming weeks, and that Buyer’s “approach the company…had come about

indirectly.”505 But the Special Committee’s deficiencies did not facilitate Garland’s

deception. The Special Committee oversaw and engaged in the sale process, and

504
See Macmillan, 559 A.2d at 1279 (“[J]udicial reluctance to assess the merits of a
business decision ends in the face of illicit manipulation of a board’s deliberative processes
by self-interested corporate fiduciaries. Here, not only was there such deception, but the
board’s own lack of oversight in structuring and directing the auction afforded management
the opportunity to indulge in the misconduct which occurred. In such a context, the
challenged transaction must withstand rigorous judicial scrutiny under the exacting
standards of entire fairness.”).
505
Compl. ¶ 140.

97
took measures to oversee Garland, including issuing repeated instructions on how

conflicted fiduciaries should behave and issuing a corrective memorandum after

learning of Garland’s April 15 Meeting.506 Importantly, Plaintiff’s argument seeking

entire fairness review depends on the allegation that “Garland breached the

Committee protocols.”507 Batkin told the Special Committee Garland had

discussions with Riverstone and Buyer concerning a potential acquisition, albeit

tardily and without the detail that Garland had met with them together.

The undisclosed fact that Garland had met with Riverstone and Buyer together

“is relevant and of a magnitude to be important to directors in carrying out their

fiduciary duty of care in decisionmaking.”508 The April 15 Meeting’s materiality is

evidenced by the Batkin Memo, which is the only memo sent during the process.

On May 15, the Batkin Memo informed the Special Committee that Garland had

discussions with Riverstone and Buyer concerning Buyer’s potential acquisition of

the Company. The Batkin Memo indicated that Buyer was interested in a transaction

and was willing to enter into a confidentiality agreement to engage in discussions.

But the Batkin Memo did not fully disclose that Garland met with Riverstone and

506
Id. ¶ 128.
507
D.I. 82 at 34.
508
Mindbody, 2020 WL 5870084, at *23 (internal quotation marks omitted) (quoting
Haley, 235 A.3d at 718).

98
Buyer together and the impetus for, circumstances surrounding, and substance of

that meeting.

As for the Proxy, it discloses the fact of the meeting but is silent regarding its

timing, substance, and context. It inaccurately suggests that Garland disclosed the

April 15 Meeting immediately after it occurred—if Garland had so disclosed shortly

after the April 15 Meeting as the Proxy suggests, there would have been no occasion

to circulate the Batkin Memo weeks later. The Proxy also states that on May 2,

Garland “informed the Special Committee of his recent meeting with Riverstone

Representatives and [Buyer].”509 But the May 2 meeting minutes do not mention

Buyer, and state that Garland disclosed Riverstone had suggested taking the

Company private in conjunction with an unidentified third-party institutional

investor, but had “dropped the suggestion following consideration of conflicts and

certain contractual obligations of [Riverstone].”510 The May 2 meeting minutes were

therefore also misleading, as Garland had already identified and held a meeting with

Buyer.

To be sure, Garland’s tardy half-truths pale in comparison to the undisclosed

conflicts in Haley and Mindbody.511 They more resemble the immaterial early

509
Proxy at 40.
510
Compl. ¶ 127.
511
See Haley, 235 A.3d at 719 (“Plaintiffs have adequately alleged that the Board would
have found it material that its lead negotiator had been presented with a compensation
proposal having a potential upside of nearly five times his compensation at Towers, and

99
undisclosed management employment discussion in Comstock, as the Special

Committee would become fully aware of Riverstone and Buyer’s partnership, just

as the Comstock board would become aware of the undisclosed discussion.512 But

the Batkin Memo supports the inference that the Company’s fiduciaries considered

the April 15 Meeting material.

While the full story about the April 15 Meeting is material, its concealment

did not impact the Special Committee’s decisionmaking as Plaintiff suggests.

Garland’s belated half-truths about the meeting appear to have had no effect on the

process. The omitted fact that he actually spoke with Riverstone and Buyer together,

and the belated disclosure in the Batkin Memo, does not amount to “illicit

manipulation of the board’s deliberative process.”513 As in Comstock, Plaintiff does

that he was presented with this Proposal during an atmosphere of deal uncertainty and
before they authorized him to renegotiate the merger consideration.”); Mindbody, 2020 WL
5870084, at *24 (offering a “catalogue[]” of “undisclosed conflicts”).
512
Comstock, 2016 WL 4464156, at *21 (“Plaintiff also alleges that Comstock deceived
the board by failing to inform it of various steps he took while negotiating the transaction.
For instance, plaintiff alleges that Comstock did not disclose an early discussion with
Petrello regarding C&J management’s potential future contracts with New C&J, or
Comstock’s motives for negotiating the transaction, as plaintiff interprets them.
Significantly, however, plaintiff does not allege that management’s eventual future roles
were never disclosed to the board, or that the critical deal terms Comstock negotiated, such
as the EBITDA multiple, were hidden from the board.” (footnote omitted)).
513
Id. at *19 (quoting Macmillan, 559 A.2d at 1279).

100
not allege that Riverstone’s partnership with Buyer was never disclosed to the Board,

or that any terms Garland may have negotiated in those discussions were hidden.514

While Plaintiff contends the April 15 Meeting gave Riverstone and Buyer

entry to the sales process, the Board had already included Riverstone in the process.

Riverstone’s representative, Hunt, attended the first Board meeting and substantive

discussions of potential strategic alternatives.515 “The Board then solicited the views

of Riverstone” who it believed “may be interested in participating in a potential

transaction.”516

Plaintiff has not alleged how the meeting, the delayed and incomplete

disclosures, or the Special Committee’s lukewarm response harmed Brookfield,

caused the Board or Special Committee to disadvantage Brookfield, or enabled

Garland to continue any meaningful unprincipled conduct. The Special Committee,

with Batkin in the driver’s seat, engaged with Brookfield and afforded it the

opportunity to conduct extensive due diligence. Nor did Garland mislead the Special

Committee as to Brookfield’s bid; the Special Committee and its advisors

acknowledged the superior aspects of Brookfield’s bid, including its superior value.

Plaintiff does not allege that Garland “deceived the rest of the board into approving

514
Compare id. at *21, with Macmillan, 559 A.2d at 1279.
515
Compl. ¶¶ 92–94.
516
Id. ¶ 97 (emphasis omitted).

101
the transaction” or into rejecting Brookfield.517 Plaintiff does not plead facts to

support outcome-determinative deception.518

I end where I began, by noting that Plaintiff’s paradigmatic Revlon theory of

breach is incompatible with her fraud-on-the-board theory for entire fairness. Under

Plaintiff’s own breach theory, in which the Special Committee favored Riverstone’s

interest over that of company stockholders, the sales process outcome would have

been the same whether or not the Special Committee immediately learned the full

truth of Garland’s April 15 Meeting with Riverstone and Buyer.

b. Whether The Officer And Entity
Defendants Form A Control Group
Must Be Determined With The Benefit
Of A Factual Record.

Plaintiff alleges the Officer Defendants stood on both sides of the transaction;

that Riverstone and the Officer Defendants, as Developer 2 stakeholders, competed

with the Company’s public stockholders for consideration; and that Riverstone and

the Officer Defendants retained equity in the post-Merger entity while public

stockholders were cashed out. Plaintiff contends the Entity and Officer Defendants

(together, the “Controller Defendants”) aggregated their sources of power and

517
See Comstock, 2016 WL 4464156, at *19.
518
Roche, 2020 WL 7023896, at *14–15; see also Comstock, 2016 WL 4464156, at *21
(describing the type of deceitful conduct necessary to trigger entire fairness).

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influence to control the Company. Accordingly, entire fairness review may be

warranted if the Entity and Officer Defendants acted as a control group.519

“Delaware law imposes fiduciary duties on those who effectively control a

corporation.”520 The premise for contending that a controller owes fiduciary duties

“is that the controller exerts its will over the enterprise in the manner of the board

itself.”521 The controller analysis “must take into account whether the stockholder,

as a practical matter, possesses a combination of stock voting power and managerial

authority that enables him to control the corporation, if he so wishes.” 522 If a

controller or control group is present, entire fairness review arises “when the board

labors under actual conflicts of interest” stemming from the controller standing on

both sides of a challenged transaction or competing with the minority for

consideration.523 “The question whether a shareholder is a controlling one is highly

519
Despite Plaintiff’s deficient presentation of this theory for purposes of the standard of
review, limited to a footnote in her answering brief, I consider whether she has pled a
control group because she also asserts the Controller Defendants owe fiduciary duties and
are liable for breaching them, and has briefed that those claims should survive Defendants’
motion under Rule 12(b)(6). See D.I. 82 at 34 n.66.
520
Voigt v. Metcalf, 2020 WL 614999, at *11 (Del. Ch. Feb. 10, 2020) (quoting Quadrant
Structured Prods. Co. Ltd. v. Vertin, 102 A.3d 155, 183–84 (Del. Ch. 2014)).
521
Abraham v. Emerson Radio Corp., 901 A.2d 751, 759 (Del. Ch. 2006).
522
In re Cysive, Inc. S’holders Litig., 836 A.2d 531, 553 (Del. Ch. 2003).
523
FrontFour Cap. Gp. LLC v. Taube, 2019 WL 1313408, at *20 (Del. Ch. Mar. 11, 2019)
(quoting Reis, 28 A.3d at 457, and citing Kahn v. Tremont Corp., 694 A.2d 422, 428 (Del.
1997), and Kahn, 638 A.2d at 1115, and Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del.
1983), and In re John Q. Hammons Hotels Inc. S’holder Litig., 2009 WL 3165613, at *12
(Del. Ch. Oct. 2, 2009), and In re Delphi Fin. Gp. S’holder Litig., 2012 WL 729232, at *12

103
contextualized and is difficult to resolve based solely on the complaint.”524 “[T]here

is no magic formula to find control; rather, it is a highly fact specific inquiry.”525

Delaware cases have traditionally evaluated whether stockholders wielded

control over the corporation.526 This is unsurprising, as control manifests in whether

an individual or entity has the power to displace the will of the board, 527 and stock

n.57 (Del. Ch. Mar. 6, 2012), and also citing In re Primedia, Inc. S’holders Litig., 67 A.3d
455, 487 (Del. Ch. 2013)).
524
Williamson v. Cox Commc’ns, Inc., 2006 WL 1586375, at *6 (Del. Ch. June 5, 2006);
accord In re Tesla Motors, Inc. S’holder Litig., 2018 WL 1560293, at *13 (Del. Ch.
Mar. 28, 2018) (“Whether a large blockholder is so powerful as to have obtained the status
of a ‘controlling stockholder’ is intensely factual and it is a difficult question to resolve on
the pleadings.” (alterations and internal quotation marks omitted)); Cysive, 836 A.2d at
550–51 (same); see In re Zhongpin Inc. S’holders Litig., 2014 WL 6735457, at *9 n.33
(Del. Ch. Nov. 26, 2014) (“Whether or not a particular CEO and sizeable stockholder holds
more practical power than is typical should not be decided at the motion to dismiss stage
if a plaintiff pleads facts sufficient to raise the inference of control. To ignore real-world
indicia of a stockholder’s actual power would depart from this Court’s precedent.”), rev’d
on other grounds sub nom. In re Cornerstone Therapeutics Inc. S’holder Litig., 115 A.3d
1173 (Del. 2015).
525
Calesa Assocs., L.P. v. Am. Cap., Ltd., 2016 WL 770251, at *11 (Del. Ch. Feb. 29, 2016)
(citing In re Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *10 (Del. Ch.
Oct. 24, 2014)); see Zhongpin, 2014 WL 6735457, at *6–7 (noting the inquiry of “whether
or not a stockholder’s voting power and managerial authority, when combined, enable him
to control the corporation . . . is not a formulaic endeavor and depends on the particular
circumstances of a given case” (footnote and internal quotation marks omitted) (quoting
Cysive, 836 A.2d at 553)).
526
E.g., In re KKR Fin. Hldgs. LLC S’holder Litig., 101 A.3d 980, 983 (Del. Ch. 2014)
(“This action involves the novel claim that a holder of less than one percent of the stock of
a Delaware corporation was a controlling stockholder and thus owed fiduciary obligations
to the other stockholders of the corporation.”), aff’d sub nom. Corwin v. KKR Fin. Hldgs.
LLC, 125 A.3d 304 (Del. 2015).
527
Superior Vision Servs., Inc. v. Reliastar Life Ins. Co., 2006 WL 2521426, at *4 (Del.
Ch. Aug. 25, 2006) (considering “whether the actual control must be over the Board or
whether separately negotiated contract rights can supply the requisite degree of control,”

104
ownership is the original vehicle for such displacement. A majority stockholder’s

control flows principally from its voting power, which translates into the power to

“alter materially the nature of the corporation and the public stockholders’

interests.”528

For a minority stockholder or an aggregate control group of minority

stockholders, fiduciary duties flow from aggregated sources of influence, including

voting power and softer sources of power.529 “It is impossible to identify or foresee

all of the possible sources of influence that could contribute to a finding of actual

and noting that, in evaluating whether a stockholder is a controller, “Delaware case law has
focused on control of the board”).
528
Paramount Commc’ns Inc. v. QVC Network Inc., 637 A.2d 34, 43 (Del. 1994); see also
Voigt, 2020 WL 614999, at *11 (“One method of pleading control sufficient to impose
fiduciary duties is to allege that a defendant has the ability to exercise a majority of the
corporation’s voting power.”).
529
See Corwin, 125 A.3d at 307 (noting the Delaware Supreme Court’s “instructions” to
“look[] for a combination of potent voting power and management control such that the
stockholder could be deemed to have effective control of the board without actually owning
a majority of stock” (footnote omitted)); Emerald P’rs v. Berlin, 726 A.2d 1215, 1221 n.8
(Del. 1999) (noting that minority stockholdings with “some additional allegation of
domination through actual control of corporate conduct” may give rise to controller status);
In re PNB Hldg. Co. S’holders Litig., 2006 WL 2403999, at *9 (Del. Ch. Aug. 18, 2006)
(considering “stockholders who, although lacking a clear majority, have such formidable
voting and managerial power that they, as a practical matter, are no differently situated
than if they had majority voting control”); see also 8 Del. C. § 203(c)(4) (defining
“[c]ontrol” as “the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership of
voting stock, by contract or otherwise”); 17 C.F.R. § 230.405 (defining “control” as “the
possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting securities,
by contract, or otherwise”).

105
control.”530 The many sources of influence and of control that could contribute to a

finding of actual control include:

(i) relationships with particular directors, (ii) relationships with key
managers or advisors, (iii) the exercise of contractual rights to channel
the corporation into a particular outcome, and (iv) the existence of
commercial relationships that provide the defendant with leverage over
the corporation, such as status as a key customer or supplier.531

“Broader indicia of effective control also play a role,”532 and include, but are not

limited to, ownership of a significant equity stake; the right to designate directors;

contractual augmentation of the power of a minority stockholder or board-level

position; and the ability to exercise outsized influence in the board room or on

committees, as through roles like CEO, Chairman, or founder.533

Here, Plaintiff’s control group theory aggregates the Officer Defendants’

stock holdings and management roles with the Entity Defendants’ contractual,

operational, and structural pull, even though the Entity Defendants are not

stockholders. Plaintiff pegs the Entity Defendants as the group’s primary source of

power, pointing to the Company’s formation to serve Riverstone, the importance of

Developer 2’s commercial relationship with the Company, Riverstone’s ability to

530
Voigt, 2020 WL 614999, at *12 (citing Basho Techs. Holdco B, LLC v. Georgetown
Basho Invs., LLC, 2018 WL 3326693, at *26 (Del. Ch. July 6, 2018), aff’d sub nom.
Davenport v. Basho Techs. Holdco B, LLC, 221 A.3d 100 (Del. 2019) (TABLE)).
531
Id. (citing Basho, 2018 WL 3326693, at *26).
532
Id. (citing Basho, 2018 WL 3326693, at *27).
533
Id. (citing Basho, 2018 WL 3326693, at *27).

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install insiders as officers and directors at both the Company and Developer 2, and

the Consent Right. Accordingly, this case presents an interesting wrinkle. It is an

open question under Delaware law whether the Entity Defendants’ soft power alone,

anchored in historical and commercial ties and the contractual Consent Right, can

support including the Entity Defendants in a control group and imposing fiduciary

duties.

This Court has dismissed fiduciary duty claims against a group of alleged

controllers where some or all of the members held no stock in the company. 534 For

example, Klein v. H.I.G. Capital, L.C.C. considered a “novel” control group theory

in which the group’s purported members were not alleged to have owned any

company stock at the time of the transaction in question.535 Relying on the accurate

observation that Delaware law looks to substance rather than form when considering

who wields control sufficient to impose fiduciary duties, the plaintiff argued that the

group’s members “were effectively controlling stockholders of the Company.”536

The Court rejected this position: “[i]t [wa]s not alleged that [the defendant] owned

any stock of [the company] until the Transactions closed and thus, by definition, [the

534
See, e.g.¸ Skye Min. Invs., LLC v. DXS Cap. (U.S.) Ltd., 2020 WL 881544, at *24–29
(Del. Ch. Feb. 24, 2020); Klein v. H.I.G. Cap., L.L.C., 2018 WL 6719717, at *13 (Del. Ch.
Dec. 19, 2018); Forsythe v. ESC Fund Mgmt. Co. (U.S.), 2007 WL 2982247, at *12–13
(Del. Ch. Oct. 9, 2007).
535
2018 WL 6719717, at *13.
536
Id.

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defendant] could not have been part of a ‘group’ of Company stockholders when the

Transactions were negotiated.”537

But after remarking on the hurdle of stock ownership, the Court went on to

make the “more general[]” observation that the complaint was “devoid of any

allegations that [the defendant] was a party to any agreement or arrangement that

controlled the votes of any shares of the Company’s stock,” or that it “otherwise took

any action to exercise control over the directors of [the company] before the parties

entered into the Transactions.”538 Rather, the most that could be reasonably inferred

from alleged sources of power other than stock ownership was that the purported

controller “had the potential to later exercise control over the Company,” which “is

not enough to impose fiduciary obligations.”539

And Skye Mineral Investors, LLC v. DXS Capital (U.S.) Limited considered

claims against an alleged control group of six, only two members of which held any

537
Id.
538
Id.
539
Id. (emphasis added) (citing In re Sea-Land Corp. S’holders Litig., 1987 WL 11283, at
*5 (Del. Ch. May 22, 1987) (reasoning that the “potential ability to exercise control is not
equivalent to the actual exercise of that ability,” and only actual control over the board’s
decision-making process suffices to impose fiduciary duties (emphasis omitted)), and also
citing Gilbert v. El Paso Co., 490 A.2d 1050, 1056 (Del. Ch. 1984) (“Plaintiffs’ contention
that Burlington occupied a fiduciary role because of its potential for control is subject to
the same infirmity as its contract argument. . . . State law claims of breach of contract and
breach of fiduciary relationship must subsist on the actuality of a specific legal relationship,
not in its potential.”), aff’d, 575 A.3d 1131 (Del. 1990)).

108
company stock.540 Because the alleged group owned less than 50% of the

outstanding stock, the Court observed that plaintiff was required to plead facts

“allow[ing] a reasonable inference that the Alleged Controllers exercised such

formidable voting and managerial power that, as a practical matter, they were no

differently situated than if they had majority voting control.” 541 As to the four

alleged nonstockholder control group members, the Court concluded it was “not

reasonably conceivable they exercised actual control over the company because they

“owned no [company] units, appointed none of [the company]’s Board members and

held no contractual blocking rights.”542

But as to the two minority stockholders, the Court found it reasonably

conceivable that they exercised control, aggregating their stock with their

contractual blocking rights.543 The Court emphasized that “the focal point” of the

control analysis was the stockholders’ blocking rights and how they used them.544

540
Skye Min. Invs., 2020 WL 881544, at *24–29.
541
Id. at *26 (alterations and internal quotation marks omitted) (quoting In re Morton’s
Rest. Gp., Inc. S’holders Litig., 74 A.3d 656, 665 (Del. Ch. 2013)).
542
Id. at *27 (emphasis in original).
543
Id. at *26.
544
Id. (citing Basho, 2018 WL 3326693, at *25 (“If a defendant wields control over a
corporation” either “generally or with regard to a particular transaction,” then “the
defendant takes on fiduciary duties, even if the defendant is a stockholder who otherwise
would not owe duties in that capacity.”), & *26 (noting that a plaintiff can show a minority
blockholder’s domination and control in various ways including personal relationships
with board members, contractual rights, commercial relationships, de facto ability to

109
Relying on Basho Technologies v. Georgetown Basho Investors,545 the defendants

argued that “a mere blocking right standing alone is highly unlikely to support either

a finding or a reasonable inference of control.”546 The Court agreed with that

statement, but held the plaintiff had alleged more.547 As alleged, the blocking rights

“amounted to a self-destruct button” that allowed the stockholders to “wield control

by driving [the company] into the ground if it suited their interests.”548 With this

“on/off switch for [the company] that could be, and allegedly was, manipulated by

[the stockholders] to serve their interests at the expense of [the company],” 549 the

stockholders “exercised their leverage with the Blocking Rights to steer [the

company’s operating subsidiary] off the cliff into the bankruptcy ravine below,” by

allowing the stockholders “to block all of [the company]’s efforts to finance any of

its ongoing operations.”550 As the Court observed, “[w]hen blocking rights empower

a minority investor to channel the corporation into a particular outcome, they

remove directors or the company’s own characterizations of the minority blockholder’s
influence)).
545
2018 WL 3326693 (Del. Ch. July 6, 2018).
546
Skye Min. Invs., 2020 WL 881544, at *27 (internal quotation marks omitted) (referring
to Basho, 2018 WL 3326693, at *26 n.315).
547
Id.
548
Id. at *26 (internal quotation marks omitted).
549
Id.
550
Id. at *27 (emphasis in original).

