In Re: MultiPlan Corp. Stockholders Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

)
IN RE MULTIPLAN CORP. ) CONSOLIDATED
STOCKHOLDERS LITIGATION ) C.A. No. 2021-0300-LWW
)

OPINION

Date Submitted: September 20, 2021
Date Decided: January 3, 2022

Gregory V. Varallo, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP,
Wilmington, Delaware; Mark Lebovitch, Daniel E. Meyer, Margaret Sanborn-
Lowing, and Joseph W. Caputo, BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP, New York, New York; Counsel for Plaintiffs Kwame Amo and
Anthony Franchi

Raymond J. DiCamillo, Kevin M. Gallagher, and Matthew D. Perri, RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware; Jonathan K. Youngwood and
Rachel S. Sparks Bradley, SIMPSON THACHER & BARTLETT LLP, New York,
New York; Stephen P. Blake, SIMPSON THACHER & BARTLETT LLP, Palo
Alto, California; Counsel for Defendant MultiPlan Corporation f/k/a Churchill
Capital Corp. III

Bradley R. Aronstam and S. Michael Sirkin, ROSS ARONSTAM & MORITZ LLP,
Wilmington, Delaware; John A. Neuwirth, Joshua S. Amsel, Evert J. Christensen,
Jr., Matthew S. Connors, and Nicole E. Prunetti, WEIL, GOTSHAL & MANGES
LLP, New York, New York; Counsel for Defendants Michael Klein, Jay Taragin,
Jeremy Paul Abson, Glenn R. August, Mark Klein, Malcolm S. McDermid, Karen G.
Mills, Michael Eck, M. Klein and Company, LLC, Churchill Sponsor III, LLC, and
The Klein Group, LLC

WILL, Vice Chancellor
 Churchill Capital Corp. III—a special purpose acquisition company, or

SPAC—was formed as a Delaware corporation in October 2019. Lacking operations

of its own, the SPAC’s primary purpose was to seek out and combine with a private

operating company. The SPAC closed its $1.1 billion initial public offering in

February 2020.

The SPAC’s sponsor, led by Michael Klein, was compensated for its

anticipated efforts in the form of “founder” shares constituting 20% of the SPAC’s

equity and purchased for a nominal price. The SPAC’s directors were hand-picked

by Klein and given valuable economic interests in the sponsor.

The SPAC’s initial public stockholders, on the other hand, purchased IPO

units consisting of one common share and a fractional warrant for $10 per unit. The

IPO proceeds were placed into a trust account. The SPAC was structured around

giving public stockholders the choice between redeeming their $10 investment from

the trust and investing in the post-combination entity after an acquisition target was

identified.

If the SPAC entered into a business combination within its two-year

completion window, the founder shares would convert into common shares upon

closing. But if no transaction was completed, the SPAC would liquidate—leaving

the founder shares worthless. Public stockholders, on the other hand, would receive

back the full value of their investment with interest.

1
 The SPAC’s sponsor team selected MultiPlan, Inc. as its target. The SPAC

issued a proxy statement that solicited stockholder votes on the deal and informed

public stockholders’ redemption decisions. Few stockholders redeemed and the

stockholder vote on the merger was overwhelmingly in favor. The business

combination closed in October 2020 and the SPAC’s non-redeeming stockholders

became stockholders in the combined entity. After closing, these shares declined in

value to several dollars below the $10 plus interest the public stockholders could

have received had they chosen to redeem. By contrast, the founder shares, which

converted into shares of the post-merger entity, were pure upside to the SPAC’s

insiders.

The plaintiffs allege that the SPAC’s fiduciaries—motivated by financial

incentives not shared with public stockholders—impaired the public stockholders’

right to divest their shares before the business combination occurred. According to

the Complaint, material information indicating that MultiPlan’s largest customer

was building an in-house platform to compete with MultiPlan was withheld. The

defendants have moved to dismiss the plaintiffs’ claims on several grounds—

primarily, that the plaintiffs have alleged derivative claims but failed to plead

demand futility and that the business judgment rule applies.

Many of the parties’ arguments center around the unique characteristics of a

SPAC. Though SPACs are a popular vehicle for private companies to access the

2
public markets, Delaware courts have not previously had an opportunity to consider

the application of our law in the SPAC context. In this decision, well-worn fiduciary

principles are applied to the plaintiffs’ claims despite the novel issues presented.

Doing so leads to several conclusions.