110
contribute to an inference of control.”551 The Skye plaintiffs “ma[d]e an even

stronger case as the Blocking Rights did more than channel [the company] to a

particular outcome,” as “the Blocking Rights gave [the stockholders] the unilateral

power to shut [the company] down—full stop.”552 In the end, the Court declined to

impute the stockholders’ blocking right to the nonstockholders, who otherwise

brought no power to the table, and so declined to find a control group.553

Klein and Skye Mineral Investors concluded that the members of a purported

control group that did not own stock were not part of the group. But both looked

beyond the bounds of stock ownership to other sources of soft power and left open

the possibility that, if a plaintiff pleads sufficient sources of influence, controller

status and its attendant fiduciary duties may extend to a nonstockholder.554 These

fact-specific evaluations of nonstockholder members of alleged control groups

followed this Court’s consideration of the possibility that fiduciary duties would

extend to a nonstockholder in In re EZCORP Inc. Consulting Agreement Derivative

Litigation.555 That consideration built on the United States Supreme Court’s

551
Id. (internal quotation marks omitted) (quoting Basho, 2018 WL 3326693, at *29).
552
Id. (internal quotation marks omitted) (quoting Basho, 2018 WL 3326693, at *29).
553
See id. at *27–29.
554
See id.; Klein, 2018 WL 6719717, at *13.
555
2016 WL 301245, at *8–10 (Del. Ch. Jan. 25, 2016).

111
decision in Southern Pacific Co. v. Bogert,556 which observed that the “the doctrine

under which majority stockholders exercising control are deemed trustees for the

minority” was not avoided simply because the defendant “did not itself own directly

any stock” in the company, but exerted its control through its subsidiary that held

the majority of the company’s stock.557 The Supreme Court stated,

[T]he doctrine by which the holders of a majority of the stock of a
corporation who dominate its affairs are held to act as trustee for the
minority does not rest upon such technical distinctions. It is the fact of
control of the common property held and exercised, not the particular
means by which or manner in which the control is exercised, that
creates the fiduciary obligation.558

Chancellor Wolcott similarly held in the seminal decision in Eshleman v. Keenan;559

affirming that decision, the Delaware Supreme Court ruled that “the formal

corporate vehicle” behind a transaction does not necessarily matter, as “[t]he

conception of corporate entity is not a thing so opaque that it cannot be seen

through.”560 Drawing on Southern Pacific and Eshleman, EZCORP held that

fiduciary duties extended to an individual defendant that was the company’s

556
250 U.S. 483 (1919).
557
Id. at 491–92.
558
Id. at 492.
559
187 A. 25 (Del. Ch. 1936), aff’d, 2 A.2d 904 (Del. 1938).
560
EZCORP, 2016 WL 301245, at *9 (quoting Eshleman, 2 A.2d at 908).

112
“ultimate controller,” even though he exercised control only indirectly and did not

himself own stock.561

Fiduciary duties arise from the separation of ownership and control. 562 The

essential quality of a fiduciary is that she controls something she does not own. A

trustee need not (and does not) own the assets held in trust; directors need not own

stock. Even a third party lender that influences extraordinary influence over a

company may be liable for acting negligently or in bad faith.563 If a stockholder, as

one co-owner, can owe fiduciary duties to fellow co-owners because the stockholder

controls the thing collectively owned, surely an “outsider[]” that controls something

it does not own owes duties to the owner.564 “[I]t is a maxim of equity that ‘equity

regards substance rather than form,’”565 and “the application of equitable principles

561
Id. at *10.
562
See S. Pac. Co., 250 U.S. at 492.
563
Basho, 2018 WL 3326693, at *26 (citing NVent, LLC v. Hortonworks, Inc., 2017 WL
449585 at *9–10 (Del. Super. Feb. 1, 2017) (applying California law)).
564
EZCORP, 2016 WL 301245, at *9 (citing S. Pac. Co., 250 U.S. at 488, and Sterling v.
Mayflower Hotel Corp., 93 A.2d 107, 109–10 (Del. 1952)).
565
Id. (quoting Monroe Park v. Metro. Life Ins. Co., 457 A.2d 734, 737 (Del. 1983), and
citing Gatz v. Ponsoldt, 925 A.2d 1265, 1280 (Del. 2007)).
Not every member of a control group needs to be similarly situated in that they each
own stock. Envision a particular task that requires a truck, tools, and know-how. A first
person owns a truck, a second owns the tools, and the third has the know-how. The three
individuals can come together and complete the task, and are responsible for the quality of
its completion. Their contributions need not be in identical ratios; that they do not each
possess one truck part, one tool, and one skill is no reason to absolve them of their
responsibility for the final work product. Similarly, holders of voting and soft power can
work together to exert control without being similarly situated. The Officer Defendants

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depends on the substance of control rather than the form[;] it does not matter whether

the control is exercised directly or indirectly.”566 “[T]he level of stock ownership is

not the predominant factor, and an inability to exert influence through voting power

does not foreclose a finding of control.”567 Thus, “Delaware corporate decisions

consistently have looked to who wields control in substance and have imposed the

risk of fiduciary liability on that person,”568 and “[l]iability for breach of fiduciary

duty therefore extends to outsiders who effectively controlled the corporation.”569

With this foundation, and considering evolving market realities and corporate

structures affording effective control, Delaware law may countenance extending

contributed stock ownership and executive leadership positions; Developer 2 had its
commercial relationship with the Company; and Riverstone had the Consent Right, the
Officer Defendants, and Developer 2. When aggregated, those sources of influence
enabled the Controller Defendants to complete the task: exercising control over the
Company to cause a merger with Buyer. The fact that the different actors held different
sources of disaggregated power does not dilute their combined effectiveness, and I can see
no reason why it should absolve the actors of the consequences of their control.
566
EZCORP, 2016 WL 301245, at *9–10.
567
FrontFour, 2019 WL 1313408, at *21; see also Crimson Expl., 2014 WL 5449419, at
*10 (collecting cases and noting that “the cases do not reveal any sort of linear, sliding-
scale approach whereby a larger share percentage makes it substantially more likely that
the court will find the stockholder was a controlling stockholder,” but “[i]nstead, the
scatter-plot nature of the holdings highlights the importance and fact-intensive nature of
the actual control factor”); Calesa Assocs., 2016 WL 770251, at *11 (discussing Crimson
Exploration and noting that it “found no correlation between the percentage of equity
owned and the determination of control status”).
568
EZCORP, 2016 WL 301245, at *9.
569
Id. (emphasis added) (citing S. Pac. Co., 250 U.S. at 488, and also citing Sterling, 93
A.2d at 109–10).

114
controller status and fiduciary duties to a nonstockholder that holds and exercises

soft power that displaces the will of the board with respect to a particular decision

or transaction.

Here, in the context of the Company’s end-stage transaction, Plaintiff asks the

Court to consider Riverstone’s Consent Right, its commercial power through

Developer 2, and role as the Company’s creator, together with the Officer

Defendants’ managerial power and some stockholdings. And so, with the door left

open by EZCORP, Skye Mineral Investors, and Klein, I proceed with the well-

established control group analysis to consider whether the Controller Defendants

collectively owed duties with respect to the Merger.

To plead a control group, the plaintiff must first plead the connection among

those in the purported control group was “legally significant” to subject the members

to fiduciary duties.570 Plaintiff must then allege that the control group exercised

de facto control by actual domination or control of the board generally, or actual

domination or control of the corporation, its board, or the deciding committee with

respect to the challenged transaction.571

I first consider whether Plaintiff has alleged that the Controller Defendants

were bound in a legally significant way. The Delaware Supreme Court recently

570
Sheldon v. Pinto Tech. Ventures, L.P., 220 A.3d 245, 252 (Del. 2019).
571
See FrontFour, 2019 WL 1313408, at *22.

115
addressed the requirements for pleading a control group in Sheldon v. Pinto

Technology Ventures, L.P., adopting the “legally significant connection” standard

applied by multiple decisions of this Court:

To demonstrate that a group of stockholders exercises control
collectively, the [plaintiff] must establish that they are connected in
some legally significant way—such as by contract, common ownership,
agreement, or other arrangement—to work together toward a shared
goal. To show a legally significant connection, the [plaintiff] must
allege that there was more than a mere concurrence of self-interest
among certain stockholders. Rather, there must be some indication of
an actual agreement, although it need not be formal or written.572

Both historical ties and transaction-specific ties may support an inference of an

actual agreement.573

Plaintiff has alleged facts giving rise to the reasonable inference that the

alleged group had an “actual agreement” to work together in connection with the

sales process.574 Plaintiff identifies relevant historical and transactional ties,

reflected in the Company’s inception and its capital structures and management, and

the Consent Right. Plaintiff relates Riverstone’s long history with the Officer

Defendants and the Company, alleging that “[t]he extent and significance of the

572
220 A.3d at 251–52 (footnotes and internal quotation marks omitted) (quoting Crimson
Expl., 2014 WL 5449419, at *15, and also quoting Carr v. New Enter. Assocs. Inc., 2018
WL 1472336, at *10 (Del. Ch. Mar. 26, 2018)).
573
See Garfield v. BlackRock Mortg. Ventures, LLC, 2019 WL 7168004, at *8–9 (Del. Ch.
Dec. 20, 2019) (applying the principles in Sheldon, as well as those in In re Hansen Med.
S’holders Litig., 2018 WL 3025525 (Del. Ch. June 18, 2018)).
574
See id. at *9–10.

116
relationship between the Officer Defendants and Riverstone cannot be overstated”

as “Riverstone has been their co-investor, partner, employer, sponsor, and financial

patron” for over a decade.575 In 2009, Riverstone and the Officer Defendants

together established Developer 1, “free[ing]” the Officer Defendants of their prior

employer which the Officer Defendants touted as “a great thing.”576 The Officer

Defendants believed they “found the perfect partner in Riverstone,” as Riverstone

was similarly “interested in investing in renewables,” “valued [the Officer

Defendants’] team,” and acted as a “new backer.”577

Riverstone delivered, and its relationship with the Officer Defendants

reverberated through the Company and its upstream developers. Riverstone

appointed the Officer Defendants to a team of fiduciaries that simultaneously served

the Company and Developer 1, and then Developer 2. The Officer Defendants also

invested in Developer 1, the Company, and Developer 2, and retained equity in the

post-Merger entity.

The connection ran deeper than overlapping appointments and investments.

Riverstone, via Developer 1, and the Officer Defendants created and molded the

Company to serve Riverstone’s needs and purchase and operate Developer 1’s

575
Compl. ¶ 45.
576
Id.
577
Id.

117
projects. Riverstone and Developer 1 used the Company’s spinoff and IPO to further

their shifting needs, meet and profit off increased demand in the energy sector, and

grow Developer 2 via Pattern Vision 2020. After the IPO, Riverstone retained

control over the Company, as Developer 2’s continued symbiotic relationship with

the Company was critical to achieving Pattern Vision 2020’s growth targets. Via

Developer 1, Riverstone controlled approximately 67.9% of the Company’s stock

and a majority of the Board, and retained the Consent Right over the Company’s

major transactions.578

Riverstone then tweaked its relationship with the Company. To retain veto

power over a change of control at the Company after selling all its equity, Riverstone

retained the Consent Right and loyal Riverstone personnel on the Board and in the

Company’s C-suite. The Company and Developer 2 agreed that Developer 2 had

contractual control over the Company in their Purchase Rights Agreement.579

As transaction-specific ties, Plaintiff alleges that the Company’s fiduciaries

with longtime Riverstone ties, including the Officer Defendants, tipped the scales to

secure a transaction with the Entity Defendants’ preferred bidder.580 Plaintiff has

578
See id. ¶¶ 47, 49, 50.
579
Id. ¶ 66.
580
The allegations against the Officer Defendants and their potential liability are discussed
further infra. Although this discussion refers to the Officer Defendants generally and
collectively, as will be discussed, Plaintiff has failed to state claims against Armistead and
Pedersen.

118
alleged that Browne and the Officer Defendants facilitated Riverstone’s influence

over the sales process. And sometime in early 2018, with access to the Company’s

confidential information, Riverstone and Goldman explored a Company take-

private, but abandoned that effort; Riverstone’s insiders at the Company picked up

where it left off. The Officer Defendants began considering a sales process without

the Board’s knowledge, even retaining an advisor to prepare an analysis. With

Garland taking the lead, the Officer Defendants initiated the sales process at a time

when the Company was independently viable and achieving Pattern Vision 2020’s

milestones as planned and when there was no exigent or apparent need to sell. They

did so at a Board meeting that a Riverstone representative attended, and solicited

Riverstone’s opinion and identified it as a potential acquirer.

During the process and without the Special Committee’s authorization,

Garland met secretly with Riverstone and Riverstone’s preferred bidder, Buyer. The

Officer Defendants introduced Riverstone-friendly Goldman into the process.

Browne attended numerous Special Committee meetings, including executive

sessions. Garland and Elkort pressed the Consent Right, asserting that “the need for

[Riverstone’s] support for any potential . . . transaction should not be underestimated

because [Riverstone’s] rights to consent that would likely be implicated by the

proposed transaction appeared to be very broad.”581 And the Officer Defendants

581
Compl. ¶ 117.

119
pushed the Entity Defendants’ agenda, as reflected in the bidders’ perception that

the Company was tightly bound to Riverstone and Developer 2.582

Having alleged a legally significant connection, Plaintiff must also allege that

the control group exercised de facto control by actual domination or control of the

board generally, or actual domination or control of the corporation, its board, or the

deciding committee with respect to the challenged transaction.583 This need not be

a “pervasive” showing.584

“Invariably, the facts and circumstances surrounding the particular transaction

will loom large.”585 “Rarely (if ever) will any one source of influence or indication

of control, standing alone, be sufficient to make the necessary showing. A

reasonable inference of control at the pleading stage typically results when a

confluence of multiple sources combines in a fact-specific manner to produce a

particular result.”586 Therefore, the Court must holistically evaluate sources of

influence and authority, as “[d]ifferent sources of influence that would not support

582
See id. ¶¶ 151, 180–81.
583
See FrontFour, 2019 WL 1313408, at *22.
584
See Superior Vision Servs., 2006 WL 2521426, at *4 (“[P]ervasive control over the
corporation’s actions is not required.”).
585
Voigt, 2020 WL 614999, at *13 (citing Basho, 2018 WL 3326693, at *28) (“A plaintiff
may allege facts indicating that a defendant insisted on a particular course of action even
though other fiduciaries or advisors resisted or had second thoughts. Or a plaintiff may
allege that the defendant engaged in pressure tactics that went beyond ordinary advocacy
to encompass aggressive, threatening, disruptive, or punitive behavior.”).
586
Id. (alterations omitted) (quoting Basho, 2018 WL 3326693, at *28).

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an inference of control if held in isolation may, in the aggregate, support an inference

of control.”587 If that authority takes the form of a contractual right, that right must

give the nonstockholder power akin to “‘operating the decision-making machinery

of the corporation’ (a ‘classic fiduciary’),” rather than “‘an individual who owns a

contractual right, and who exploits that right,’ forcing a corporation to ‘react’ (which

does not support a fiduciary status).”588 The contractual right must confer control

over the board.589 Transaction-specific context is important: for example, a consent

right to a change of control carries more transactional influence in the context of an

end-stage transaction than it would in others.590 Whether such a right translates to

587
Id.
588
Skye Min. Invs., 2020 WL 881544, at *27 n.330 (alterations omitted) (quoting
Thermopylae Cap. P’rs, L.P. v. Simbol, Inc., 2016 WL 368170, at *14 (Del. Ch.
Jan. 29, 2016)).
589
See KKR, 101 A.3d at 994 (contemplating a contractual right “to veto any action of the
board”); Superior Vision Servs., 2006 WL 2521426, at *4 (noting a contractual right must
afford control over the corporate decision-making process); Cox Commc’ns, 2006 WL
1586375, at *5 (finding control in a low stockholder stake and “the ability to shut down
the effective operation of the At Home board of directors by vetoing board actions”); Acp
Master, Ltd. v. Sprint Corp., 2016 WL 3566363, at *2 (Del. Ch. June 30, 2016) (finding
control supported by “veto power over almost all important business actions at [the
Company] under the company’s governing documents”).
590
See Cox Commc’ns, 2006 WL 1586375, at *5 (noting “[t]here is no case law in
Delaware, nor in any other jurisdiction that this Court is aware of, holding that board veto
power in and of itself gives rise to a shareholder’s controlling status” where such veto
power was never actually wielded, but considering such veto power as “significant” to
“coercive leverage” because the veto right conferred “the ability to shut down the effective
operation of the . . . board”, and when combined with other soft power, might also confer
the power to tilt a transaction (emphasis in original)); see KKR, 101 A.3d at 994
(considering “coercive power that stockholder could wield over the board’s ability to
independently decide whether or not to approve the merger” as distinct from constraint of

121
control also depends on what other sources of soft power may be aggregated with

it.591

Plaintiff has not established that the Controller Defendants had the ability to

exercise a majority of the corporation’s voting power via stock ownership: not even

close. At the time of the Merger, the owners of Developer 2, including the Officer

Defendants, slightly more than 10% of the Company’s common stock; Riverstone

and Developer 2 held no stock in the Company.592 Accordingly, Plaintiff’s control

theory principally relies on the Controller Defendants’ soft sources of power.

The Entity Defendants had three sources of soft power. First, as explained,

the long history between Riverstone, Browne, and the Officer Defendants, amplified

by the officers’ significant Company roles as founders, CEO, executive vice

presidents, COO, chief compliance officer, and general counsel supports the

reasonable inference that Riverstone and Developer 2, via the Officer Defendants,

had “the ability to exercise outsized influence in the board room or on

the “business or strategic options available to the corporation”); Basho, 2018 WL 3326693,
at *29 (considering contractual rights to limit financing wielded “to cut off the Company’s
access to other sources of financing” when the company was in a “position of maximum
financial distress” (emphasis added)).
591
See Cox Commc’ns, 2006 WL 1586375, at *4–5.
592
See Compl. ¶ 249 (identifying the stockholdings of PSP and Company management,
which equaled roughly 10.7% of the Company’s outstanding stock and 9.7% of shares
voted in favor of the Merger).

122
committees.”593 Second, and relatedly, Riverstone controlled Developer 2, an

essential part of the Company’s upstream supply chain, supporting the inference of

even more Riverstone “leverage over” the outcome of the sales process.594 With

these two sources of soft power, Riverstone pervaded the Company’s C-suite,

boardroom, and supply chain.

The third source of soft power, the Consent Right, is contractual, and is the

Entity Defendants’ direct source of control over the Company’s fate. “[V]eto power

is significant for analysis of the control issue.”595 In the context of a sales process,

Riverstone’s power to veto a transaction replicated the veto power of a majority

stockholder’s vote, even after Developer 1 sold off its interest in the Company. And

Riverstone used it to that effect, flexing the Consent Right before the Special

Committee and bidders to “channel the corporation into a particular outcome,”596

specifically cashing out public stockholders and internalizing Developer 2.

593
Voigt, 2020 WL 614999, at *12.
594
Id.; see also Cox Commc’ns, 2006 WL 1586375, at *5 (noting the Company’s
operational dependence on the defendants offered leverage and contributed to control); Acp
Master, Ltd., 2016 WL 3566363, at *2 (noting a stockholder that is a company’s “only
significant customer” may “exert control” and “have significant leverage” (alterations
omitted) (quoting Cox Commc’ns, 2006 WL 1586375, at *5)). As reflected by the
Company’s many third-party bidders, its structure did not appear to “limit [the Company’s]
value-maximizing options,” and is not the source of “Plaintiff[’s] real grievance” as in
KKR. See KKR, 101 A.3d at 994; see also Corwin, 125 A.3d at 307–08 (quoting, analyzing,
and affirming the Court of Chancery’s decision in KKR).
595
Cox Commc’ns, 2006 WL 1586375, at *5.
596
Voigt, 2020 WL 614999, at *12.

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 The Consent Right’s effect was outsized due to Riverstone’s other sources of

soft power. Even though advisors and Brookfield saw the Consent Right was readily

circumvented, all understood Riverstone’s approval was required, conditioned on

acquisition of Developer 2, no matter the transaction’s structure. The Company’s

advisors acknowledged early in the process that a transaction with Brookfield could

be structured to avoid the Consent Right, stating that the parties would “need to

structure the transaction as a merger of [TerraForm] into a subsidiary of [the

Company] due to” and that doing so would “not affect the economic terms of the

transaction.”597 But from the start, Garland insisted to the Special Committee that

any transaction with Brookfield would trigger the Consent Right.598 And Garland

and Elkort suggested to the Special Committee that Riverstone had “broad” consent

rights such that Riverstone would have to approve of any merger transaction

involving the Company.599

The Consent Right loomed large in negotiations with Brookfield. When

Brookfield submitted an offer that would exclude Developer 2, Evercore and

Goldman told Brookfield that “Riverstone has a consent right with respect to a

merger of [the Company], and Riverstone will not provide such consent to a

597
Compl. ¶ 121; see also id. ¶ 139.
598
See, e.g., id. ¶ 8.
599
Id. ¶¶ 117, 130.

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transaction in which [TerraForm] becomes the parent company of [the

Company].”600 At first, Brookfield proposed the Company acquire TerraForm in a

transaction that excluded Developer 2 “so that no Riverstone consent is required in

connection with the transaction.”601 Brookfield explained:

We had previously been notified by your advisors that Riverstone has
a consent right with respect to a merger of [the Company], and
Riverstone will not provide such consent to a transaction in which
[TerraForm] becomes the parent company of [the Company]. As you
are aware, we, at your request, restructured the proposed transaction
with [the Company] as the surviving parent company so that no
Riverstone consent is required in connection with this proposed
transaction.602

Even with the Consent Right so circumvented, the Special Committee worried

Riverstone would sue to block a transaction that did not involve Developer 2.603

Riverstone expressed it would not consent to any transaction with Brookfield and

600
Id. ¶ 164.
601
Id. ¶ 166.
602
Id. ¶ 173 (emphasis omitted).
603
Id. ¶ 171. Plaintiff contends that the Entity Defendants “threaten[ed] meritless litigation
in the event a merger agreement was entered with Brookfield and TerraForm that did not
satisfy Riverstone’s demands.” D.I. 82 at 5; see Compl. ¶¶ 15, 171, 177, 180, 260, 306,
311(d), 317. As support for this theory, Plaintiff points to Shah’s September 10 letter to
the Board that acknowledged the Board was not “free to accept certain types of transactions
without prior Riverstone consent or, as we understand, any transaction not supported by
Riverstone without attracting Riverstone litigation risk.” Compl. ¶¶ 179–80. While the
Complaint and the documents integral to it suggest that Riverstone was willing to take
necessary steps to enforce the Consent Right in the event of a breach, they do not support
Plaintiff’s sweeping allegations of overt and explicit threats. Those allegations must be
developed through discovery.

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TerraForm and would be displeased with the Company if it entered a deal that

circumvented the Consent Right.604 By September 2019, Brookfield understood the

state of play, as reflected in its letter to the Special Committee after meeting with

Riverstone:

Our understanding is that the relationship between the [] Board and
Riverstone is complex. The Board has a fiduciary duty to shareholders
of [the Company] but is not free to accept certain types of transactions
without prior Riverstone consent or, as we understand, any transaction
not supported by Riverstone without attracting Riverstone litigation
risk.605

After meeting with Riverstone, Brookfield was unwilling to proceed with a

transaction structure that avoided the Consent Right, placing the Consent Right back

in play. Brookfield remained willing to move forward if Riverstone consented to

the deal and the parties agreed to Riverstone’s requested amendments of existing

contractual arrangements.606

Riverstone’s outsized role is reflected in the process itself. Riverstone had the

ability to meet with bidders, review and assess their offers, and weigh in, many times

before the Special Committee had considered the proposal. Bidders believed that

Riverstone’s satisfaction was essential to closing any deal, and accurately perceived

Developer 2 and the Company as a bundled buy-one-get-one package. Specifically,

604
Compl. ¶ 15.
605
Id. ¶ 179 (emphasis omitted).
606
Id. ¶ 180.

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Party D acknowledged that Riverstone was one of “the three legs of the stool that

are critical to accomplishing our objective of acquiring and combining [the

Company] and [Developer] 2.”607 Brookfield stated that “the Board and

management wish to also internalize [Developer 2] as part of this transaction.”608

Brookfield acknowledged that it was not “in anyone’s best interests to engage with

Riverstone in a manner that creates animosity or material litigation,” and believed

that “no deal could be completed without the consent of Riverstone even though it

had no legal right to block a properly structured transaction.”609

Thus, having determined that the Controller Defendants are connected in a

legally significant way, it may be that their aggregate sources of power are sufficient

to establish a control group, as they allowed the Controller Defendants to drive the

outcome of the sales process and favor Buyer. But because this inquiry is highly

fact intensive, I decline to make a definitive determination that the Controller

Defendants operated as a control group owing fiduciary duties with respect to the

transaction and that entire fairness therefore applies.610 The Controller Defendants’

duties and resultant standard of review can only be known after the record is

607
Id. ¶ 181.
608
Id. ¶ 151 (emphasis added).
609
Id. ¶ 180.
610
See, e.g., In re W. Nat’l Corp. S’holders Litig., 2000 WL 710192, at *5–6 (Del. Ch.
May 22, 2000) (determining the controlling stockholder issue at summary judgment);
Cysive, 836 A.2d at 552 (determining the controlling stockholder issue post-trial).

127
developed through discovery.611 I also decline to rule on the Motions to dismiss

Count VI until a later stage in these proceedings.612

*****

While discovery may shed light on facts that support increasing the standard

of review, at this stage, Plaintiff’s Revlon theory will be considered through the lens

of enhanced scrutiny because Company stockholders received cash for their shares.

This is so unless Defendants can demonstrate they should be afforded unrebuttable

protection under the business judgment rule via a Corwin cleansing vote.613 I turn

611
See In re Tesla Motors, Inc., 2018 WL 2006678, at *3 (Del. Ch. Apr. 27, 2018)
(explaining the Court’s intention to merely hold plaintiffs had met their pleading-stage
burden, but left the standard of review to be determined).
612
See Ct. Ch. R. 12(d) (“The defenses specifically enumerated (1)-(7) in paragraph (b) of
this rule, whether made in a pleading or by motion, and the motion for judgment mentioned
in paragraph (c) of this rule, shall be heard and determined before trial on application of
any party, unless the Court orders that the hearing and determination thereof be deferred
until the trial.”); see also Spencer v. Malik, 2021 WL 719862, at *5 (Del. Ch. Feb. 23, 2021)
(“A party does not have a right to a pleading-stage ruling. Rule 12(d) states that pleading-
stage motions brought under Rule 12 shall be heard and determined before trial on
application of any party, unless the Court orders that the hearing and determination thereof
be deferred until the trial. Not all disputes can or should be resolved at the pleading stage.
Given the importance of the issue presented, the limited briefing provided by the parties,
and the early stage of the case, the question . . . is deferred until after trial. The motion for
judgment on the pleadings on this issue is denied on that basis.” (internal quotation marks
omitted)); Slingshot Techs., LLC v. Acacia Rsch. Corp., 2021 WL 1224828, at *3 (Del. Ch.
March 30, 2021) (“Under Rule 12(a)(1), a court may postpone the disposition of a pleading
stage motion until a later stage of the case, including until the trial on the merits. Rule
12(d) reiterates this point, noting that a court should address a Rule 12(b)(6) motion in a
preliminary hearing unless the court orders that the hearing and determination thereof be
deferred until the trial.” (alterations and internal quotation marks omitted)).
613
See KCG Hldgs., 2019 WL 2564093, at *10.

128
next to whether Plaintiff has stated a nonexculpated claim in view of Revlon, and

then turn to whether cleansing has occurred under Corwin.

2. Plaintiff Has Stated A Nonexculpated Claim For
Breach Against The Director Defendants.

The duties of care and loyalty “are the traditional hallmarks of a fiduciary who

endeavors to act in the service of a corporation and its stockholders” and “[e]ach of

these duties is of equal and independent significance.”614 The duty of care requires

the directors of a company to act on an informed basis.615 It also “requires a director

to take an active and direct role in the context of a sale of a company from beginning

to end.”616 “A breach of the duty of care exists where the fiduciary acted with gross

negligence.”617

“[T]he duty of loyalty mandates that the best interest of the corporation and

its shareholders takes precedence over any interest possessed by a director, officer

or controlling shareholder and not shared by the stockholders generally.”618

Corporate fiduciaries “are not permitted to use their position of trust and confidence

614
Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 367 (Del. 1993).
615
See id. at 368.
616
Id. (citing Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 66 (Del. 1989),
and also citing Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 954 (Del. 1985)).
617
Mindbody, 2020 WL 5870084, at *32 (citing Morrison v. Berry (Morrison I), 2019 WL
7369431, at *22 (Del. Ch. Dec. 31, 2019)).
618
Cede & Co., 634 A.2d at 361 (citing Pogostin v. Rice, 480 A.2d 619, 624 (Del. 1984),
and also citing Aronson, 473 A.2d at 812).

129
to further their private interests.”619 Under Delaware law, for a director to act loyally

to advance the best interests of the corporation, she “must seek to promote the value

of the corporation for the benefit of its stockholders.”620 “Delaware case law is clear

that the board of directors of a for-profit corporation must, within the limits of its

legal discretion, treat stockholder welfare as the only end, considering other interests

only to the extent that doing so is rationally related to stockholder welfare.”621

There is “no dilution of the duty of loyalty when a director holds dual or

multiple fiduciary obligations,” and there is “no safe harbor for such divided

loyalties in Delaware.”622 “If the interests of the beneficiaries to whom the dual

fiduciary owes duties diverge, the fiduciary faces an inherent conflict of interest.

But if the interests of the beneficiaries are aligned, then there is no conflict.”623

Claims arising out of the cash-out Merger, “a final-stage transaction

presumptively subject to enhanced scrutiny under Revlon,”624 “do not admit of easy

619
Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939).
620
Frederick Hsu Living Tr. v. ODN Hldg. Corp., 2017 WL 1437308, at *17 (Del. Ch.
Apr. 14, 2017) (internal quotation marks omitted) (quoting eBay Domestic Hldgs., Inc. v.
Newmark, 16 A.3d 1, 34 (Del. Ch. 2010)).
621
Id. (alteration and internal quotation marks omitted) (quoting Leo E. Strine, Jr., A Job
is Not a Hobby: The Judicial Revival of Corporate Paternalism and its Problematic
Implications, 41 J. Corp. L. 71, 107 (2015)).
622
Chen, 87 A.3d at 670 (internal quotation marks omitted) (quoting Weinberger, 457 A.2d
at 710).
623
Id. (footnote omitted) (citing Van de Walle v. Unimation, Inc., 1991 WL 29303, at *11
(Del. Ch. Mar. 7, 1991)).
624
Mindbody, 2020 WL 5870084, at *13.

130
categorization as duties of care or loyalty.”625 Situations that warrant enhanced

scrutiny “involv[e] potential conflicts of interest where the realities of the

decisionmaking context can subtly undermine the decisions of even independent and

disinterested directors.”626 “[T]he predicate question of what the board’s true

motivation was comes into play, and the court must take a nuanced and realistic look

at the possibility that personal interests short of pure self-dealing have influenced

the board.”627

To address this pervasive concern in final-stage transactions, Delaware law

expects directors to hold a single goal: “get the highest value reasonably attainable

for the shareholders.”628 “At a minimum, Revlon requires that there be the most

scrupulous adherence to ordinary principles of fairness in the sense that stockholder

interests are enhanced, rather than diminished, in the conduct of an auction for the

sale of corporate control.”629 “The sole responsibility of the directors in such a sale

625
Chen, 87 A.3d at 677 (quoting In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59,
67 (Del. 1995)).
626
Id. (quoting Trados II, 73 A.3d at 43).
627
Id. at 678 (alterations and internal quotation marks omitted) (quoting In re Dollar Thrifty
S’holder Litig., 14 A.3d 573, 598 (Del. Ch. 2010)). In these game-ending situations, “there
is a basis for concern that directors without a pure self-dealing motive might be influenced
by considerations other than the best interests of the corporation and other stockholders.”
Dollar Thrifty, 14 A.3d at 599 n.181.
628
Macmillan, 559 A.2d at 1285.
629
Id.; see also id. at 1264 (“When conducting an auction for the sale of corporate control,
this concept of fairness must be viewed solely from the standpoint of advancing general,
rather than individual, shareholder interests.”).

131
is for the shareholders’ benefit,” and “[t]he board may not allow any impermissible

influence, inconsistent with the best interests of the shareholders, to alter the strict

fulfillment of th[is obligation].”630

“A corporate board’s failure to obtain the best value for its stockholders may

be the result of illicit motivation (bad faith), personal interest divergent from

shareholder interest (disloyalty) or a lack of due care.”631 In evaluating alleged

breaches of the duties of care and loyalty through the lens of enhanced scrutiny, “the

focus is on whether the directors’ decision was, on balance, within a range of

reasonableness.”632

In order to maximize stockholder value, “[d]irectors are not required by

Delaware law to conduct an auction according to some standard formula, only that

they observe the significant requirement of fairness for the purpose of enhancing

general shareholder interests.”633 Accordingly, Delaware law does not per se

630
Id. at 1285 (citing Revlon, 506 A.2d at 182).
631
Rudd v. Brown, 2020 WL 5494526, at *6 (Del. Ch. Sept. 11, 2020) (quoting Lukens,
757 A.2d at 731).
632
Baker Hughes, 2020 WL 6281427, at *7 (internal quotation marks omitted) (quoting
Paramount, 637 A.2d at 45).
633
Macmillan, 559 A.2d at 1286; see also id. at 1287 (“We do not intend to limit the broad
negotiating authority of the directors to achieve the best price available to the
stockholders.”); KCG Hldgs., 2019 WL 2564093, at *16 (“Under Revlon, directors are
generally free to select the path to value maximization, so long as they choose a reasonable
route to get there.” (internal quotation marks omitted) (quoting In re Answers Corp.
S’holders Litig., 2011 WL 1366780, at *3 (Del. Ch. Apr. 11, 2011))).

132
“preclude differing treatment of bidders when necessary to advance those interests,”

as “[v]ariables may occur which necessitate such treatment.”634 “A board of

directors may favor a bidder if in good faith and advisedly it believes shareholder

interests would be thereby advanced,”635 and “[a] board may tilt the playing field if,

but only if, it is in the shareholders’ interest to do so.”636 But “the board’s primary

objective, and essential purpose, must remain the enhancement of the bidding

process for the benefit of the stockholders.”637

“[T]he paradigmatic claim under Revlon [] arises when a supine board under

the sway of an overweening CEO bent on a certain direction tilts the sales process

for reasons inimical to the stockholders’ desire for the best price.”638 A plaintiff may

state a claim for liability under Revlon by pleading a claim as to only one board

634
Macmillan, 559 A.2d at 1286–87.
635
Chen, 87 A.3d at 674 (internal quotation marks omitted) (quoting In re Fort Howard
Corp. S’holders Litig., 1988 WL 83147, at *14 (Del. Ch. Aug. 8, 1988) (Allen, C.)).
Id. (internal quotation marks omitted) (quoting In re J.P. Stevens & Co. S’holders Litig.,
636

542 A.2d 770, 782 (Del. Ch. 1988)).
637
Macmillan, 559 A.2d at 1287 (noting that “there must be a rational basis for the action
such that the interests of the stockholders are manifestly the board’s paramount objective”);
see also Chen, 87 A.3d at 674 (“A board may not favor one bidder over another for selfish
or inappropriate reasons. Any favoritism directors display toward particular bidders must
be justified solely by reference to the objective of maximizing the price the stockholders
receive for their shares.” (alterations and citation omitted) (quoting Golden Cycle, LLC v.
Allan, 1998 WL 892631, at *14 (Del. Ch. Dec. 10, 1998), and then quoting In re Topps
Co. S’holders Litig., 926 A.2d 58, 64 (Del. Ch. 2007))).
638
Mindbody, 2020 WL 5870084, at *1 (alteration, footnote, and internal quotation marks
omitted) (quoting Toys “R” Us, 877 A.2d at 1002).

133
member––“[t]he sins of just one fiduciary can support a viable Revlon claim.”639

Plaintiff’s allegations are modeled after that paradigmatic theory: she asserts

Riverstone, through or alongside Garland, overrode a supine Special Committee

which, while disinterested and independent, breached its duty of loyalty to Company

stockholders by acting in bad faith.

Under this rubric, Plaintiff’s ability to state a claim against each of the

Director Defendants is further restricted by the exculpation provision in the

Company’s charter pursuant to 8 Del. C § 102(b)(7).640 Even under Revlon scrutiny,

allegations of a violation of duty of care alone do not state a claim against the

Director Defendants; Plaintiff must state a claim for breach of the duty of loyalty.641

In order to survive a motion to dismiss under a breach of the duty of loyalty theory,

Plaintiff must plead that the Director Defendants “were interested in the transaction,

lacked independence, or acted in bad faith.”642 If a plaintiff alleges “well pleaded

639
Id. at *14.
640
See Kirby Decl. Ex. 8 (“To the fullest extent permitted by the DGCL, a director of the
Corporation shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty owed to the Corporation or its
stockholders.”).
641
See Cornerstone, 115 A.3d at 1179; Malpiede v. Townson, 780 A.2d 1075, 1094–95
(Del. 2001); Rudd, 2020 WL 5494526, at *7; KCG Hldgs., 2019 WL 2564093, at *16.
642
Baker Hughes, 2020 WL 6281427, at *15 (quoting Morrison I, 2019 WL 7369431, at
*13).

134
facts that track the paradigmatic Revlon theory,” they will generally be sufficient to

support a nonexculpated claim at the motion to dismiss phase.643

A finding of bad faith in the fiduciary context is rare.644 “In the context of a

sale of corporate control, bad faith is qualitatively different from an inadequate or

flawed effort to obtain the highest value reasonably available for a corporation.”645

“[C]riticizing the price at which a board agrees to sell a company, without more,

does not a bad a faith claim make.”646 Delaware law explicitly recognizes several

forms of bad faith: (i) subjective bad faith, in conduct motivated by an intent to do

harm; (ii) intentional dereliction of duty or conscious disregard of duty; and (iii)

“allow[ing] interests other than obtaining the best value reasonably available for [the

company’s] stockholders to influence [director] decisions during the sale process,

given that they made decisions falling outside of the range of reasonableness.”647

“Absent direct evidence of an improper intent, a plaintiff must point to a decision

643
Mindbody, 2020 WL 5870084, at *13.
644
See In re Saba Software, Inc. S’holder Litig., 2017 WL 1201108, at *20 (Del. Ch.
Mar. 31, 2017) (citing In re Chelsea Therapeutics Int’l Ltd. S’holders Litig., 2016 WL
3044721, at *1 (Del. Ch. May 20, 2016)).
645
In re Essendant, Inc. S’holder Litig., 2019 WL 7290944, at *13 (Del. Ch. Dec. 30, 2019)
(internal quotations marks omitted) (quoting Lyondell Chem. Co. v. Ryan, 970 A.2d 235,
243 (Del. 2009)).
646
Id. at *14 (collecting cases).
647
Chen, 87 A.3d at 677–78; see also Disney II, 906 A.2d at 63–66.

135
that lacked any rationally conceivable basis associated with maximizing stockholder

value to survive a motion to dismiss.”648

Plaintiff asserts the Director Defendants’ bad faith takes the forms of

conscious disregard of their obligation to seek the highest value reasonably available

for Company shareholders, and conduct that “lacked any rationally conceivable

basis associated with maximizing stockholder value.”649 In support, Plaintiff

contends that the Director Defendants “knew the Merger did not maximize

stockholder value but approved it anyway,”650 and “knowingly fail[ed] to manage

conflicts at virtually every level of the Merger process” and “protect stockholders”651

by “d[oing] nothing to exclude Garland or Riverstone from the sale process after

learning of their misconduct” and “retain[ing] Goldman.”652 “In the transactional

context, an extreme set of facts is required to sustain a disloyalty claim premised on

648
Essendant, 2019 WL 7290944, at *13, *14 (alteration and internal quotation marks
omitted) (quoting Chen, 87 A.3d at 684); see also Chelsea Therapeutics, 2016 WL
3044721, at *1 (stating that in cases where “there is no indication of conflicted interests or
lack of independence on the part of the directors,” a finding of bad faith should be reserved
for situations where “the nature of [the directors’] action can in no way be understood as
in the corporate interest: res ipsa loquitur”).
649
D.I. 82 at 59 (alteration omitted) (quoting In re USG Corp. S’holder Litig., 2020 WL
5126671, at *29 (Del. Ch. Aug. 31, 2020)).
650
Id.
651
Id. at 62.
652
Id. at 64 (emphasis omitted).

136
the notion that disinterested directors were intentionally disregarding their duties.”653

Plaintiff’s allegations do not support an inference of conscious disregard, or that the

transaction lacked any rationally conceivable basis.

The Special Committee took a great number of reasonable actions to fulfill

their duties, as pled in the Complaint and disclosed in the Proxy. The Board

immediately formed the disinterested and independent Special Committee when it

decided to put the Company up for sale, and tasked it with managing the sales

process. The Special Committee hired Evercore as an independent financial advisor

and Paul Weiss as counsel, and met regularly with those advisors. The Special

Committee’s meeting minutes reflect that it discussed with its advisors how

Riverstone might wield the Consent Right. The Special Committee was aware

Goldman, Garland, and Browne had conflicts and those conflicts were later

disclosed in part to Company stockholders. To manage fiduciary conflicts, the

Special Committee twice implemented protocols requiring its authorization before

Garland, Browne, or the Officer Defendants contacted bidders. Those protocols

specifically prohibited management from discussing compensation relating to any

potential transaction.

653
Lyondell, 970 A.2d at 243 (alterations and internal quotation marks omitted) (quoting
In re Lear Corp. S’holder Litig., 967 A.2d 640, 654 (Del. Ch. 2008)).

137
 Further, for over one year, the Special Committee actively engaged in sale

discussions with roughly a dozen bidders, and kept at least four bidders in the

running until late October 2019. It weighed the risks and merits of transactions with

each potential bidder; executed confidentiality agreements with serious bidders in

an effort to further due diligence; encouraged those bidders to connect with

Riverstone in view of the Consent Right to increase the likelihood of a deal; arranged

meetings between Company representatives and each bidder; and exchanged draft

merger agreements with more than one interested party. The Special Committee

resisted calls for exclusivity, pursued go-shop provisions, and interfaced with

numerous bidders during the go-shop in its agreement with Buyer.654

Specifically as to Brookfield, Batkin and the Special Committee worked to

extract value and to facilitate Brookfield’s cooperation with Riverstone on multiple

occasions. When Brookfield threatened to walk away, Batkin and the Special

Committee worked to keep Brookfield seated. It offered to cover Brookfield’s

going-forward expenses, accommodated requests in due diligence, and gave

numerous extensions for document submissions. These actions with respect to

Brookfield yielded a return: by November 2019, Brookfield was offering a 45%

premium, was willing to satisfy Riverstone and Developer 2’s demands, and decided

to forego a Company-on-top merger.

654
See Compl. ¶ 216; Proxy at 47–49, 54.

138
 Thus, the Special Committee took an “active and direct role in the sale

process” from beginning to end,655 was “reasonably informed about the alternatives

available to the company,” and acted “reasonably to learn about actual and potential

conflicts faced by directors, management, and their advisors.”656 “At first glance, it

is difficult to discern bad faith from this narrative.”657 It is impossible to conceive

of conscious disregard or the absence of any rationally conceivable basis for the

Director Defendants’ action.

But with each reasonable and measured step forward, the Complaint alleges

the Director Defendants took two steps back. At this procedural stage and in view

of the Court’s obligation to view end-game transactions with inherent skepticism,658

“the predicate question of what the board’s true motivation was comes into play, and

the court must take a nuanced and realistic look at the possibility that personal

interests short of pure self-dealing have influenced the board.”659 While this does

not give the Court free rein to rewrite the story or impose on fiduciaries post hoc

655
Citron, 569 A.2d at 66.
656
KCG Hldgs., 2019 WL 2564093, at *16 (quoting In re Rural Metro Corp. S’holders
Litig., 88 A.3d 54, 89–90 (Del. Ch. 2014)).
657
Saba Software, 2017 WL 1201108, at *20.
658
See Chen, 87 A.3d at 677–78.
659
Id. at 678 (alterations and internal quotation marks omitted) (emphasis added) (quoting
Dollar Thrifty, 14 A.3d at 598).