The plaintiffs have pleaded direct claims that center around the purported

impairment of their redemption rights. The entire fairness standard of review applies

due to inherent conflicts between the SPAC’s fiduciaries and public stockholders in

the context of a value-decreasing transaction. And the plaintiffs have pleaded viable,

non-exculpated claims against the SPAC’s controlling stockholder and directors.

It bears emphasizing that my conclusions stem from the fact that a reasonably

conceivable impairment of public stockholders’ redemption rights—in the form of

materially misleading disclosures—has been pleaded in this case. Many of the

features that I consider in this opinion are common to SPACs, although some entities

have more bespoke structures intended to address conflicts. The mismatched

incentives relevant here were known to public stockholders who chose to invest in

the SPAC. But those stockholders were allegedly robbed of their right to make a

fully informed decision about whether to redeem their shares. Accordingly, and for

the reasons discussed below, the defendants’ motions to dismiss are denied except

as to two named defendants.

3
I. BACKGROUND

The following facts are drawn from the Verified Class Action Complaint for

Breach of Fiduciary Duties (the “Complaint”) and the documents it incorporates by

reference.1 Any additional facts discussed in this Opinion are subject to judicial

notice.2

A. Churchill’s Formation

Defendant Churchill Capital Corp. III (“Churchill” or the “Company”) was

formed in October 2019 to serve as a special purpose acquisition company.3 A

SPAC—also called a blank check company—is a publicly traded company that

raises capital through an initial public offering to realize a single goal: merge with a

1
Verified Class Action Compl. for Breach of Fiduciary Duties (“Compl.”) (Dkt. 1). See
Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013) (“[A] plaintiff may not
reference certain documents outside the complaint and at the same time prevent the court
from considering those documents’ actual terms.” (quoting Fletcher Int’l, Ltd. v. ION
Geophysical Corp., 2011 WL 1167088, at *3 n.17 (Del. Ch. Mar. 29, 2011))); Freedman v.
Adams, 2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff expressly
refers to and heavily relies upon documents in her complaint, these documents are
considered to be incorporated by reference into the complaint . . . .”), aff’d, 58 A.3d 414
(Del. 2013).
2
See, e.g., In re Books–A–Million, Inc. S’holders Litig., 2016 WL 5874974, at *1, *8 (Del.
Ch. Oct. 10, 2016) (explaining that the court may take judicial notice of “facts that are not
subject to reasonable dispute”); Omnicare, Inc. v. NCS Healthcare, Inc., 809 A.2d 1163,
1167 n.3 (Del. Ch. 2002) (“The court may take judicial notice of facts publicly available
in filings with the SEC.”); McMillan v. Intercargo Corp., 768 A.2d 492, 501 n.40 (Del.
Ch. 2000) (“The court may take judicial notice of a[] . . . charter provision in resolving a
motion addressed to the pleadings.”).
3
Compl. ¶ 20. Churchill was later renamed MultiPlan Corporation and is listed as a
defendant under that name. See infra note 43 and accompanying text.

4
private company and take it public.4 Unlike most companies that go public, a SPAC

has no operations and its assets are effectively limited to its IPO proceeds.5

SPACs are often formed and controlled by an individual or management

group, referred to as the SPAC’s “sponsor.” The sponsor’s primary job is to identify

a target for a “de-SPAC” merger. Churchill was no different. Defendant Michael

Klein, a former chairman of Citigroup’s institutional clients group, incorporated

Churchill as a Delaware corporation through defendant Churchill Sponsor III, LLC

(the “Sponsor”).6 The Sponsor’s managing member is M. Klein Associates, Inc.,

whose sole stockholder is Klein.7

Churchill, Klein’s third SPAC (of at least seven), was formed in the midst of

a SPAC boom.8 In 2013, ten SPACs went public, raising a total of $1.4 billion. By

2019, SPAC IPOs numbered 59, with $13.6 billion raised. Those figures more than

4
The transaction that this opinion refers to as a “merger” is technically a series of business
combinations between SPAC merger subsidiaries and the target that result in the operating
company becoming a subsidiary of the SPAC.
5
For academic discussions of SPACs, including their features, mechanics, and historical
trends, see Michael Klausner, Michael Ohlrogge, & Emily Ruan, A Sober Look at SPACs
(European Corp. Governance Inst., Working Paper No. 746, 2021),
http://ssrn.com/abstract_id=3720919, and Usha Rodrigues & Michael Stegemoller,
SPACs: Insider IPOs (U. Ga. Sch. L., Research Paper 2021-09, 2021),
https://papers.ssrn.com/sol3/pap-ers.cfm?abstract_id=3906196.
6
Compl. ¶¶ 21, 54.
7
Id. ¶ 30; Churchill Cap. Corp. III, Definitive Proxy Statement (Schedule 14A), at 248
(Sept. 18, 2020) (“Proxy”).
8
Compl. ¶ 53.