139
obligations to have taken certain steps,660 the Court must seek to “assure itself that

the board acted reasonably, in the sense of taking a logical and reasoned approach

for the purpose of advancing a proper objective and to thereby smoke out mere

pretextual justifications for improperly motivated decisions.”661 This mandates that

I assess the facts as pled and determine whether Plaintiff has stated a claim for bad

faith on the part of the Director Defendants. Rather than conscious disregard, “[t]he

loyalty issue in this case is whether the directors allowed interests other than

obtaining the best value reasonably available for [the Company’s] stockholders to

influence their decisions during the sale process, given that they made decisions

falling outside of the range of reasonableness.”662

Plaintiff’s allegations make it reasonably conceivable that the Director

Defendants placed the interests of Riverstone, Developer 2, and the Officer

Defendants above the interest of Company stockholders and their obligation to

maximize stockholder value, and therefore acted in bad faith.663

660
See Baker Hughes, 2020 WL 6281427, at *7; see also Lyondell, 970 A.2d at 243 (“The
trial court decided that the Revlon sale process must follow one of three courses, and that
the Lyondell directors did not discharge that known set of Revlon ‘duties.’ But, as noted,
there are no legally prescribed steps that directors must follow to satisfy their Revlon duties.
. . . More importantly, there is a vast difference between an inadequate or flawed effort to
carry out fiduciary duties and a conscious disregard for those duties.” (alteration, internal
quotation marks, and citation omitted)).
661
Baker Hughes, 2020 WL 6281427, at *7 (quoting Dollar Thrifty, 14 A.3d at 598).
662
Chen, 87 A.3d at 677.
663
See, e.g., KCG Hldgs., 2019 WL 2564093, at *17.

140
 a. The Complaint Pleads That The
Director Defendants Allowed Interests
Other Than Obtaining The Best Value
For Company Stockholders To
Influence Their Decisions During The
Sales Process.

The Complaint alleges that the Director Defendants elevated the long-term

welfare of Riverstone and Developer 2 over seeking the best value reasonably

available for Company stockholders by (1) infecting the process with interested

fiduciaries and conflicted advisors; (2) preferring Buyer throughout the process and

at the moment of decision over Brookfield’s premium bid; and (3) misusing the

Consent Right to dissuade Brookfield. Plaintiff’s concerns outweigh the Special

Committee’s few reasonable steps and demonstrate that, on balance, the Director

Defendants’ choices in conducting the sales process were unreasonable and in bad

faith.

i. The Special Committee’s Work
Was Infected By Conflicted
Directors, Management, And
Advisors.

First, Plaintiff contends the Director Defendants allowed conflicted

individuals and entities to participate in deliberations (including Browne, Garland,

and Goldman) and failed to manage those conflicts. The facts alleged demonstrate

that the decision to involve these conflicted parties in the sales process depressed

Company stockholders’ value for Riverstone and Developer 2’s benefit.

141
 The Board immediately identified Riverstone and Developer 2 as the source

of potential and actual conflicts with respect to the sales process. Nonetheless, the

Board gave Riverstone a seat at the table on day one and every day thereafter. Before

the June 5, 2018, annual meeting, and presumably without the knowledge of the

Board or stockholders, conflicted management—including Garland—retained

Evercore and secured a presentation that “included preliminary potential valuations

for various strategic options.”664 At the meeting, Garland first proposed that the

Board consider a potential sale, despite repeated and numerous representations to

Company investors (both before and after the meeting) that Pattern Vision 2020 was

proceeding as planned and that the Company had ample liquidity and was not

planning on raising common equity capital. Hunt (Developer 2’s director and

Riverstone’s partner, but not a Company fiduciary) attended that meeting, knowing

that Riverstone had already explored a potential take-private of the Company, with

access to the Company’s confidential information and with Goldman as an

advisor.665 The Board solicited Riverstone’s views on a potential transaction while

simultaneously identifying Riverstone as a prospective acquirer.666 From these facts,

it is reasonably conceivable that the June 5 suggestion that the Board “consider a

664
Compl. ¶ 95 (emphasis omitted).
665
See id. ¶¶ 93, 98.
666
Id. ¶ 97.

142
potential sale of the business” was from the start driven by, or for the benefit of,

Riverstone.667

Thereafter, the Board formed the Special Committee. The Board was aware

of Garland and Browne’s open and apparent ties to Riverstone.668 Because the

interests of Developer 2 and Riverstone diverged from those of the Company

stockholders, Browne and Garland “face[d] an inherent conflict of interest.”669 In

view of these conflicts, the Board did not appoint Browne or Garland to the Special

Committee, and the Special Committee twice implemented conflict-safety protocols.

Nonetheless, despite the risk that Browne would share information with Riverstone,

the Special Committee allowed Browne to attend the majority of Special Committee

meetings in his capacity as Riverstone’s representative and to attend executive

sessions where the Special Committee specifically excluded conflicted Company

management.670

The Special Committee also allowed Garland substantial involvement in its

process, delegating to him primary responsibility for engaging with the Company’s

667
Id. ¶ 94.
668
Id. ¶ 101.
669
Chen, 87 A.3d at 670.
Compl. ¶¶ 101–04. The Proxy does not disclose Browne’s attendance at any Special
670

Committee meeting. Id. ¶ 104.

143
potential suitors.671 As the Director Defendants accurately point out, “[t]here is

nothing inherently wrong with a Board delegating to a conflicted CEO the task of

negotiating a transaction.”672 “But the conflict must be adequately disclosed to the

Board, and the Board must properly oversee and manage the conflict.”673 Garland

was afforded the opportunity to tip the scales in Riverstone’s favor and did so.

Plaintiff points to Garland’s unauthorized April 15 Meeting with Riverstone

and Buyer. The context is important. At this point, the Special Committee was

actively shopping the Company, taking into consideration Riverstone and

Developer 2’s interest in and potential satisfaction from the outcome, and working

to find a Riverstone-friendly financial acquirer, beginning with PSP.674 But

671
Id. ¶¶ 102–03, 105.
672
Haley, 235 A.3d at 721 n.69.
673
Id.; see also In re OPENLANE, Inc. S’holders Litig., 2011 WL 4599662, *5 (Del. Ch.
Sept. 30, 2011) (finding that, as the Board was aware of the CEO’s possible employment
after consummation of the transaction “and was fully committed to the process,” and that
even though the CEO, who led the negotiations, was conflicted, “his efforts in negotiating
the Merger Agreement and dealing with other potential acquirers d[id] not taint the
process”)); RBC, 129 A.3d at 850–57 (affirming trial court’s findings that the Board failed
to oversee the Special Committee, failed to become informed about strategic alternatives
and about potential conflicts faced by advisors, and approved the merger without adequate
information); id. at 855 (holding that, “[t]he record indicates that Rural’s Board was
unaware of the implications of the dual-track structure of the bidding process and that the
design was driven by RBC’s motivation to obtain financing fees in another transaction with
Rural’s competitor,” and that, “[t]he Board, as a result, took no steps to address or mitigate
RBC’s conflicts”); id. (“While a board may be free to consent to certain conflicts, . . .
directors need to be active and reasonably informed when overseeing the sale process,
including identifying and responding to actual or potential conflicts of interest.”).
674
See Compl. ¶¶ 109–11, 116–17; Proxy at 3.

144
Brookfield had emerged as a disinterested strategic bidder, proposing a transaction

that might not benefit Riverstone and leave Developer 2 behind.675 In late February,

Garland and Elkort allegedly met Brookfield’s interest with resistance, raising the

Consent Right to cast doubt on the viability of a Brookfield transaction.676 At a

March 11, 2019 Special Committee meeting, Brookfield submitted a term sheet

reflecting a Company-TerraForm transaction structured to circumvent the Consent

Right.677 The Special Committee did not meet again until May.678

During this period of quiet, after Brookfield sharpened its offer to avoid the

Consent Right, Garland arranged and held the unauthorized April 15 Meeting with

Riverstone and Buyer. That meeting presented Riverstone the opportunity to offer

up a preferred and familiar face as a third-party bidder: Buyer, which previously

invested over $700 million in Riverstone investment funds and whose representative

Garland “knew.”679 While Riverstone had been in the room since the first Board

meeting on June 5, 2018, and while the Special Committee had kept Riverstone and

Developer 2 in mind since the early stages of the sales process, Garland’s meeting

675
See Compl. ¶¶ 111–15.
676
See id. ¶¶ 116–19.
677
Id. ¶ 121.
678
Id. ¶ 122.
679
Id. ¶ 128.

145
after Brookfield’s offer spurred Buyer to action.680 It is reasonably conceivable (in

view of loose information sharing in the past, including through Hunt and Browne)

that Riverstone and Garland communicated the Company’s confidential information

to Buyer at the meeting.

If sunlight is the best disinfectant, the April 15 Meeting remained infectious.

Weeks later, on May 2, Garland disclosed that Riverstone had suggested taking the

Company private in conjunction with an unidentified third-party institutional

investor, but had “dropped the suggestion following consideration of conflicts and

certain contractual obligations of [Riverstone].”681 This was misleading, as

evidenced by the Batkin Memo and Proxy, which themselves fall short of full and

adequate disclosure.682 This series of inconsistent and incomplete disclosures gives

rise to the reasonable inference that Garland was less than candid with the Special

Committee—and later, Company stockholders—about his early dealings with

Riverstone and Buyer.

Nonetheless, after the April 15 Meeting, the Special Committee allowed

Garland to continue to front the sale process, even after learning that the risks

associated with his conflicts had materialized when he violated the Special

680
See id. ¶ 132; Proxy at 37.
681
Compl. ¶ 127.
682
See supra Section II.A.1.a.

146
Committee’s express conduct guidelines. The April 15 Meeting serves as one of the

structural components of the sales process that renders it reasonably conceivable that

Garland perceptibly tilted the sales process in favor of Riverstone, the Special

Committee was lackluster in its response, and this classic Revlon combination

ultimately gave Riverstone, via Buyer, the advantage.

In addition to conflicted management, the Special Committee’s work was

tainted by a conflicted advisor. The decision to hire Goldman illustrates the Special

Committee’s passivity in the face of Garland’s requests. When the Special

Committee first met on July 13, 2018, Garland (and the Officer Defendants)

recommended that the Special Committee retain Goldman, despite Evercore having

prepared management’s presentation for the June 5, 2018 meeting. As alleged,

conflicted management’s push for Goldman is unsurprising, as Goldman had

longstanding, deep, and financial ties to Riverstone and, more significantly, had

recently advised Riverstone with respect to a potential take-private of the

Company.683

Conceivably perceiving the risks associated with Goldman’s conflict, the

Special Committee decided to retain only Evercore and to revisit the possibility of

retaining Goldman at a later time, but did not determine that Goldman’s participation

683
See Compl. ¶¶ 12, 98; see Cinerama, 663 A.2d at 1169 (holding a “stake in” a “firm
that deals with the corporation” is “self-dealing”) (citing 8 Del. C. § 144(a)).

147
would run afoul of the stockholder’s best interests.684 The Special Committee left

the door open, and Goldman would eventually join the fray and advocate for

Riverstone and Buyer, who each enjoyed a “substantial business relationship” with

Goldman.685 Goldman entered the sales process (1) in “early April 2019,” on the

heels of Brookfield’s third-party, independent bid and Paul Weiss’ suggestion that a

Company-TerraForm transaction could be structured to circumvent the Consent

Right and exclude Riverstone; and (2) on the eve of Riverstone and Garland offering

up a third-party bidder of their own, Buyer, with whom Goldman and Riverstone

were affiliated. Unlike the decision to retain Evercore, the Special Committee’s

decision to retain Goldman is not recorded in meeting minutes.686 Plaintiff and the

Director Defendants agree that “each and every one of these alleged conflicts was

disclosed to the Special Committee prior to the Special Committee’s decision to

retain Goldman Sachs.”687 At the end of the day, Goldman did not issue an

opinion.688 Rather, in the final days of the sales process, “Goldman advocated for

Riverstone, describing Riverstone’s communications with the conflicted investment

684
Compl. ¶ 108.
685
Id.
686
See id. ¶¶ 134–35.
687
See D.I. 74 at 23–24.
688
See Proxy at A-24.

148
bank that expressed confidence in the proposed transaction among the Company,

Buyer, and [Developer 2].”689

A secondary financial advisor may be “conflict-cleansing.”690 Here, as

alleged, Goldman further contaminated the process, despite the Special Committee’s

awareness of that risk. There was no apparent need for the Special Committee to

retain a second advisor; the Complaint and the Proxy indicate that Evercore was

sufficiently advising on the financial aspects of the process.691 And Goldman

benefitted from the Merger, as Goldman’s engagement letter entitled it to $2 million

upon the announcement of the Merger; an additional $4 million upon consummation

of the Merger; and a discretionary payment of up to $3 million upon or promptly

following the consummation of the Merger.692

Thus, Buyer, Riverstone, and conflicted management—who maintained post-

close positions with the company—had the ability to pay or withhold nearly a third

of Goldman’s total fee. Further, the Company granted Goldman a right of first offer

to act as joint book-runner or agent in the case of any offering of securities and a

right of first offer as a joint arranger and book-runner for any bank or bridge loan

689
Compl. ¶ 197; see also id. ¶¶ 153–58.
690
RBC, 129 A.3d at 864.
691
See Compl. ¶ 108.
692
Id. ¶ 271.

149
related to the Merger.693 As alleged, this further incentivized Goldman to push the

Special Committee toward Buyer’s offer and away from Brookfield’s, which was

structured such that the Company would not be required to raise capital through debt

or a security offering.694

ii. The Director Defendants
Prioritized Riverstone and
Developer 2 Over Maximizing
Value.

In addition to mismanaging the foregoing conflicts, the Special Committee,

and eventually the entire Board, approved Riverstone’s preferred transaction with

Buyer despite acknowledging that Brookfield offered the superior bid. Plaintiff has

pled facts making it reasonably conceivable that the Director Defendants did not

believe “in good faith and advisedly” that Buyer’s bid would advance the

stockholders’ interest,695 and that the Director Defendants had no “rational basis” for

shunning Brookfield’s premium that was “justified solely by reference to the

objective of maximizing the price the stockholders receive for their shares.”696

As alleged, Riverstone’s desire for a Company take-private and Developer 2

internalization was the impetus for the sales process, the Special Committee’s focus

693
Id. ¶ 272.
694
Id.
695
Chen, 87 A.3d at 674 (quoting Fort Howard, 1988 WL 83147, at *14).
696
Id. (quoting Topps, 926 A.2d at 64).

150
during deliberations, and the reason for its final selection of Buyer over Brookfield.

The Special Committee held various meetings that addressed Developer 2 and its

interests; ways to structure transactions to include Developer 2; and the importance

of Riverstone’s ability to exercise the Consent Right, even though it was readily

circumvented. And the Special Committee explicitly told bidders that internalizing

Developer 2 was the preferred course of conduct and pressed bidders to structure

offers toward that end, despite knowing that it would require the Company’s

stockholders to compete for transaction consideration. Thus, while the Special

Committee engaged with numerous bidders and pressed them for value, they

repeatedly revealed their focus on satisfying Riverstone and meeting its desire to

internalize Developer 2.

When the sales process began, with Riverstone in the room, the Special

Committee first looked to Riverstone as an acquirer. The Special Committee next

considered PSP, which had strong ties to Riverstone. When a transaction directly

involving Riverstone or Riverstone-friendly PSP did not pan out, Riverstone’s role

evolved from preferred bidder to co-negotiator alongside the Company’s fiduciaries,

attending meetings with Garland, Brookfield and other bidders to discuss

Developer 2. The Special Committee encouraged bidders to meet with Riverstone

and agree to confidentiality, and Riverstone had those meetings.

151
 While the Special Committee properly responded to Brookfield’s initial

October 2018 offer by pressing for a premium, it also communicated Riverstone’s

concerns about internalizing Developer 2. By May 31, 2019, Brookfield submitted

a revised term sheet that reflected an all-stock acquisition of the Company by

TerraForm at a 15% premium and also contemplated a concurrent acquisition of

Developer 2, which would cash Riverstone out of the Company and Developer 2 for

a cash price to be negotiated by the Company and Riverstone.697 The Special

Committee authorized Garland to “notify” Developer 2 and Riverstone about the

Company’s discussions with Brookfield.698

Brookfield’s offer inspired Garland and Riverstone to introduce Buyer into

the process. Even in the absence of an offer, the Special Committee devoted time

and resources to Buyer.699 Buyer did not submit a proposal to acquire the Company

until June 28, 2019. It proposed an all-cash transaction at a 14% premium, less than

Brookfield’s offer.700 Buyer’s offer specifically assumed that it would reach a

separate agreement with Riverstone with respect to Developer 2, and separate

agreements with senior management, without the Special Committee’s

697
Compl. ¶ 142.
698
Id. ¶ 119.
699
See id. ¶ 145.
700
Id. ¶¶ 145–47.

152
involvement.701 As the sales process progressed, Buyer solidified its offer for

Developer 2, stating it would purchase Developer 2 at a price equal to 1.8x of

Riverstone’s invested capital subject to a contingent earnout provision that could

increase the total purchase price to up to 2.25x Riverstone’s invested capital. The

Special Committee would later deem this earnout “acceptable to Riverstone.”702

Brookfield volleyed on July 1, reiterating its offer for the Company and

pricing Developer 2 for cash at a 1.75x multiple of invested capital, still cashing

Riverstone out of the combined company. Unlike Buyer, Brookfield intended to

reach an agreement with the Company, not just Riverstone, regarding Developer 2’s

valuation. Despite the higher premium and acquisition of Developer 2, the Special

Committee did not favor Brookfield, allegedly because Brookfield’s proposal did

not contemplate negotiating for Developer 2 free of the Special Committee.

On July 23, Brookfield submitted a new offer, noting the Special Committee’s

desire to “internalize [Developer 2] as part of this transaction.”703 Brookfield offered

to do so for cash at a 15% premium to Company stockholders. But Brookfield also

offered a 20% premium for a deal without Developer 2.704

701
Id. ¶¶ 147–48.
702
Id. ¶ 163.
703
Id. ¶ 151.
704
Id.

153
 The Special Committee worried over Riverstone and Developer 2, even

though a deal with Brookfield offered the greatest value to Company stockholders.705

At July 31 and August 1 meetings, the Special Committee discussed that

Brookfield’s and Buyer’s offers internalizing Developer 2 provided similar value to

Company stockholders; but in a key difference, Brookfield would cash out

Riverstone, while Buyer would allow Riverstone to continue to own an equity

interest.706 The Special Committee also considered that Buyer’s offer favored

Riverstone over the Company’s stockholders: its offer for Developer 2 with an

earnout was higher than Brookfield’s, which made it less likely Buyer would

increase its offer for the Company.707 Thus, the Special Committee explicitly

acknowledged that the Company’s public stockholders were competing with

Developer 2’s owners for merger consideration.708

With Riverstone and Developer 2’s satisfaction driving the Special

Committee’s deliberations, Buyer emerged from those Special Committee meetings

as the frontrunner.709 Evercore observed that Buyer was already in “advanced stages

of negotiation” with Riverstone, and that combining the Company and Developer 2

705
See id. ¶ 158.
706
Id. ¶ 154.
707
Id. ¶ 163.
708
See id.
709
See id. ¶¶ 156–57.

154
was “in line with management’s vision.”710 The Special Committee recognized the

need to “determine whether [Buyer] would increase its offer,”711 but also insisted

that “it would need to convey to Brookfield the importance of reaching an agreement

with Riverstone about a deal that included [Developer 2] if it wanted to have a

chance to acquire [the Company].”712

On August 16, Buyer submitted an updated offer for both the Company and

Developer 2, valuing the Company less than Brookfield’s 15% premium bundled

with Developer 2, and certainly less than Brookfield’s 20% standalone premium.

The Company’s messaging to Brookfield from this point was inconsistent at

best and sabotage at worst. At an August 20 meeting, Evercore and Goldman told

Brookfield that the “Board of Directors of [the Company] is no longer supportive of

any transaction which includes the internalization of the 71% [of Developer 2] that

[the Company] does not currently own.”713 Goldman and Evercore also pressed the

Consent Right, stating that “Riverstone will not provide such consent to a transaction

in which TerraForm becomes the parent company of [the Company].”714

710
Id. ¶ 157.
711
Id. ¶ 156.
712
Id. ¶ 157.
713
Id. ¶ 164.
714
Id. (alteration omitted).

155
 On August 28, 2019, the Special Committee discussed how Brookfield’s offer

was worth $34 per share, a 45% premium based on the then-current trading price,

and the risk that Riverstone would sue to block a transaction that did not involve

Developer 2 even though the Brookfield proposal was structured to avoid the

Consent Right. The Special Committee determined it was best “to progress the

transaction” with Buyer.715

By late August, Brookfield submitted an updated offer valuing the Company

at $33.38 per share.716 Brookfield restructured the proposed transaction as a

Company acquisition of TerraForm to avoid the Consent Right; addressed the

Board’s supposed disinterest in internalizing Developer 2; and stated that it had been

told early in the process, when internalizing Developer 2 was a priority, that the

Company believed it was desirable for senior management to maintain their

positions in the combined company, including their dual positions at Developer 2.717

Meanwhile, Buyer’s offer had remained afloat with little to no enhancement.

The Special Committee met on September 29, 2019. The meeting minutes

show the Special Committee explicitly recognized its duty to “maximize value for

shareholders”718 and had even acknowledged to Brookfield “that [its] proposal [wa]s

715
Id. ¶ 172.
716
Id. ¶ 167.
717
See id. ¶¶ 166, 168, 173–75.
718
Id. ¶ 188.

156
superior from a value perspective to the others that [the Company] ha[d] received

and that [the Company] will receive in this sales process.”719

But at that meeting, focused on Developer 2, Garland warned that a Company-

TerraForm merger would alter the Company’s relationship with Developer 2.720 In

addition, pushing to lock up a transaction with Buyer, Garland pressured the Board

to issue preferred stock that was bound to vote in favor of a Board-recommended

merger with Buyer. Garland brought this idea to the Special Committee as

Brookfield continued to press forward in the face of Riverstone’s many demands.721

A separate and independent committee was responsible for handling the stock

issuance, so there is no reasonably conceivable explanation as to why Garland would

have brought the “importance” of consummating the Preferred Issuance to the

Special Committee’s attention.722 And Garland had been touting the Company’s

padded wallet and exceptional performance; representing that the Company had no

need for liquidity; and assuring investors that the Company could easily manage any

maturing obligations without raising additional funds. But he told the Special

Committee that the issuance was required to fund two new projects.

719
Id. ¶ 192.
720
Id. ¶ 186.
721
See id. ¶¶ 183–90.
722
Id. ¶ 187.

157
 The next day, September 30, the Board’s transaction committee approved the

Preferred Issuance. Plaintiff alleges Defendants issued the preferred shares to tilt

the stockholder vote on the Merger with Buyer in their favor.723 In support, Plaintiff

points out that “[t]he issuance of the preferred shares made no commercial sense”

because “[the Company] had more than sufficient borrowing capacity under its

credit agreements to purchase the projects in question, and the interest rate on such

debt would have been lower than the interest rate it agreed to pay on the preferred

shares.”724 Those shares would become pivotal in approving the Merger. It is

reasonably conceivable that the preferred stock issuance, backed by Garland and

passively observed by the Special Committee, was in furtherance of jamming though

the Board-approved Merger, which was not the best deal for stockholders.

Brookfield soldiered on. In late October, Evercore presented an analysis that

indicated that a TerraForm merger would result in a combined company with a stock

valued well above Buyer’s latest offer.725 But Evercore also asserted that a

TerraForm transaction would undermine the “purpose and commercial viability” of

723
See id. ¶¶ 236–38.
724
D.I. 82 at 26; Compl. ¶¶ 238–44.
725
Compl. ¶ 199. Plaintiff alleges that even those values for the combined company were
depressed because Evercore did not use consistent or updated dividend yields across its
analyses, and if corrected, Evercore’s analysis would have shown the combined company
would trade in the range of $32.69 to $36.15 per share.

158
Developer 2.726 Goldman expressed its confidence in the Company-Buyer-

Developer 2 proposal.727

On November 1, Brookfield told the Special Committee it believed it could

negotiate any necessary terms with Riverstone within thirty days. This was met

with an unanticipated change of pace.728 The Special Committee’s advisors

demanded that Brookfield submit definitive documents the next day, which

Brookfield could not do without Riverstone’s cooperation.729 From the facts

alleged, Riverstone had its sights set on a take-private with a friendly acquirer, and

so it would not finalize a deal with Brookfield on that short deadline. Considering

that the sales process had lasted over a year and a half, that there was no exigent

need to sell, and that the Company had been amenable to extensions in the past, it

is reasonably conceivable that this was the final effort to elevate Buyer as the best

and last bidder standing. It worked: Brookfield withdrew its bid. 730 And on

November 3, the Special Committee voted to recommend that the Board approve

726
Id. ¶ 201.
727
Id. ¶ 197.
728
See id. ¶ 205; Proxy at 52.
729
Compl. ¶ 205; Proxy at 52.
730
Compl. ¶ 205; Proxy at 53.

159
the all-cash Merger with Buyer at $26.75 per share, which was $1.05 less than the

$27.80 closing trading price of the Company’s stock the previous day.731

The Director Defendants have argued they favored Buyer’s all-cash proposal

based in part on the complexities of Brookfield’s more burdensome stock-for-stock

deal. But in the Revlon context, it is dispositive that Buyer’s offer took Merger

consideration away from the Company’s public stockholders in protecting

Developer 2 and Riverstone. The Special Committee was bound to obtain the best

possible transaction for Company Stockholders.732 Where other forces preclude a

transaction at a higher price, “[t]he only leverage that a special committee may have

. . . is the power to say no.”733 As this Court has recognized,

The power to say no is a significant power. It is the duty of directors
serving on such a committee to approve only a transaction that is in the
best interests of the public shareholders, to say no to any transaction
that is not fair to those shareholders and is not the best transaction
available.734

Here, the Special Committee failed to use its voice. It is reasonably

conceivable that the Special Committee favored Riverstone’s long-term play over

stockholders’ final-moment value, and did so due to Riverstone’s influence and a

concern for Developer 2: “inappropriate” reasons that undermined the interests of

731
Compl. ¶¶ 206–07, 222.
732
See In re First Bos., Inc. S’holders Litig., 1990 WL 78836, at *7 (Del. Ch. June 7, 1990).
733
Id.
734
Id.

160
the stockholders.735 And even in the shadow of the Company’s contractual

obligation under the Consent Right, the Special Committee remained bound by

fiduciary duty to maximize stockholder value when considering that obligation and

any alternatives, such as Brookfield’s offer structured around the Consent Right.736

Accordingly, Plaintiff has stated a nonexculpated claim against the Director

Defendants collectively.737 “Whether Plaintiff can develop proof to sustain these

735
Chen, 87 A.3d at 674.
736
See Frederick Hsu, 2017 WL 1437308, at *23–24.
737
Indeed, “[t]he liability of the directors must be determined on an individual basis
because the nature of their breach of duty (if any), and whether they are exculpated from
liability for that breach, can vary for each director.” In re Dole Food Co., Inc. S’holder,
2015 WL 5052214, at *39 (Del. Ch. Aug. 27, 2015); see also In re Oracle Corp. Deriv.
Litig., 2018 WL 1381331, at *20 (Del. Ch. Mar. 19, 2018). Consequently, “[a] plaintiff
must well-plead a loyalty breach against each individual director; so-called ‘group
pleading’ will not suffice.” Reith v. Lichtenstein, 2019 WL 2714065, at *18 (Del. Ch.
June 28, 2019) (internal quotation marks omitted) (quoting In re Tangoe, Inc. S’holders
Litig., 2018 WL 6074435, at *12 (Del. Ch. Nov. 20, 2018)). That is, even if a plaintiff
could “state a duty of loyalty claim against the interested fiduciaries,” that “does not relieve
the plaintiff of the responsibility to plead a non-exculpated claim against each [other]
director who moves for dismissal.” Cornerstone, 115 A.3d at 1180.
Here, Plaintiff has pled specific facts against Garland and Browne supporting the
reasonable inference that they acted in bad faith such that they breached the duty of loyalty.
While the allegations against Batkin, Goodman, Hall, Newson, and Sutphen collectively
group them as the Special Committee, Plaintiff pleads an adequate basis “to infer that these
defendants acted disloyally or in bad faith” by virtue of the Special Committee’s
involvement in the sales process. Voigt, 2020 WL 614999, at *25–26; see also In re
WeWork Litig., 2020 WL 7343021, at *11 (Del. Ch. Dec. 14, 2020) (“Although group
pleading is generally disfavored, the Complaint’s use of the term ‘SoftBank’ to capture
both SBG and Vision Fund was justified here given the close relationship between these
entities plead in the Complaint.”); Chen, 87 A.3d at 676–77 (“Depending on the facts of
the case, the standard of review, and the procedural stage of the litigation, a court may be
able to determine that a plaintiff’s claims only involve breaches of the duty of care such
that the court can apply an exculpatory provision to enter judgment in favor of the
defendant directors before making a post-trial finding of a breach of fiduciary duty and

161
allegations remains to be seen, but for now, the Complaint alleges facts from which

it is reasonably conceivable that the Board’s conduct with regard to the sales process

and approval of the Merger can in no way be understood as in the corporate

interest.”738 The Individual Defendants’ motion to dismiss Count I is denied.739

b. The Complaint Pleads That The
Director Defendants Abdicated Their
Duty Of Disclosure.

After resolving to sell the Company to Buyer in a combination with

Developer 2, the Board issued a resolution giving the Officer Defendants the power

to “prepare and execute” the Merger Proxy “containing such information deemed

necessary, appropriate or advisable” by only the Officer Defendants, and then to file

the Proxy with the SEC without the Board’s review.740 Plaintiff contends that the

Director Defendants acted in bad faith by “abdicating their strict and unyielding duty

determining the nature of the breach. If a court cannot make the requisite determination as
a matter of law on a pre-trial record, then it becomes necessary to hold a trial and evaluate
each director s potential liability individually. The liability of the directors must be
determined on an individual basis because the nature of their breach of duty (if any), and
whether they are exculpated from liability for that breach, can vary for each director.”
(footnote omitted) (quoting In re Emerging Commc’ns, Inc. S’holders Litig., 2004 WL
1305745, at *38 (Del. Ch. June 4, 2002), and citing Venhill Ltd. P’ship ex rel. Stallkamp v.
Hillman, 2008 WL 2270488, at *23 (Del. Ch. June 3, 2008))).
738
Saba Software, 2017 WL 1201108, at *20 (internal quotation marks omitted) (quoting
Chelsea Therapeutics, 2016 WL 3044721, at *1).
739
See, e.g., KCG Hldgs., 2019 WL 2564093, at *17; Saba Software, 2017 WL 1201108,
at *20; Chen, 87 A.3d at 677–78.
740
Compl. ¶ 231; see id. ¶¶ 232–33.

162
of disclosure,”741 and relatedly, by “knowingly fail[ing] to correct a proxy statement

that they knew was materially incomplete and misleading.”742

Directors’ “fiduciary duties of care and loyalty apply when directors

communicate with stockholders,” and their “specific disclosure obligations are

defined by the context in which the director communicates.”743 When directors

request discretionary stockholder action, such as the approval of corporate

transactions like mergers, “they must disclose fully and fairly all material facts

within their control bearing on the request.”744 “This application of the fiduciary

duties of care and loyalty is referred to as the ‘fiduciary duty of disclosure.’”745 The

Delaware Supreme Court has described the parameters of this duty as “strict and

unyielding.”746

“A fundamental precept of Delaware corporation law is that it is the board of

directors, and neither shareholders nor managers, that has ultimate responsibility for

741
D.I. 82 at 66 (alterations and internal quotation marks omitted) (quoting Rosenblatt v.
Getty Oil Co., 493 A.2d 929, 944 (Del. 1985)).
742
Id. at 68.
743
Dohmen v. Goodman, 234 A.3d 1161, 1168 (Del. 2020).
744
Id.; see also Baker Hughes, 2020 WL 6281427, at *12 (“Under Delaware law, when
directors solicit stockholder action, they must disclose fully and fairly all material
information within the board’s control.” (quoting In re Solera Hldgs., Inc. S’holder Litig.,
2017 WL 57839, at *9 (Del. Ch. Jan. 5, 2017))).
745
Id.
746
Rosenblatt, 493 A.2d at 944 (discussing whether the defendant fiduciaries had satisfied
their “duty of complete candor” and “whether the proxy statement satisfied the strict and
unyielding disclosure requirements of Delaware law”).

163
the management of the enterprise.”747 But “[t]he realities of modern corporate life

are such that directors cannot be expected to manage the day-to-day activities of a

company.”748 “Thus Section 141(a) of DGCL expressly permits a board of directors

to delegate managerial duties to officers of the corporation, except to the extent that

the corporation’s certificate of incorporation or bylaws may limit or prohibit such a

delegation.”749 While the board “may delegate such powers to the officers of the

company as in the board’s good faith, informed judgment are appropriate,” “this

power is not without limit.”750 “The board may not either formally or effectively

abdicate its statutory power and its fiduciary duty to manage or direct the

management of the business and affairs of this corporation.”751 “Thus it is well

established that while a board may delegate powers subject to possible review, it

Grimes v. Donald, 1995 WL 54441, at *8 (Del. Ch. Jan. 11, 1995), aff’d, 673 A.2d 1207
747

(Del. 1996).
748
Rosenblatt, 493 A.2d at 943; accord Grimes, 1995 WL 54441, at *8 (“Of course, given
the large, complex organizations through which modern, multi-function business
corporations often operate, the law recognizes that corporate boards, comprised as they
traditionally have been of persons dedicating less than all of their attention to that role,
cannot themselves manage the operations of the firm, but may satisfy their obligations by
thoughtfully appointing officers, establishing or approving goals and plans and monitoring
performance.”).
749
Grimes, 1995 WL 54441, at *8.
750
Id. at *9.
751
Id.

164
may not abdicate them.”752 “The board must retain the ultimate freedom to direct

the strategy and affairs of the Company for the delegation decision to be upheld.”753

Abdication of directorial duty evidences disloyalty.754 “Allegations that [the

company’s] directors abdicated all responsibility to consider appropriately an action

of material importance to the corporation puts directly in question whether the

board’s decision-making processes were employed in a good faith effort to advance

corporate interests.”755 “Whether or not a delegation of a particular responsibility

constitutes an abdication of directorial duty is necessarily a fact specific question.”756

The Court must consider “why the delegation was made, and what task was actually

delegated,” as well as whether the board acted independently in delegating the

task.757

752
Id.
753
In re Bally’s Grand Deriv. Litig., 1997 WL 305803, at *4 (Del. Ch. June 4, 1997)
(internal quotation marks omitted) (quoting Grimes v. Donald, 673 A.2d 1207, 1215 (Del.
1996), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000)).
Bomarko, Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1178 (Del. Ch. 1999) (citing
754

Cede & Co., 634 A.2d at 363), aff’d, 766 A.2d 437 (Del. 2000).
755
In re Walt Disney Co. Deriv. Litig. (Disney I), 825 A.2d 275, 278 (Del. Ch. 2003); see
also Cysive, 836 A.2d at 550 n.26 (“Unless the plaintiffs can show that the independent
board majority was duped by the interested block holder, abdicated its responsibilities so
as to have acted in subjective bad faith, or acted so irrationally so as to have committed a
violation of their duty of care, the business judgment standard of review would condemn
their claims.”).
756
Bally’s Grand, 1997 WL 305803, at *4.
757
Rosenblatt, 493 A.2d at 943; see also id. at 944.

165
 Here, Plaintiff has alleged that the Director Defendants delegated to

conflicted management total and complete authority to prepare and file the Proxy

and that the Director Defendants did not review the Proxy before it was filed. The

Director Defendants contend that “[o]f course” Plaintiff’s allegations are “not

true.”758 They argue that while Plaintiff is entitled to all reasonable inferences in

her favor, she “is not entitled to ask the Court to presume a board of directors

somehow waives its right to review a Proxy, acts in bad faith and breaches its

fiduciary duty whenever it fails to reserve its right to review subsequent drafts of a

proposed disclosure in a standard board resolution.”759

But the Director Defendants have not asserted any reason to reject Plaintiff’s

allegations as untrue at this stage, particularly where those allegations are consistent

with the delegating Board resolution. For example, there are no meeting minutes

demonstrating that the Director Defendants oversaw the Proxy’s preparation or that

they reviewed the Proxy before the Officer Defendants filed it with the SEC.760 So,

as is nearly always the case, the Court must accept Plaintiff’s allegations as true for

the purpose of the Motions.761 Plaintiff has alleged facts making it reasonably

758
D.I. 74 at 39.
759
D.I. 85 at 28.
760
See D.I. 74 at 39–40; D.I. 85 at 28.
761
See KCG Hldgs., 2019 WL 2564093, at *17 (“Defendants attack these allegations as
factually inaccurate, but the Court must accept them as true for the purpose of this motion.”
(footnote omitted)).

166
conceivable that the Director Defendants delegated full authority to prepare and

disseminate the Proxy to the allegedly conflicted Officer Defendants, and did so in

bad faith.762 Bad faith is reflected in the choice of agent and the complete scope of

delegation.

I first consider the Board’s chosen agents in determining whether a

delegation constitutes abdication.763 The Board delegated drafting the Proxy to the

Officer Defendants, known conflicted individuals who had been ostensibly walled

off from the sale process but still assisted in tilting the playing field toward Buyer

for the benefit of Riverstone and Developer 2. Delegating to Garland was

particularly problematic, especially after he had been less than forthright with the

Special Committee about his April 15 Meeting with Riverstone after Brookfield’s

first offer.

Second, the scope of the delegation goes too far. The Board’s resolution

granted the Officer Defendants full power and discretion to prepare the Proxy with

information they thought it needed to contain, and then to file the Proxy with the

762
See Compl. ¶¶ 231–32; Weinberger Decl. Ex. 8.
763
Cf. Rosenblatt, 493 A.2d at 942–43 (upholding the board’s delegation of authority as a
valid exercise of business judgment where there was “no proof that D & M lacked
independence or was in any way beholden to either party,” and “[t]he record fully
support[ed] a conclusion that D & M had the requisite reputation and experience to assist
Getty and Skelly”).

167
SEC without the Board’s review.764 The Board authorized interested parties to

unilaterally describe the process to the stockholders with finality, thereby infecting

the stockholder vote as well.

And from the alleged misrepresentations in the Proxy, it appears that the

Officer Defendants—specifically, Garland—capitalized on the opportunity to

selectively disclose the Individual Defendants’ self-interested involvement.765 As

alleged, the Proxy and Supplemental Proxy failed to disclose, among other things,

that Riverstone leveraged its relationship with Developer 2 and the Company to

block a more valuable deal with Brookfield and TerraForm; that Garland had

unauthorized discussions with potential bidders in violation of the Special

Committee’s instructions, including an unauthorized in-person April 15 Meeting

with Buyer and Riverstone in April 2019; that Goldman faced conflicts of interest,

including that Goldman owns a substantial stake in Riverstone, had advised

Riverstone on a take-private of the Company, and had earned fees totaling over

$100 million from Riverstone and Buyer in recent years; that Browne, a

representative of Riverstone, attended a majority of the Special Committee’s

764
See Compl. ¶¶ 231–33.
765
The Officer Defendants’ involvement in drafting and disseminating the Proxy, as well
as the Proxy’s deficiencies, are discussed in Section II.B.2 infra.

168
meetings and Executive Sessions; and that the Company’s largest stockholder, PSP,

held a 22% interest in Developer 2.

Finally, Plaintiff has adequately alleged that the Director Defendants failed

to correct a Proxy they knew to be false and misleading. The Complaint’s

allegations indicate that the Director Defendants knew the truth (except for the

whole truth about Garland’s April 15 Meeting) so if the Director Defendants had

reviewed the Proxy, even if only after it was issued, they would have known it was

false or misleading. Because the Company issued further disclosures before the

stockholder vote in the Supplemental Proxy, the Director Defendants conceivably

had the opportunity to correct any alleged misstatements but failed to do so.766

As alleged, the Director Defendants’ decisions to delegate the Proxy to the

Conflicted Officer Defendants and forego reviewing it before filing, as well as their

failure to correct the Proxy’s alleged false and misleading statements, are actionable

as bad faith.767

766
See Kirby Decl. Ex. 2.
767
See, e.g., Rich ex rel. Fuqi Int’l, Inc. v. Yu Kwai Chong, 66 A.3d 963, 979 (Del. Ch.
2013) (holding that complaint stated a claim that board had abdicated its responsibilities
by failing to conduct meaningful investigation and allowing management to make
decisions without oversight); Disney I, 825 A.2d at 278 (holding that complaint stated a
claim for breach of duty of loyalty and action not in good faith where it alleged that board
failed to act on executive’s compensation and abdicated decision-making responsibility to
the company’s CEO); Nagy v. Bistricer, 770 A.2d 43, 61–62, 64 (Del. Ch. 2000) (holding
that a board abdicated its statutory duty under Section 251(b) when it delegated the
determination of the merger consideration to an investment bank selected by the acquirer);
Grimes, 1995 WL 54441, at *11 (finding that complaint stated a claim that board had

169
 3. The Merger Was Not Cleansed Under
Corwin.

Having determined that Plaintiff has stated a claim against the Director

Defendants for breach of the duty of loyalty, I turn to the Director Defendants’

argument that any such breach was cleansed by a stockholder vote and that therefore

dismissal is appropriate under Corwin.768 Corwin gives rise to the irrebuttable

presumption of the business judgment rule when a transaction “is approved by a

fully informed, uncoerced vote of the disinterested stockholders.”769 To obtain the

protection of that presumption, the Director Defendants must “demonstrate that the

[cash-out] merger has been approved by a fully informed, uncoerced majority of the

disinterested stockholders.”770 Otherwise, for the reasons discussed supra, Revlon

improperly delegated its authority under Section 141(a) to the CEO, where the board
agreed not to engage in “unreasonable interference, in the good faith judgment of the
Executive, by the Board . . . in the Executive’s carrying out of his duties and
responsibilities”); Jackson v. Turnbull, 1994 WL 174668, at *4–5 (Del. Ch. Feb. 8, 1994)
(holding board impermissibly abdicated statutory obligation to set merger consideration by
delegating task to its investment bankers), aff’d, 653 A.2d 306 (Del. 1994) (TABLE); Sealy
Mattress Co. of N.J., Inc. v. Sealy, Inc., 532 A.2d 1324, 1338 (Del. Ch. 1987) (holding that
board “could not abdicate its obligation to make an informed decision on the fairness of
the merger by simply deferring to the judgment of the controlling stockholder”).
768
125 A.3d at 308 (holding that an “uncoerced, informed stockholder vote is outcome-
determinative, even if Revlon applied to the merger”).
769
Id. at 309.
770
KCG Hldgs., 2019 WL 2564093, at *10 (internal quotation marks omitted) (quoting
Corwin, 125 A.3d at 306).

170
enhanced scrutiny or entire fairness will apply and Plaintiff’s claims against the

Director Defendants will survive the Motions.

As of the close of business on the Merger’s record date, the Company had

98,218,625 shares of common stock and 10,400,000 shares of preferred stock

outstanding.771 The common and preferred shares voted together on the Merger as

a single class, with each common and preferred share receiving one vote for a total

of 108,618,625 potential votes.772 CBRE’s 10,400,000 preferred shares represented

roughly 10.4% of the outstanding shares. PSP, which also held a substantial stake

in Developer 2, held 9,341,025 shares.773 And management, who received post-

close equity and jobs, held 1,210,049 shares.774 Overall, 56,856,604 of these shares

or 52%, including CBRE, PSP, and management, voted in favor of the Merger.775

Plaintiff contends that Corwin does not apply because the vote was

uninformed and because a significant block of votes was not disinterested.776

771
Compl. ¶ 247.
772
Id.
773
Id. ¶ 249.
774
Id.
775
Id. ¶ 248. The Proxy informed stockholders if “you abstain from voting or fail to cast
your vote, in person or by proxy, it will have the same effect as a vote ‘AGAINST’ the
proposal to adopt the Merger Agreement and approve the Merger.” Proxy at 5 (emphasis
omitted).
776
See D.I. 82 at 84–85.

171
Plaintiff argues PSP was not disinterested because “it held a stake in the buyer,”777

meaning Riverstone’s Developer 2. Plaintiff argues CBRE was neither disinterested

nor uncoerced, as it was contractually obligated to vote its preferred shares in

accordance with the Board’s recommendation regardless of its own economic

interest, and that further, its “preferred shares rolled over into the combined company

with an increased dividend rate.”778 The parties submitted supplemental briefing on

whether CBRE’s preferred shares should count toward the uncoerced, disinterested,

and fully-informed vote. Removing shares held by PSP, CBRE, and conflicted

management from the vote total, 35,905,530—or only 41%—of the remaining

87,667,551 disinterested shares were voted in favor of the Merger.779 Removing

only CBRE’s preferred shares leaves 46,456,604 or 47.3% of the overall outstanding

98,218,625 shares in favor of the Merger.780

In light of CBRE’s contractual obligation to vote in favor of the merger, which

CBRE agreed to without being informed of the merger’s terms, the Director

Defendants cannot invoke Corwin’s protections. CBRE was neither fully informed

nor disinterested, and its votes were compelled by contractual duty. Because

777
Id. at 84.
778
Id.
779
Compl. ¶ 250.
780
Id. ¶ 252.

172
removing CBRE’s preferred stock strips the Director Defendants of Corwin’s

protections, I need not reach PSP and management’s votes.

CBRE’s vote in favor of the Merger was not informed. Under Delaware law,

determining whether a vote was fully informed at the pleading stage requires the

Court to consider whether the “complaint, when fairly read, supports a rational

inference that material facts were not disclosed or that the disclosed information was

otherwise materially misleading.”781 For shareholders to be “fully informed,” they

must possess “all material information” as to a particular transaction.782

CBRE acquired its stock on October 10 when it executed the Purchase

Agreement.783 CBRE agreed that in the event of “any proposed merger,” it would

“vote its Preferred Shares in a manner consistent with the recommendation of the

Board.”784 CBRE agreed to this term 13 days before bidders submitted definitive

781
Mindbody, 2020 WL 5870084, at *26.
782
van der Fluit v. Yates, 2017 WL 5953514, at *7 (Del. Ch. Nov. 30, 2017) (quoting
Solomon v. Armstrong, 747 A.2d 1098, 1127–28 (Del. Ch. 1999)).
783
See Compl. ¶¶ 181–206, 235; D.I. 92, Ex. A.
784
D.I. 92, Ex. A. § 6.09(g) (emphasis added); Compl. ¶ 237. CBRE also expressly waived
any right to recover damages from the Company beyond the purchase price of the preferred
stock, absent fraud. D.I. 92, Ex. A § 8.04. The preferred stock issuance and voting
provision were disclosed in the Proxy. See, e.g., Proxy at 15 (“[T]he holders of Company
Preferred Stock and Pattern have agreed that the holders of Company Preferred Stock shall
vote their 10,400,000 shares of Company Preferred Stock in a manner consistent with the
recommendations of the Board . . . .”); id. at 129 (“Pursuant to the Company Preferred
Stock Purchase Agreement, we issued and sold 10,400,000 shares of Company Preferred
Stock on October 25, 2019 to entities affiliated with CBRE . . . .”).

173
documentation and 18 days before bidders submitted best and final offers; 24 days

before the Special Committee and Board voted to approve the Merger; 117 days

before the Company issued the Proxy; and 152 days before the stockholder vote. As

of the date of the Purchase Agreement, the Special Committee was fielding offers

from at least four bidders, including Brookfield and Buyer, and it was rejecting

exclusivity requests. No transaction was definitive, and any terms were tentative at

best. CBRE effectively cast its vote in favor of the Merger before the Special

Committee and Board had the opportunity to finalize its terms, consider its merits,

approve it as furthering the best interests of the Company and its stockholders, or

disclose its terms for stockholder consideration. When CBRE agreed to vote in favor

of the Merger, it did not know that the transaction would close, the price at which it

might close and whether that price would be paid in cash or stock, or who the

counterparty might be. Contrary to the Director Defendants’ assertion,785 CBRE’s

lack of information was not cured ex post facto by the allegedly deficient Proxy,

issued after CBRE agreed to vote in favor of the Merger. CBRE’s uninformed assent

to the Merger precludes its votes from contributing to any cleansing under Corwin.

785
See D.I. 96 at 2 (“Plaintiff asks the Court to simply assume that CBRE must have
disregarded the Proxy and the terms of the Merger itself in casting its votes because it had
agreed to vote in favor of whatever transaction the [Company] board recommended. . . .
CBRE, as a holder of preferred stock, had access to the same information set forth in the
Proxy as every other stockholder. Plaintiff does not allege otherwise, and she offers no
reason to assume that CBRE ignored the Proxy.” (footnote omitted)).

174
 Second, CBRE was interested with respect to the Merger. A stockholder is

interested if it may derive pecuniary interest from one particular result or is otherwise

unable to be fair-minded, unbiased, and impartial.786 “That is, only the votes of those

stockholders with no economic incentive to approve a [challenged] transaction

count.”787 CBRE’s contractual obligation to vote in favor of the Merger carried with

786
See Scott v. Arden Farms Co., 28 A.2d 81, 85 (Del. Ch. 1942) (“The word ‘disinterested’
as so used, plainly means something more than not having a pecuniary interest in the
controversy; it connotes fair-mindedness, including freedom from actual or probable bias,
prejudice or partiality with relation to the questions to be determined.”).
787
Harbor Fin. P’rs v. Huizenga, 751 A.2d 879, 900 (Del. Ch. 1999) (emphasis omitted);
cf. Corwin, 125 A.3d at 313–14 (“There are sound reasons for this policy. When the real
parties in interest—the disinterested equity owners—can easily protect themselves at the
ballot box by simply voting no, the utility of a litigation-intrusive standard of review
promises more costs to stockholders in the form of litigation rents and inhibitions on risk-
taking than it promises in terms of benefits to them. The reason for that is tied to the core
rationale of the business judgment rule, which is that judges are poorly positioned to
evaluate the wisdom of business decisions and there is little utility to having them second-
guess the determination of impartial decision-makers with more information (in the case
of directors) or an actual economic stake in the outcome (in the case of informed,
disinterested stockholders). In circumstances, therefore, where the stockholders have had
the voluntary choice to accept or reject a transaction, the business judgment rule standard
of review is the presumptively correct one and best facilitates wealth creation through the
corporate form.” (footnote omitted)); see In re Pure Res., Inc., S’holders Litig., 808 A.2d
421, 426 (Del. Ch. 2002) (stating that “it is clear that the Put Agreements can create
materially different incentives for the holders than if they were simply holders of Pure
common stock,” and therefore discounting holders of those shares in majority of minority
calculation); In re CNX Gas Corp. S’holders Litig., 4 A.3d 397, 416 (Del. Ch. 2010)
(explaining that “[e]conomic incentives matter, particularly for the effectiveness of a
legitimizing mechanism like a . . . stockholder vote”); Morton’s Rest. Gp., 74 A.3d at 663
n.34 (“[O]nly disinterested stockholder approval is a strong assurance of fairness.”); In re
Zale Corp. S’holders Litig., 2015 WL 5853693, at *9 (Del. Ch. Oct. 29, 2015) (ruling
plaintiff had not adequately alleged a stockholder was interested where the stockholder’s
alternate economic interest, unique to that stockholder, was not material); Brandon
Mordue, The Revlon Divergence: Evolution of Judicial Review of Merger Litigation, 12
Va. L. Bus. R. 531, 567 (2018) (explaining, in light of Corwin’s economic purposes,

175
it financial consequences for breach and financial incentives for performance.

CBRE bargained for the right to rollover its preferred stock at a premium into the

post-closing company and keep its shares after a merger.788 And after a change in

control, the annual dividend rate on CBRE’s preferred stock would increase by as

much as seventy-five basis points, and the holders would receive an accelerated

payment on certain otherwise contingent dividends.789 CBRE’s Merger benefits

were not shared with the Company’s public common stockholders, who were to be

cashed out.790 Accordingly, CBRE was interested by virtue of the Purchase

Agreement, as it stood to receive benefits from the Merger that were not shared with

the cashed-out majority.791 CBRE was also economically incentivized to perform

“Corwin thus suggests that an ‘interested’ stockholder would be one voting in favor of a
transaction for reasons other than the economic merits of the transaction itself”).
788
Compl. ¶ 249.
789
D.I. 94, Ex. A § 2(a)–(c).
790
See PNB, 2006 WL 2403999, at *8, *14, *15 (holding that for the purposes of
ratification, the only votes that counted were those of the shareholders who would be
cashed out; a majority of those shareholders had to vote in favor of the transaction for the
interested transaction to be ratified; and that the shareholders who stood to keep their shares
in the merger were considered interested); cf. Stewart v. BF Bolthouse Holdco, LLC, 2013
WL 5210220, at *10 (Del. Ch. Aug. 30, 2013) (stating that “allegations that the directors
stood on both sides of the transaction or derived a benefit that was not shared pro rata
among the other shareholders” may implicate duty of loyalty as an “interested
transaction”).
791
Cf. Larkin v. Shah, 2016 WL 4485447, at *20 (Del. Ch. Aug. 25, 2016) (noting that
“[n]ot all stockholder approvals of a transaction have a cleansing effect,” and observing
that “[a]mong that ‘yes’-block were stockholders owning 27.4% of Auspex’s shares who
contractually agreed to tender under the Tender and Support Agreement,” and “[e]xcluding

176
under the Purchase Agreement and avoid the consequences of breach. CBRE’s votes

cannot contribute to cleansing under Corwin.

Finally, and fundamentally, Defendants have failed to demonstrate that

CBRE’s vote was voluntary. The business judgment rule standard of review applies

only if disinterested and informed stockholders have had the voluntary choice to

accept or reject a transaction.792 “[T]he term ‘ratification’ applies only to a voluntary

stockholder vote.”793 The Court declines to second-guess the board when the

stockholders, as a second set of decisionmakers, have approved the economic merits

of a transaction for themselves.794 To be a meaningful ratifying vote, the stockholder

must be voting on the transaction of her own accord and on the transaction’s merits.

A stockholder voting in favor of a specific transaction because it had previously

contracted to vote in favor of any transaction in exchange for consideration is not

them, stockholders owning roughly 70% of the outstanding shares not contractually bound
to tender agreed to the merger”).
792
Corwin, 125 A.3d at 306, 310, 312–13; Frank v. Wilson & Co., 32 A.2d 277, 305 (Del.
1943) (“Ratification . . . implies a voluntary and positive act . . . .”).
793
KKR, 101 A.3d at 1003. The vote itself may be statutorily required; the point is that the
stockholder’s “yes” is voluntary. See Corwin, 125 A.3d at 312–14; In re Volcano Corp.
S’holder Litig., 143 A.3d 727, 740–45 (Del. Ch. 2016).
794
See Lavin v. West Corp., 2017 WL 6728702, at *8 (Del. Ch. Dec. 29, 2017) (citing
Corwin, 125 A.3d at 313); J. Travis Laster, The Effect of Stockholder Approval on
Enhanced Scrutiny, 40 Wm. Mitchell L. Rev. 1443, 1457 (2014) (commenting that “a
compromised board can substitute the stockholders as the necessary qualified decision
maker and, thereby, restore the protections of the business judgment rule” and that it is
appropriate that “a court should take into account and defer to an uncoerced endorsement
from fully informed, disinterested stockholders”).

177
offering the second review that supports application of the business judgment rule.795

Indeed, this Court has excluded from a Corwin calculus votes by stockholders who

contractually agreed to vote their shares in favor of a transaction.796

CBRE’s vote was not a ratification of the Merger. Rather, it was a dutiful

performance under the Purchase Agreement. CBRE lacked the ability to vote no at

the ballot box in light of its contractual obligation to vote for the Merger. CBRE

could either perform its contractual obligation to vote in favor of the Merger, or

breach the Purchase Agreement and face the consequences. Including CBRE in the

cleansing vote count would run afoul of Corwin’s logical underpinnings.

In an effort to count CBRE’s votes as cleansing votes, the Director Defendants

point out that the Special Committee put Buyer and Brookfield on level footing

before CBRE. According to the September 29 meeting minutes, the purchaser of

the preferred shares would have a premium redemption right in the event the

Company’s acquirer did not meet certain requirements, but both Brookfield and

795
See In re Invs. Bancorp, Inc. S’holder Litig., 177 A.3d 1208, 1220–21 (Del. 2017)
(noting “mere approval by stockholders of a request by directors for the authority to take
action within broad parameters does not insulate all future action by the directors within
those parameters from attack,” and explaining that only where “stockholders approve a
specific corporate action, [will] the doctrine of ratification, in most situations, preclude[]
claims for breach of fiduciary duty attacking that action” (quoting Sample v. Morgan, 914
A.2d 647, 663–64 (Del. Ch. 2007))); Gantler v. Stephens, 965 A.2d 695, 713 (Del. 2009)
(“[T]he only director action or conduct that can be ratified is that which the shareholders
are specifically asked to approve.”).
796
See Larkin, 2016 WL 4485447, at *20 (excluding shareholders who had contractual
obligation to tender shares and vote yes if necessary).

178
Buyer were carved out from that redemption right.797 But this does not change the

fact that CBRE was required to vote in favor of the Merger regardless of the identity

of the acquirer.

The Director Defendants also contend Plaintiff cannot “explain how it was

coercive for CBRE to agree to vote in a manner consistent with the board’s

recommendation, where the Board itself was bound to vote the way of a fully

independent Special Committee, and a majority of the Board and all of the Special

Committee members are concededly independent.”798 This misses the point of

ratification and why the vote must be voluntary: the stockholders must consider and

approve the transaction with their own voice, wholly independently from the board.

CBRE agreed to vote in favor of the Merger—or any merger—without evaluating

the transaction’s merits or the Board’s fiduciary performance. CBRE agreed to

substitute or forego its own independent judgment and support the Board’s

recommendation for any merger within the identified timeframe.799 Plaintiff’s

argument, connecting CBRE’s vote through a daisy chain of substituted judgment to

the very Special Committee whose conduct the vote is to ratify, demonstrates the

fundamental reason why CBRE’s vote cannot be a cleansing vote. A stockholder

797
Kirby Decl. Ex. 20 at PEGI-00001291.
798
D.I. 92 at 5.
799
See Invs. Bancorp, 177 A.3d at 1222.

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who must vote the same way as the board is echoing, not ratifying, the board’s

conduct, even if the board were comprised of entirely careful and loyal directors.

Without CBRE’s vote, the Director Defendants do not have the majority

necessary for Corwin to cleanse the Merger. The Individual Defendants’ Motion is

denied as to Count I, and Plaintiff’s nonexculpated claims against the Director

Defendants shall proceed.

B. Plaintiff Has Stated A Claim For Breach Of Fiduciary Duty
Against Certain Officer Defendants.

Because Section 102(b)(7) does not exculpate a corporate officer’s breach of

fiduciary duty, Plaintiff’s claims against the Officer Defendants face a different

standard.800 Plaintiffs need only plead facts supporting a reasonable inference that

the Officer Defendants breached their fiduciary duty of care in their official

800
See, e.g., Baker Hughes, 2020 WL 6281427, at *15–16; Essendant, 2019 WL 7290944,
at *15.

180
capacities.801 Plaintiff may recover damages from the Officer Defendants in their

roles as officers for breach of either the duty of loyalty or the duty of care.802

“Corporate officers owe fiduciary duties that are identical to those owed by

corporate directors.”803 As stated, “the duty of loyalty mandates that the best interest

of the corporation and its shareholders takes precedence over any interest possessed

by a director, officer or controlling shareholder and not shared by the stockholders

801
See, e.g., Baker Hughes, 2020 WL 6281427, at *15. As this Court noted recently, “[i]t
is an open issue of Delaware law as to whether Revlon applies to an officer’s actions.”
Mindbody, 2020 WL 5870084, at *32 n.287. For purposes of this decision, I assume a
breach of an officer’s duties of care and loyalty should be reviewed under the traditional
standards of bad faith and gross negligence, respectively, because the directors—not the
officers—are responsible for the types of decisions that warrant Revlon enhanced scrutiny
review. See id. (applying gross negligence even though Revlon applied to the underlying
transaction because “Revlon neither creates a new type of fiduciary duty in the sale-of-
control context nor alters the nature of the fiduciary duties that generally apply” (quoting
Malpiede, 780 A.2d at 1083)); Morrison I, 2019 WL 7369431, at *22 (applying gross
negligence standard to officer conduct, even though Revlon applied to the underlying
company sale process).
802
See, e.g., Baker Hughes, 2020 WL 6281427, at *15.
803
Frederick Hsu, 2017 WL 1437308, at *39 (citation, footnote, and internal quotation
marks omitted) (quoting Gantler, 965 A.2d at 708, and then quoting Hampshire Gp. Ltd.
v. Kuttner, 2010 WL 2739995, at *12 (Del. Ch. July 12, 2010)).

181
generally.”804 Corporate officers “are not permitted to use their position of trust and

confidence to further their private interests.”805

“To plead a claim for breach of the duty of loyalty that will overcome a motion

to dismiss, a plaintiff must plead sufficient facts to support a rational inference that

the corporate fiduciary acted out of material self-interest that diverged from the

interests of the shareholders.”806 To make such a showing, the plaintiff may plead

that the officer was interested or lacked independence with respect to the challenged

transaction.807 To plead interestedness, a plaintiff can plead the fiduciary received

804
Cede & Co., 634 A.2d at 361; see also Gantler, 965 A.2d at 709 (“[T]he fiduciary duties
of officers are the same as those of directors.”); Guth, 5 A.2d at 510 (“While technically
not trustees, [corporate officers and directors] stand in a fiduciary relation to the
corporation and its stockholders. A public policy, existing through the years, and derived
from a profound knowledge of human characteristics and motives, has established a rule
that demands of a corporate officer or director, peremptorily and inexorably, the most
scrupulous observance of his duty, not only affirmatively to protect the interests of the
corporation committed to his charge, but also to refrain from doing anything that would
work injury to the corporation, or to deprive it of profit or advantage which his skill and
ability might properly bring to it, or to enable it to make in the reasonable and lawful
exercise of its powers. The rule that requires an undivided and unselfish loyalty to the
corporation demands that there shall be no conflict between duty and self-interest. The
occasions for the determination of honesty, good faith and loyal conduct are many and
varied, and no hard and fast rule can be formulated. The standard of loyalty is measured
by no fixed scale.”).
805
Guth, 5 A.2d at 510.
806
Saba Software, 2017 WL 1201108, at *21.
807
See, e.g., Cede & Co., 634 A.2d at 362 (“Classic examples of director self-interest in a
business transaction involve either a director appearing on both sides of a transaction or a
director receiving a personal benefit from a transaction not received by the shareholders
generally. We have generally defined a director as being independent only when the
director’s decision is based entirely on the corporate merits of the transaction and is not
influenced by personal or extraneous considerations. By contrast, a director who receives

182
“a personal financial benefit from a transaction that is not equally shared by the

stockholders,” or “was a dual fiduciary and owed a competing duty of loyalty to an

entity that itself stood on the other side of the transaction or received a unique benefit

not shared with the stockholders.”808 To plead a lack of independence, a plaintiff

can plead the fiduciary is “sufficiently loyal to, beholden to, or otherwise influenced

by an interested party” to undermine the fiduciary’s ability to judge the matter on its

merits.809

Further, “[l]ike directors, officers breach the duty of loyalty if they act in bad

faith for a purpose other than advancing the best interests of the corporation.” 810 A

claim for breach of the duty of loyalty against officers will proceed where the

complaint alleges that they manipulated the sales process to sabotage the alternatives

they did not personally favor and acted with favoritism toward a particular bidder.811

a substantial benefit from supporting a transaction cannot be objectively viewed as
disinterested or independent. This principle necessarily constrains our review of the Court
of Chancery’s duty of loyalty formulation.” (citations omitted)).
808
Frederick Hsu, 2017 WL 1437308, at *26 (quoting Rales v. Blasband, 634 A.2d 927,
936 (Del. 1993)).
809
Id.
810
Id. at *39 (alteration and internal quotation marks omitted) (quoting Kuttner, 2010 WL
2739995, at *12).
811
See Chen, 87 A.3d at 686–87 (quoting and discussing Gantler, 965 A.2d at 709).

183
 An officer’s compliance with the duty of care is evaluated for gross

negligence.812 “Gross negligence involves more than simple carelessness. To plead

gross negligence, a plaintiff must allege conduct that constitutes reckless

indifference or actions that are without the bounds of reason.”813 “While the inquiry

of whether the claims amount to gross negligence is necessarily fact-specific, the

burden to plead gross negligence is a difficult one.”814

Plaintiff’s Complaint places many wrongs at the many feet of the Officer

Defendants or “conflicted management,” and Garland appears in nearly every scene

of Plaintiff’s narrative. But the Complaint pleads few facts addressing the other

Officer Defendants’ individual involvement in the sales process. As a result,

Plaintiff has failed to plead breaches by each Officer Defendant. Plaintiff has alleged

facts from which it is reasonably conceivable that Garland, Elkort, and Lyon—but

not Armistead and Pedersen—breached their duty of loyalty by titling the sales

process toward Buyer in pursuit of their own interests and Riverstone and

Developer 2’s interests. Plaintiff has stated a claim against Garland for breaching

his duties as an officer in preparing the allegedly false and misleading Proxy—but

812
Baker Hughes, 2020 WL 6281427, at *15.
813
Id. (internal quotation marks omitted) (quoting Morrison I, 2019 WL 7369431, at *22).
814
Id. (quoting Zucker v. Hassell, 2016 WL 7011351, at *7 (Del. Ch. Nov. 30, 2016), aff’d,
165 A.3d 288 (Del. 2017)).

184
not Armistead, Elkort, Lyon, or Pedersen. The Individual Defendants’ Motion on

Count II is granted and denied in part.

1. It Is Reasonably Conceivable That Only
Garland, Elkort, And Lyon Tilted The Sales
Process In Buyer’s Favor; It Is Not Reasonably
Conceivable That Armistead And Pedersen Did
The Same.

Plaintiff claims the Officer Defendants breached both their duty of loyalty and

duty of care by “tilt[ing] the sale process” in Riverstone’s and Buyer’s “favor due to

[their] conflicts of interest.”815 The Complaint supports a reasonable inference that

Garland, Elkort, Lyon, and Pederson favored Riverstone and Developer 2’s interests

over the Company’s public stockholders because they were not independent of

Riverstone and Developer 2.816

As an initial matter, Plaintiff has alleged that each Officer Defendant was

conflicted with respect to Riverstone.817 Each held substantial roles with

Riverstone’s subsidiaries and the favored entity in the sales process, Developer 2 as

preceded by Developer 1. Garland, the Company’s CEO since its founding in

October 2012, also served as the President and a director of both Developer 1 and

815
D.I. 82 at 35 (quoting Mindbody, 2020 WL 5870084, at *1).
816
See Frederick Hsu, 2017 WL 1437308, at *39.
817
Compl. ¶¶ 32–36.

185
Developer 2.818 Armistead, the Company’s Executive Vice President of Business

Development since August 2013, served as Developer 1’s Executive Director since

June 2009 and as Developer 2’s President since April 2019.819 Elkort, the

Company’s Executive Vice President and Chief Legal Officer since May 2018, also

served as Developer 1’s Director of Legal Services and Co-Head of Finance since

June 2009 and as a Developer 2 officer.820 Lyon, the Company’s President since

April 2019, also previously served as Developer 1’s Head of Structured Finance.821

And Pedersen, the Company’s CFO since April 2019, also served as Developer 2’s

CFO since May 2018 and Developer 1’s Co-Head of Finance since June 2009.822

Thus, the Officer Defendants were dual fiduciaries at the time of the Merger.823

Because Riverstone’s and Developer 2’s interests diverged from those of the

818
Id. ¶ 24. Before the Merger, Garland also held a substantial equity interest in
Developer 2. Therefore, his interests also diverged from those of the Company’s public
stockholders to the extent an internalization of Developer 2 required the companies’
stockholders to compete for consideration.
819
Id. ¶ 32.
820
Id. ¶ 33. Before the Merger, Elkort also held a substantial equity interest in Developer 2.
Therefore, his interests also diverged from those of the Company’s public stockholders to
the extent an internalization of Developer 2 required the companies’ stockholders to
compete for consideration.
821
Id. ¶ 34.
822
Id. ¶ 35.
823
See, e.g., Chen, 87 A.3d at 670.

186
Company’s stockholders, those Officer Defendants faced an inherent conflict of

interest.824

Plaintiff has also alleged that those Officer Defendants were interested in the

Merger and incentivized to favor Buyer and the associated internalization of

Developer 2 to secure for themselves equity and continued employment.825 Post-

closing, Garland continues to run the combined entity, and Armistead, Elkort, Lyon,

and Pedersen continue to serve as its executives.826 During the sales process, the

Company communicated to bidders that it was desirable for the Officer Defendants

“to maintain their positions in the combined company,”827 and the Officer

Defendants were, after a blackout period, permitted to negotiate these roles without

the Special Committee’s involvement.828 Each was therefore conceivably beholden

to Riverstone and Developer 2 for their continued employment, calling into question

their independence. Armistead, Garland, Elkort, Lyon, and Pederson also had the

opportunity to retain equity in the post-closing company, while the Company’s

824
Id.
825
See, e.g., Frederick Hsu, 2017 WL 1437308, at *26.
826
Compl. ¶¶ 24, 32–36.
827
Id. ¶ 174.
828
See id. ¶¶ 147, 174, 163.

187
public stockholders were cashed out. As disclosed in the Proxy, each received

substantial equity in the post-closing company.829

While Plaintiff has alleged that each of the Officer Defendants faced conflicts

of interest with respect to the Merger, the key question is whether Plaintiff has plead

facts making it reasonably conceivable that each Officer Defendant acted during the

sales process due to those conflicts. Plaintiff has not. The Complaint pleads facts

supporting a reasonable inference that only Garland, Elkort, and Lyon acted

disloyally to favor Riverstone and Developer 2’s interests, consistent with their

incentives. The Complaint lacks similarly sufficient allegations against Armistead

and Pedersen.

Readers who have made it this far are familiar with Garland’s questionable

contributions to the sales process. As discussed at length above, Garland is alleged

to have initiated and actively participated in the sales process as both a director and

officer with the primary objective of securing a merger with a friendly bidder that

would internalize Developer 2 at a premium price. In pursuit of this objective, he

and the Director Defendants acknowledged, yet ignored, concerns that the

Company’s public stockholders would be shorted merger consideration.

In addition, Plaintiff has alleged that Elkort and Lyon also contributed to

tilting the sales process toward Buyer. After Riverstone spurred the idea of take-

829
Id. ¶¶ 24, 32–35.

188
private, at a time when the Company did not need to raise equity capital,

management—including Garland, Elkort, and Lyon—kicked off the sales process

with Riverstone in the room and able to gather Company confidential information.830

Plaintiff alleges Garland and Lyon encouraged the Special Committee to retain

Goldman, despite its known conflicts including advising Riverstone on a potential

buyout of the Company.831 Garland and Elkort pressed the Special Committee to

favor a transaction that was Riverstone-approved.832 Elkort “emphasized” to the

Special Committee that “the need for Riverstone’s support for any potential

transaction should not be underestimated because Riverstone’s rights to consent that

would likely be implicated by the proposed transaction appeared to be very

broad.”833 But, as Brookfield realized, the Consent Right was readily structurally

circumvented.

Based on these facts, it is reasonably conceivable that Garland, Elkort and

Lyon breached their fiduciary duties as officers by consciously pressing for a

transaction with Buyer consistent with their personal and financial incentives, as

830
Taking Plaintiff’s group pleading as true, Armistead and Pedersen also participated in
the sales process kickoff. However, unlike Elkort and Lyon, the Complaint does not allege
that they took action to further their own interests or Riverstone’s interests once the sales
process was underway.
831
Compl. ¶¶ 106–08; see also id. ¶ 139.
832
Id. ¶ 117.
833
Id. (alterations omitted).

189
well as Riverstone and Developer 2 interests.834 As alleged, their actions give rise

to a breach of the duty of loyalty, as they cannot escape their inherent conflicts. But

even if it were a close call, at a minimum, the facts pled give rise to the reasonable

inference that Elkort and Lyon were at least recklessly indifferent or grossly

834
See Frederick Hsu, 2017 WL 1437308, at *39; Chen, 87 A.3d at 687. The Officer
Defendants contend that the 220 materials undermine Plaintiff’s allegations against them.
See D.I. 85 at 23. Plaintiff refutes the Officer Defendants’ interpretation of those materials.
See D.I. 82 at 37–40, 41. The 220 documents used to draft the Complaint are incorporated
by reference or integral to it, and therefore I may review documents cited in the Complaint
“to ensure that the plaintiff has not misrepresented [their] contents and that any inference
the plaintiff seeks to have drawn is a reasonable one.” Amalgamated Bank v. Yahoo! Inc.,
132 A.3d 752, 797 (Del. Ch. 2016), abrogated on other grounds by Tiger v. Boast Apparel,
Inc., 214 A.3d 933 (Del. 2019). “Section 220 documents, hand selected by the company,
cannot be offered to rewrite an otherwise well-pled complaint,” but can be offered to ensure
the plaintiff is not taking documents out of context. In re Clovis Oncology, Inc. Deriv.
Litig., 2019 WL 4850188, at *14 n.216 (Del. Ch. Oct. 1, 2019). The Court cannot weigh
competing factual interpretations of incorporated documents on a motion to dismiss.
Owens on Behalf of Esperion Therapeutics, Inc. v. Mayleben, 2020 WL 748023, at *9 (Del.
Ch. Feb. 13, 2020), aff’d sub nom. Owens v. Mayleben, 241 A.3d 218 (Del. 2020). It
appears to me that Plaintiff has not misrepresented the 220 materials and has drawn
reasonable inferences therefrom. See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del.
2013); see also In re CBS Corp. S’holder Class Action & Deriv. Litig., 2021 WL 268779,
at *18 (Del. Ch. Jan. 27, 2021) (“The incorporation-by-reference doctrine does not enable
a court to weigh evidence on a motion to dismiss. It permits a court to review the actual
documents to ensure that the plaintiff has not misrepresented their contents and that any
inference the plaintiff seeks to have drawn is a reasonable one. Where a defendant
improperly and extensively uses Section 220 Documents in support of a Chancery Rule
12(b)(6) motion to support factual inferences that run counter to those supported in the
complaint, the court may either exclude the extraneous matter from its consideration or
convert the Chancery Rule 12(b)(6) motion into a motion for summary judgment so that
the plaintiff may take discovery before the court determines if pre-trial dispositive relief is
appropriate.” (footnotes and internal quotation marks omitted) (quoting Voigt, 2020 WL
614999, at *9)).

190
negligent with respect to the steps Garland and the Board took to tilt the sale process

in Buyer’s favor.835 Plaintiff has stated a claim against Garland, Elkort, and Lyon.

Plaintiff has failed to state a claim for breach against Armistead and Pedersen.

Unlike Elkort and Lyon, the Complaint fails to allege anything specific about

Armistead and Pedersen’s involvement in the sales process.836 The Complaint

alleges that Armistead and Pedersen had long histories with Riverstone and were

conflicted.837 But the only allegations tethering Armistead and Pedersen to the

process concern the Officer Defendants collectively.838 With no allegations

whatsoever tying Armistead to the process, it is not reasonably conceivable that

Armistead breached his duty of loyalty or care by titling the process toward Buyer

835
See Mindbody, 2020 WL 5870084, at *33 (“White was also involved in providing timing
and informational advantages to Vista throughout the sale process. Plaintiffs allege that
White, with Stollmeyer [director], populated Vista’s substantial data room. . . . In view of
these facts, it is reasonably conceivable that White was at least recklessly indifferent to the
steps Stollmeyer took to tilt the sale process in Vista’s favor.”); cf. KCG Hldgs., 2019 WL
2564093, at *18 (“The allegations support a pleadings-stage inference that the Director
Defendants breached their duty of care by failing to employ a reasonable process that
managed Jefferies’ influence. Whether the Director Defendants’ actions in this regard rose
to the level of bad faith or merely state a claim for breach of the duty of care is a close call.
The Court need not make this call in light of the sufficiency of Plaintiff’s other allegations.”
(footnote omitted)).
836
Compare Compl. ¶¶ 33, 34, 106, 117, 130, 139, 210, 213–14, with id. ¶¶ 32, 35, 45, 85–
88, 210, 213–14.
837
See id. ¶¶ 32, 35.
838
See, e.g., Essendant, 2019 WL 7290944, at *7 n.91 (“[G]roup pleading is not sufficient
to state a claim of breach of duty against an individual fiduciary.”); see D.I. 82 at 36 (citing
Compl. ¶¶ 107–08, 116–17, 124, 126–27, 140, 187, 234).

191
in pursuit of his, Riverstone, or Developer 2’s interests.839 Plaintiff has not stated a

claim against Armistead.

As for Pedersen, the Complaint alleges that Pedersen shared the Company’s

favorable financial growth on 2019 earnings calls.840 Pedersen’s statements are the

backdrop against which Plaintiff outlines Garland’s stock issuances, contending the

issuances were not financially necessary and only done to secure CBRE’s favorable

votes. But Pedersen’s statements are consistent with his position as CFO, and

Plaintiff has not alleged that he utilized those statements to advance his own interests

or Riverstone and Developer 2’s interests. Nor has Plaintiff alleged those statements

were false; rather, Plaintiff relies on the truth of those statements to outline the

preferred stock issuance in stark relief. Plaintiff has not pled a breach of fiduciary

duty by Pedersen.

839
Compare Baker Hughes, 2020 WL 6281427, at *15–16, with Frederick Hsu, 2017 WL
1437308, at *39–40 (recognizing the lack of allegations against certain officer defendants,
but inferring their involvement in management-level initiatives that were constructed to
favor differentiated equity, and stating that “the claims against Kupietzky and Morrow
strike me as weaker than the other claims in the case, but relative weakness is not grounds
for dismissal” and “[g]iven the plaintiff-friendly standard that governs a Rule 12(b)(6)
motion, these claims survive”). In Frederick Hsu, the Court found that, despite its scant
allegations, the complaint stated a claim against those officers in view of their role in
crafting management-level strategy and initiatives to shape the company to favor
undifferentiated equity. Here, the Court is asked to assess a Board-level sales process that
looped in conflicted management. There is no allegation that Armistead touched that
process, nor are there allegations from which it would be reasonable to infer his
involvement simply by virtue of his role as a Company offer and dual fiduciary.
840
Compl. ¶¶ 85–88.

192
 2. It Is Reasonably Conceivable That Garland Is
Responsible For The False And Misleading
Proxy.

Plaintiff also claims the Officer Defendants breached their duty of loyalty or,

at a minimum, their duty of care by causing the Company to issue the materially

incomplete and misleading Proxy to stockholders. “It is elementary that under

Delaware law the duty of candor imposes an unremitting duty on fiduciaries,

including directors and officers, to not use superior information or knowledge to

mislead others in the performance of their own fiduciary obligations.”841 And those

fiduciaries certainly cannot “use their position of trust and confidence” to withhold

from stockholders material information “to further their private interests.”842

“Officers may breach their fiduciary duties to the extent they are involved in

preparing a proxy statement that contains materially misleading disclosures or

omissions.”843 This requires that the Court conduct an officer-by-officer analysis.844

841
Haley, 235 A.3d at 718 (alteration, internal quotation marks, and footnote omitted)
(quoting McMillan, 559 A.2d at 1283).
842
Id. (alteration, internal quotation marks, and footnote omitted) (quoting Guth, 5 A.2d at
510); accord Macmillan, 559 A.2d at 1283.
843
Roche, 2020 WL 7023896, at *18 (citing Hansen, 2018 WL 3025525, at *11 (holding
that a complaint stated a claim against an officer for violation of the fiduciary duty of
disclosure and noting that directors and officers of a corporation generally owe the same
fiduciary duties)); see also Baker Hughes, 2020 WL 6281427, at *15–16; Morrison I, 2019
WL 7369431, at *25, *27.
844
See Roche, 2020 WL 7023896, at *18; Baker Hughes, 2020 WL 6281427, at *15–16.

193
 As explained, Plaintiff has pled the Board delegated preparation of the Proxy

to the conflicted Officer Defendants. Plaintiff contends the Officer Defendants are

collectively responsible for the allegedly false and misleading Proxy. Plaintiff’s

disclosure claim therefore involves a two-step analysis. The first step considers

which Officer Defendants were involved in preparing the Proxy. The second

addresses whether the Proxy is materially misleading.845

a. The Complaint Pleads Only That
Garland Was Involved In Preparing
And Disseminating The Proxy.

I turn first to the issue of whether the Officer Defendants were involved in

preparing the Proxy and whether group pleading is sufficient to state a claim against

all Officer Defendants. This Court recently addressed allegations that the

companies’ officers were responsible for disclosure deficiencies in City of Warren

General Employees’ Retirement System v. Roche846 and In re Baker Hughes Inc.

Merger Litigation.847 In both cases, the Court held that a plaintiff fails to plead a

claim against an officer based on disclosure deficiencies where “the Complaint is

devoid of any allegations that [the officer] had any role in drafting or disseminating

845
See Roche, 2020 WL 7023896, at *18–19 (noting, in the event the Proxy is misleading
and Defendants’ disclosure is insufficient, the resulting transaction may still be cleansed if
ratified by a shareholder vote under Corwin).
846
2020 WL 7023896, at *18–19 (Del. Ch. Nov. 30, 2020).
847
2020 WL 6281427, at *15–16 (Del. Ch. Oct. 27, 2020).

194
the Proxy.”848 The Court concluded the plaintiffs failed to state a claim against

certain officer defendants where (1) the complaint’s allegations did not specifically

allege that certain officers were involved in preparing the proxy, and (2) it was not

reasonably inferable from the Complaint or the Proxy that they were involved

because those officers did not sign the Proxy.849

Here, the Complaint sufficiently alleges that Garland was involved in

preparing and disseminating the Proxy. Garland was the Company’s CEO

throughout the sales process and “an integral figure” during merger negotiations.850

The Board resolutions approving the issuance of the Proxy authorized the

Company’s officers to prepare and issue the Proxy and, most significantly, Garland

signed the Proxy.851 It is reasonable to infer that Garland was involved in preparing

the disclosures in the Proxy in his capacity as an officer of the Company. 852 Count

II survives as to Garland.

848
Roche, 2020 WL 7023896, at *19 (quoting Baker Hughes, 2020 WL 6281427, at *16).
849
Id.; Baker Hughes, 2020 WL 6281427, at *16.
850
Roche, 2020 WL 7023896, at *19.
851
Id.; see Baker Hughes, 2020 WL 6281427, at *15–16 (holding that a CEO could be
liable for breach of the duty of care for a deficient proxy where the CEO was involved in
the negotiation of the merger and signed the proxy); Hansen, 2018 WL 3025525, at *11
(“Vance affixed his signature to the Proxy in his capacity as President and CEO and
presented the information to the stockholders for their consideration. This means he may
be liable for material misstatements in the Proxy in his capacity as an officer [and] as a
director.”).
852
See Roche, 2020 WL 7023896, at *19; Baker Hughes, 2020 WL 6281427, at *16.

195
 The same cannot be said for Armistead, Elkort, Lyon, and Pedersen. Although

the Board resolution delegated disclosure authority to the Officer Defendants

generally, the Complaint contains no specific allegations that Armistead, Elkort,

Lyon, or Pedersen were involved, and there is no indication from the Proxy itself

that they were, as only Garland signed off on the disclosures. Plaintiff’s case against

Armistead, Elkort, Lyon, and Pederson “boils down to the unsubstantiated assertion”

that they would have reviewed and authorized dissemination of the Proxy simply

because they were Company officers.853 This is “insufficient” to plead that

Armistead, Elkort, Lyon, and Pederson “acted with scienter or were grossly

negligent in connection with the failure” to prepare and file a materially complete

and accurate Proxy.854 Count II of the Complaint fails to state a claim for relief

against them.855

b. Plaintiff Has Alleged That Garland
Prepared And Disseminated A False
And Misleading Proxy.

I turn next to whether the Proxy was materially misleading. Plaintiff contends

that Garland breached his duty of disclosure, and consequently his duties of care and

loyalty, in preparing and disseminating a false and misleading Proxy. In a request

853
Baker Hughes, 2020 WL 6281427, at *16.
854
Id.
855
See id.

196
for stockholder action, directors are under a duty to disclose fully and fairly all

material facts within their control bearing on the request.856 The duty of disclosure

is not an independent duty, but derives from the duties of care and loyalty.857 To

state a claim for breach of the duty of loyalty, the Complaint must include well-pled

allegations supporting a reasonable inference that Garland acted in bad faith or to

further his own self-interest in disseminating the allegedly misleading Proxy.858 To

state a claim for breach of the duty of care, the Complaint must allege Garland was

grossly negligent in preparing and filing the Proxy.859 “Because fiduciaries must

take risks and make difficult decisions about what is material to disclose, they are

exposed to liability for breach of fiduciary duty only if their breach of the duty of

care is extreme.”860

Corporate fiduciaries can breach their duty of disclosure “by making a

materially false statement, by omitting a material fact, or by making a partial

856
E.g., Stroud v. Milliken Enters., Inc., 552 A.2d 476, 480 (Del. 1989).
857
E.g., Pfeffer v. Redstone, 965 A.2d 676, 684 (Del. 2009).
858
Cf. Roche, 2020 WL 7023896, at *19–20 (“For the reasons addressed above, the only
potential claim against Roche for issuing a materially misleading Proxy sounds in the
fiduciary duty of care because there is no well-pleaded allegation in the Complaint
supporting a reasonable inference that she acted in bad faith or to further her own self-
interest.”).
859
See id.
Morrison I, 2019 WL 7369431, at *25 (alteration omitted) (quoting Metro Commc’n
860

Corp. BVI v. Advanced Mobilecomm Techs. Inc., 854 A.2d 121, 157 (Del. Ch. 2004)).

197
disclosure that is materially misleading.”861 “An omitted fact is material if there is

a substantial likelihood that a reasonable shareholder would consider it important in

deciding how to vote,” in that it “would have been viewed by the reasonable investor

as having significantly altered the ‘total mix’ of information made available.”862

“[T]his materiality test does not require proof of a substantial likelihood that

disclosure of the omitted fact would have caused the reasonable investor to change

his vote.”863 Rather, a proxy must contain “information that a reasonable stockholder

would generally want to know in making [his or her voting] decision.”864 “The issue

of materiality of an alleged misstatement or omission in a prospectus is a mixed

question of law and fact, but predominantly a question of fact. Nevertheless,

conclusory allegations need not be treated as true, nor should inferences be drawn

unless they truly are reasonable.”865

861
Pfeffer, 965 A.2d at 684 (quoting O’Reilly v. Transworld Healthcare, Inc., 745 A.2d
902, 916 (Del. Ch. 1999)).
862
Rosenblatt, 493 A.2d at 944 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438,
449 (1976)).
863
Morrison v. Berry (Morrison II), 191 A.3d 268, 283 (Del. 2018) (internal quotation
marks omitted) (quoting Rosenblatt, 493 A.2d at 944).
864
Id. at 287.
865
Pfeffer, 965 A.2d at 685 (internal quotation marks omitted) (quoting Branson v. Exide
Elecs. Corp., 645 A.2d 568 (Del. 1994) (TABLE), and also quoting Feldman v. Cutaia,
951 A.2d 727, 731 (Del. 2008)).

198
 Plaintiff identifies ten categories of materially false and statements in the

Proxy.866 Plaintiff has adequately alleged that the Proxy was false or misleading

with respect to many of them, based on fair characterizations of the disclosures and

materials produced pursuant to Section 220.867 Because the claim against Garland

survives if any one of Plaintiff’s identified deficiencies is sufficiently pled, I address

only a handful of the Proxy’s allegedly misleading disclosures.868

First, Plaintiff has adequately alleged that the Proxy did not disclose all

material information about Goldman’s compensation and conflicts. “Because of the

central role played by investment banks in the evaluation, exploration, selection, and

implementation of strategic alternatives, this Court has required full disclosure of

investment banker compensation and potential conflicts.”869 Here, the Proxy

disclosed neither Goldman’s compensation nor its conflicts with respect to

866
See D.I. 82 at 43–58.
867
The Individual Defendants argue “[t]here was nothing materially misleading about the
Proxy,” D.I. 85 at 22, and that “[a]ll of Plaintiff’s allegations are based on
mischaracterizations of the 220 Materials.” D.I. 74 at 41; see also D.I. 85 at 24. But, again,
the Individual Defendants cannot rely on those materials “to rewrite an otherwise well-pled
complaint” and overcome the reasonable inferences that can be drawn therefrom. Clovis,
2019 WL 4850188, at *14 n.216.
868
Whether each of the ten categories was in facts inadequately disclosed and material will
be determined through discovery.
869
In re Del Monte Foods Co. S’holders Litig., 25 A.3d 813, 832 (Del. Ch. 2011)
(collecting cases).

199
Riverstone.870 The Individual Defendants do not argue otherwise.871 They instead

claim that no disclosure obligation existed because Goldman’s conflicts were well

known in the market and disclosed to the Special Committee before they retained

Goldman. These arguments miss the mark, as the Company’s stockholders were

entitled to be told all material information when considering the Merger, without

having to extract it from publicly available information.872 And disclosing conflicts

to a disloyal special committee compounds, rather than excuses, the failure to

disclose those conflicts to the electorate.

Second, Plaintiff contends that the Proxy failed to disclose all material

information about the Consent Right, including that the Special Committee and its

advisors confirmed that it did not prevent the Company from acquiring another

company through a reverse triangular merger.873 The Proxy described the Consent

Right and Brookfield’s reluctance to enter into a transaction without Riverstone’s

approval. But

870
See Compl. ¶¶ 267–72.
871
See D.I. 74 at 23–24.
872
See Zalmanoff v. Hardy, 2018 WL 5994762, at *5 (Del. Ch. Nov. 13, 2018), aff’d, 211
A.3d 137 (Del. 2019).
873
Compl. ¶ 254.

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 [o]nce defendants travel down the road of partial disclosure of the
history leading up to the Merger[,] they have an obligation to provide
the stockholders with an accurate, full, and fair characterization of those
historic events. Partial disclosure, in which some material facts are not
disclosed or are presented in an ambiguous, incomplete, or misleading
manner, is not sufficient to meet a fiduciary’s disclosure obligations.874

In my view, Plaintiff has alleged that other material information about the Consent

Right’s overarching importance in the sales process was omitted from the Proxy.

For example, any reasonable stockholder reading the Proxy would not have

understood that a transaction could have been structured to avoid triggering the

Consent Right—and that such a transaction was offered and was more lucrative for

stockholders. The Proxy also fails to disclose that Riverstone and management

badgered the Special Committee and bidders about the Consent Right’s scope to

emphasize Riverstone and Developer 2’s interests. From the sales process alleged

and the Company’s deep and historic ties to Riverstone, it is reasonably conceivable

the stockholders would have considered all information about the Consent Right—

including how it was wielded in the sales process and by whom, potential bidders’

responses to its invocation, and the potential to circumvent it with creative

structuring—to be important in deciding how to vote on the Merger.

874
KCG Hldgs., 2019 WL 2564093, at *11 (alterations, citations, and internal quotation
marks omitted) (quoting Morrison II, 191 A.3d at 283, and then quoting Appel v. Berkman,
180 A.3d 1055, 1064 (Del. 2018)).

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 The Individual Defendants argue that “the terms of the consent right were

public, and any investor that had decided to invest in [Company] stock was well

aware of these terms,” as the Consent Right “had already been disclosed to

[Company] investors, for years, in [the Company]’s public filings.”875 In support,

the Individual Defendants point to three SEC Form 10-Ks.876 But “our law does not

impose a duty on stockholders to rummage through a company’s prior public filings

to obtain information that might be material to a request for stockholder action.”877

And even if those public filings disclose the existence of the Consent Right, the

Consent Right’s importance as implemented in the sales process would not have

been in those filings.878 Here, the Proxy purported to describe the sales process, but

omitted any mention of how the Consent Right loomed over it.

Third, Plaintiff alleges that the Proxy was deficient in that it failed to disclose

that Brookfield proposed to pay stockholders over $6 per share more than Buyer,

and that the Special Committee believed that Brookfield’s proposal was “superior”

875
D.I. 74 at 20–21 (emphasis omitted).
876
Id. at 20 (citing Kirby Decl. Exs. 3–5).
877
Zalmanoff, 2018 WL 5994762, at *5 (citing In re Trans World Airlines, Inc. S’holders
Litig., 1988 WL 111271, at *10 (Del. Ch. Oct. 21, 1988) (Allen, C.) (“Nor can I agree that
if a fact is material, that a failure to disclose it is necessarily cured by reason that it could
be uncovered by an energetic shareholder by reading an SEC filing. Closer to an acceptable
response is the assertion that the number could be derived from appraisal information
contained in the proxy statement.”), abrogated on other grounds by Kahn v. Lynch
Commc’n Sys., Inc., 638 A.2d 1110 (Del. 1994)).
878
See id.; Trans World Airlines, 1988 WL 111271, at *10.

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to all others received, including from Buyer.879 “Delaware law does not require

disclosure of a play-by-play of negotiations leading to a transaction or of potential

offers that a board has determined were not worth pursuing.”880 And a disclosure

claim will not be supported where it “boil[s] down to an argument that plaintiff

disagreed with a Special Committee’s decision not to pursue another acquisition

proposal and that other stockholders should have been informed about the offer in

case they, too, disagreed with the Special Committee.”881 However, the availability

of a superior bid may be material and therefore may be required to be disclosed to

stockholders.882

879
E.g., Compl. ¶ 192; see id. ¶¶ 261–65.
880
Comstock, 2016 WL 4464156, at *15; see also David P. Simonetti Rollover IRA v.
Margolis, 2008 WL 5048692, at *12 (Del. Ch. June 27, 2008) (“In the usual case, where a
board has not received a firm offer or has declined to continue negotiations with a potential
acquirer because it has not received an offer worth pursuing, disclosure is not required.”).
881
In re OM Gp., Inc. S’holders Litig., 2016 WL 5929951, at *14 (Del. Ch. Oct. 12, 2016)
(internal quotation marks omitted) (quoting Comstock, 2016 WL 4464156, at *15).
882
See Xura, 2018 WL 6498677, at *12 (“From the public disclosures provided to Xura
stockholders, it is reasonably conceivable that stockholders lacked the following material
information when they voted to approve the Transaction: . . . (5) Francisco Partners
initially expressed interest in offering a superior bid but somehow learned that Siris was
Xura’s counterparty and then moved its financial support to the buy-side of the Transaction
. . . .” (emphasis added)); cf. Dent v. Ramtron Int’l Corp., 2014 WL 2931180, at *15 (Del.
Ch. June 30, 2014) (“The types of companies that may or may not have made an offer for
Ramtron during the sales process has no bearing on the issue of whether or not to seek
appraisal. Furthermore, there are no allegations that any company made an offer for
Ramtron that was of equal or greater value to the Cypress offer. Dent has failed to allege
adequately how including the details of rejected offers that offered less value for the
Company than the Cypress bid would be material to a Ramtron stockholder in determining
whether or not to seek appraisal. Accordingly, I conclude that this aspect of Dent’s

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 Here, the Proxy omitted material information about Brookfield’s superior

offer. The Individual Defendants argue that Proxy disclosed that in July 2019

Brookfield offered a 20% premium for a transaction that did not include Developer 2

and a 15% premium for a transaction that did include Developer 2, and that this was

sufficient to disclose the value of Brookfield’s offers.883 This argument misses the

mark. Even assuming that information regarding Brookfield’s bid was immaterial,

the Delaware Supreme Court has “recognized that a partial and incomplete

disclosure of arguably immaterial information regarding the history of negotiations

leading to a merger might result in a materially misleading disclosure if not

supplemented with information that would allow the stockholders to draw the

complete picture.”884 The Proxy’s disclosure does not state the monetary value of

the July offer, and most importantly, it does not disclose or suggest that Brookfield

offered even more value in August, September, and October 2019.885 Without more,

the reasonable stockholder would be left to believe that Brookfield’s bid remained

stagnant, when, in fact, it increased in value and became noticeably superior to other

bids.

disclosure claim also fails to state a claim upon which relief can be granted.” (emphasis
added)).
883
See D.I. 74, App. A at 2.
884
OM Gp., 2016 WL 5929951, at *12 (citing Arnold v. Soc’y for Sav. Bancorp, Inc., 650
A.2d 1270, 1281 (Del. 1994)).
885
See Compl. ¶¶ 164–67, 173–79, 192–200.

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 The Proxy also fails to disclose that the Special Committee itself believed, as

confirmed by Evercore’s valuation analysis, that Brookfield’s offer was more

valuable than Buyer’s.886 The Individual Defendants reject this position and the

Complaint’s allegations, arguing that the Special Committee merely believed that

Brookfield’s proposal “could” be superior and that in any event Brookfield never

submitted a “definitive, all-cash offer and proposed merger agreement.”887 The

documents incorporated and integral to the Complaint show that the Special

Committee and its advisors clearly told Brookfield that its offer was superior; and

the October 31, 2019 Board presentation shows that the Special Committee’s

advisors told the Board that Brookfield’s offer was worth vastly more to

stockholders than Buyer’s offer.888 This information should have been disclosed to

Company stockholders.889

Further, the fact that Brookfield did not submit a definitive offer does not

excuse disclosure of Brookfield’s final terms in view of the Complaint’s allegations

and the Proxy’s overall disclosures about the sales process. Brookfield eagerly

pursued the Company, even if that meant ceding to Riverstone’s demands, until the

886
See id. ¶¶ 192–200.
887
D.I. 74 at 22.
888
See Compl. ¶¶ 192–200.
889
Cf. In re Cogent, Inc. S’holder Litig., 7 A.3d 487, 511–12 (Del. Ch. 2010) (suggesting
that a board should disclose its basis for rejecting a competitive bid and pursuing an
allegedly inferior offer).

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Special Committee imposed an unreasonable deadline. As alleged, it is reasonable

to infer that Brookfield considered its late October 2019 offer as implying some

commitment to a deal within thirty days, contingent on Riverstone’s satisfaction in

negotiations; Brookfield walked away and took its premium bid with it because the

Special Committee ran out the clock.890 It is reasonable to infer that the absence of

the terms of Brookfield’s final superior bid and the Board’s recognition of that

superiority rendered the Proxy materially misleading.

Accordingly, Plaintiff has pled that the Proxy was materially misleading and

that Garland, who prepared the Proxy, was aware of its inaccuracies, and has

therefore stated a claim for breach against him. Count II, to the extent it is based on

the false and misleading Proxy, survives as to Garland.

C. Plaintiff Has Stated Third Party Liability Claims.

As explained above, Plaintiff may establish that the Officer Defendants and

Entity Defendants constitute a control group owing fiduciary duties. In the

alternative, Plaintiff has also asserted the Entity Defendants are liable as

890
Cf. Xura, 2018 WL 6498677, at *12 n.122 (“I acknowledge Defendants’ argument that
Plaintiff merely speculates regarding whether Francisco Partners ultimately would have
made a bid for Xura and whether that bid would have been superior to the Siris bid.
Plaintiff’s response—that we will never know where the Francisco Partners’ overture
might have gone—is, likewise, well taken. Indeed, as a wise ‘do-dah man’ once observed,
‘Sometimes your cards ain’t worth a dime if you don’t lay ‘em down.’ . . . In any event,
what is conceivably material about Francisco Partners is not its initial expression of interest
but the fact that it expressed interest, later declined to participate in the Go-Shop and then
mysteriously joined forces with Siris on the buy-side of the Transaction.”).

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nonfiduciary outsiders to the Company, through theories of aiding and abetting

(Count III), conspiracy together with the Officer Defendants and Browne (Count V),

and tortious interference (Count IV). If Plaintiff succeeds in demonstrating a control

group, the aiding and abetting and conspiracy claims against the Controller

Defendants will be dismissed.891

1. Plaintiff’s Claims for Aiding and Abetting and
Civil Conspiracy Are Held In Abeyance Pending
A Determination As To Whether The Controller
Defendants Owe Fiduciary Duties.

For now, it is enough to say that the allegations about the Entity Defendants’

involvement, set forth in my discussion of their potential role as controllers, are

891
See Wallace ex rel. Cencom Cable Income P’rs II, L.P. v. Wood, 752 A.2d 1175, 1184
(Del. Ch. 1999) (“[Aiding and abetting], which on its face assumes the officers, parents
and affiliates to be ‘non-fiduciaries,’ seems inconsistent with plaintiff[’]s primary
argument that each defendant owes fiduciary duties to the [Company stockholders].
Nonetheless, I will not dismiss plaintiff[’]s[] aiding and abetting claim as I may later
decide, after discovery or at trial, that plaintiff[] cannot prove the pleaded requisite control
necessary to establish the existence of a fiduciary relationship between each defendant and
the [Company].”); OptimisCorp v. Waite, 2015 WL 5147038, at *57 (Del. Ch.
Aug. 26, 2015) (“In those instances where a fiduciary takes actions that would amount to
aiding and abetting by a non-fiduciary, that conduct amounts to a direct breach of fiduciary
duties.”), aff’d, 137 A.3d 970 (Del. 2016); Albert v. Alex. Brown Mgmt. Servs., Inc., 2005
WL 2130607, at *11 (Del. Ch. Aug. 26, 2005) (“[C]ivil conspiracy is vicarious liability. It
holds a third party, not a fiduciary, responsible for a violation of fiduciary duty. Therefore,
it does not apply to the defendants which owe the [stock]holders a direct fiduciary duty.”);
accord OptimisCorp, 2015 WL 5147038, at *57 (“[I]t is highly doubtful that a conspiracy
of fiduciaries is a legally cognizable cause of action.”).

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sufficient to plead knowing participation892 and substantial assistance893 for purposes

of aiding and abetting.894 While the Entity Defendants had the right to work in their

own interests by leveraging the Consent Right,895 that right ends at the point the party

“attempts to create or exploit conflicts of interest in the board.”896 Plaintiff has

892
See RBC, 129 A.3d at 861–62 (“Knowing participation in a board’s fiduciary breach
requires that the third party act with the knowledge that the conduct advocated or assisted
constitutes such a breach.” (alterations and internal quotation marks omitted) (quoting
Malpiede, 780 A.2d at 1097)); Agspring Holdco, LLC v. NGP X US Hldgs., L.P., 2020 WL
4355555, at *20 (Del. Ch. July 30, 2020) (“[A]ll that is required to show that a defendant
knew something are sufficient well-pleaded facts from which it can reasonably be inferred
that this something was knowable and that the defendant was in a position to know it.”
(quoting Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL
6703980, at *20 (Del. Ch. Nov. 26, 2014)).
893
See In re Oracle Corp. Deriv. Litig., 2020 WL 3410745, at *11 (Del. Ch. June 22, 2020)
(noting “the secondary actor must have provided assistance or participation in aid of the
primary actor’s allegedly unlawful acts” and that assistance must be substantial (alterations
and internal quotation marks omitted) (quoting Restatement (Second) of Torts § 876 cmt. d
(1979))).
894
This is necessarily a fact-intensive inquiry, making claims for aiding and abetting “ill-
suited for disposition on the pleadings.” Clark v. Davenport, 2019 WL 3230928, at *15
(Del. Ch. July 18, 2019) (internal quotation marks omitted) (quoting In re Good Tech.
Corp. S’holder Litig., 2017 WL 2537347, at *2 (Del. Ch. May 12, 2017) (ORDER));
accord Oracle, 2020 WL 3410745, at *11.
895
See Morrison v. Berry (Morrison III), 2020 WL 2843514, at *11 (Del. Ch.
June 1, 2020); Morgan v. Cash, 2010 WL 2803746, at *7–8 (Del. Ch. July 16, 2010).
896
Morrison III, 2020 WL 2843514, at *11 (quoting RBC, 129 A.3d at 862). The cases the
Entity Defendants invoke to defend arms-length bargaining for their own benefit are
distinguishable. Unlike the alleged aider and abettor in Jacobs v. Meghji, 2020 WL
5951410, at *8 (Del. Ch. Oct. 8, 2020), the Entity Defendants had knowledge about the
Company’s process; the Special Committee’s creation and role; Brookfield’s proposal; and
the dual fiduciary Individual Defendants’ compliance with their fiduciary duties. This case
is also unlike Morrison III, in which the Court dismissed an aiding and abetting claim
against a private equity acquirer, even though it allegedly “act[ed] together with the
[target’s chairman],” who “used silence, falsehoods, and misinformation” to mislead the
board. 2020 WL 2843514, at *11 (internal quotation marks omitted). The Court concluded
it could not “reasonably infer that [the acquirer] knowingly advocated or assisted [the

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alleged facts from which it is reasonable to infer that the Entity Defendants wielded

the Consent Right and bargained with bidders in knowing tandem with the

Company’s dual fiduciaries tilting the Special Committee’s sales process toward

Riverstone’s preferred bidder.

With this conclusion on aiding and abetting, it is not surprising that Plaintiff’s

factual allegations about the Entity Defendants also support a claim for civil

conspiracy, as the claims often rise and fall together.897 Plaintiff’s allegations

support a reasonable inference that the Entity Defendants worked closely with

Browne and the remaining Officer Defendants throughout the sale process for the

purpose of closing an all-cash deal with Buyer that took the Company private,

internalized Developer 2, and left Riverstone and its dual fiduciaries with equity

stakes in the new structure.

chairman’s] deceptive communications,” and therefore dismissed the claim because the
acquirer “had the right to work in its own interests to maximize its value.” Id. But unlike
the acquirer in Morrison III, which was an arm’s-length bargaining party with no alleged
connection to any officer, director, or advisor, the Entity Defendants were tied to and held
power over Company fiduciaries and were alongside or behind the fiduciaries every step
of the way.
897
See Agspring, 2020 WL 4355555, at *21; see also Allied Cap. Corp. v. GC-Sun Hldgs.,
L.P., 910 A.2d 1020, 1039–40 (Del. Ch. 2006). Because Plaintiff has not pled facts
indicating that Armistead or Pedersen breached their duties or committed an unlawful act
in furtherance of the conspiracy, Plaintiff has not stated a claim for civil conspiracy against
them.

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 2. Plaintiff Has Pled Tortious Interference.

Count IV asserts the Entity Defendants tortiously interfered with the

stockholders’ prospective economic advantage in the superior Brookfield offer.898

The parties have not briefed the doctrinal viability of a tortious interference claim if

the Entity Defendants are held to be fiduciaries. For now, assuming the claim would

go forward, allegations underpinning their de facto control support the elements of

tortious interference. The Entity Defendants’ three arguments to the contrary are

unavailing. First, as explained, their right to compete and wield the Consent Right

did not excuse their alleged improper actions. Second, Brookfield was a business

opportunity as it was “prepared to enter into a business relationship but was

dissuaded from doing so.”899

Finally, proximate cause presents the difficult question of whether

Riverstone’s actions throughout the process caused Brookfield to walk away where

898
See Compl. ¶¶ 308–13. To state such a claim, a plaintiff must plead “(a) the reasonable
probability of a business opportunity, (b) the intentional interference by the defendant with
that opportunity, (c) proximate causation, and (d) damages.” Organovo Hldgs., Inc. v.
Dimitrov, 162 A.3d 102, 122 (Del. Ch. 2017) (quoting DeBonaventura v. Nationwide Mut.
Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)); accord Kuroda v. SPJS Hldgs., L.L.C., 971
A.2d 872, 886–87 (Del. Ch. 2009).
899
See Soterion Corp. v. Soteria Mezzanine Corp., 2012 WL 5378251, at *13 (Del. Ch.
Oct. 31, 2012) (quoting Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at *7 (Del. Ch.
Jan. 20, 2009)) (noting the specific parties offering the business opportunity “performed
extensive due diligence,” executed multiple term sheets “outlin[ing] the major terms of the
contemplated transaction[],” and had not “identified any business reasons for not
proceeding with the transaction[]”).

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it would not have but for Riverstone’s conduct.900 The Entity Defendants assert it is

the Company that proximately caused Brookfield to walk away, by declining

exclusivity or by requiring Brookfield to submit its best and final offer within

twenty-four hours, complete with an agreement with Riverstone about

Developer 2.901 “Except in rare cases, the issue of proximate cause is uniquely a fact

issue.”902 Viewing Plaintiff’s pleadings in the light most favorable to her, it is

reasonably conceivable that the Entity Defendants’ challenged actions drove

Brookfield away.

Thus, in a world in which the Entity Defendants are not fiduciaries, Plaintiff

has pled aiding and abetting, conspiracy, and tortious interference. These claims

may still be dismissed if Plaintiff establishes the Entity Defendants are fiduciaries.

900
See id. at *17 (“Delaware recognizes the traditional “but for” definition of proximate
causation. . . . Our understanding of proximate cause evolved from circumstances in which
a tortfeasor caused something to happen that harmed the victim. The harm might have had
more than one possible cause. A supervening cause might be considered the ‘real cause’
if it took over control from yet another cause that might otherwise eventually have resulted
in the same (or similar) harm.”).
901
See D.I. 72 at 50–52.
902
Good Tech., 2017 WL 2537347, at *2 (alteration omitted) (quoting DiOssi v. Maroney,
548 A.2d 1361, 1368 (Del. 1988)); accord Everest Props. II, L.L.C. v. Am. Tax Credit
Props. II, L.P., 2000 WL 145757, at *6–7 (Del. Super. Jan 7, 2000) (noting proximate
cause need not be pled with precision, but rather need only put defendants on notice of the
claims against them).

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 III. CONCLUSION

The Motions are granted and denied in part. The Individual Defendants’

Motion is DENIED as to Counts I and II. The Entity Defendants’ Motion is

DENIED as to Count IV. Counts III, V, VI are held in abeyance. With the exception

of Count VI, all claims are DISMISSED as to Armistead and Pedersen. The parties

shall submit an implementing order within twenty days of this decision.

212