5
quadrupled and sextupled, respectively, in 2020, when 248 SPAC IPOs raised a total

of $83.4 billion.9

B. Churchill’s IPO
Churchill went public in a $1.1 billion IPO on February 19, 2020. 10 Its

prospectus explained that Churchill was a “newly incorporated blank check

company formed as a Delaware corporation for the purpose of effecting a merger,

share exchange, asset acquisition, share purchase, reorganization or similar business

combination with one or more businesses.”11

Churchill sold 110,000,000 units at $10 per unit in its IPO. 12 Each unit

consisted of one share of Churchill Class A common stock and a quarter of a warrant

with an exercise price of $11.50.13 Both the unit price and composition were market

standard. Public investors who purchased units in the IPO could trade their shares

and warrants separately on the New York Stock Exchange after a set time.14

Churchill’s Class A shares composed 80% of Churchill’s outstanding stock.

Class B founder shares, purchased by the Sponsor for an upfront capital contribution

9
Id. ¶ 40.
10
Id. ¶ 56.
11
Churchill Cap. Corp. III, Prospectus (Form 424B2), at 2 (Feb. 13, 2020) (“Prospectus”).
12
Compl. ¶ 56.
13
Id.; Prospectus at 11.
14
Prospectus at 10.

6
of $25,000, made up the remaining 20%.15 That 20% stake—a so-called

“promote”—was the Sponsor’s chosen form of compensation. The founder shares

would convert into Class A shares at a one-to-one ratio (subject to adjustments) if

Churchill succeeded in consummating an initial business combination.16

The Sponsor was also compensated through an option to purchase warrants in

the SPAC. Churchill made a private placement of 23 million warrants to the Sponsor

at $1 each (the “Private Placement Warrants”).17 Like the warrants associated with

the IPO units, the Private Placement Warrants had an exercise price of $11.50.18

Churchill’s “completion window” for a business combination ended 24

months after the IPO—also market standard.19 If no transaction was completed by

then, Churchill would return the IPO proceeds plus interest to its stockholders, cease

operations, and wind up.20 In this scenario, both the Class B shares and Private

Placement Warrants would expire worthless.21

15
Compl. ¶ 56.
16
Prospectus at 15-16.
17
Compl. ¶ 56.
18
Prospectus at 16.
19
Compl. ¶¶ 43, 57. The completion window would extend to 27 months if Churchill
“executed a letter of intent, agreement in principle or definitive agreement for an initial
business combination within 24 months from the closing of this offering.” Prospectus
at 1.
20
Prospectus at 25.
21
Compl. ¶ 57; see Prospectus at 14-16.

7
 C. Churchill’s Directors and Officers

Klein, through his control of the Sponsor, had the exclusive power to appoint

Churchill’s board of directors (the “Board”).22 Klein initially appointed himself,

along with defendants Jeremy Paul Abson, Glenn R. August, Mark Klein, Malcom

S. McDermid, and Karen G. Mills, to the Board. He later added defendant Michael

Eck and non-party Bonnie Jonas.23 Klein served as Churchill’s Chief Executive

Officer and Chairman.24 Defendant Jay Taragin served as Churchill’s Chief

Financial Officer.25

The Board members (other than Klein’s brother Mark Klein) were

compensated with membership interests in the Sponsor, indirectly receiving

economic interests in the founder shares and Private Placement Warrants without

diluting Klein’s control of Churchill.26 Abson, Eck, and Mills each held interests

equivalent to 294,985 founder shares.27 McDermid and August held interests worth

22
Compl. ¶¶ 58-59.
23
Id. ¶ 59.
24
Id. ¶ 21.
25
Id. ¶ 22.
26
Id. ¶¶ 30, 58-60, 80.
27
Id. ¶ 60; Proxy at 248. Abson held his interest in the Sponsor indirectly through TBG
AG, an investment company. Proxy at 147, 248.

8
786,672 and 3,933,137 shares, respectively.28 Klein’s interest amounted to

20,710,281 founder shares.29

The directors and Taragin allegedly had prior connections to Klein. Taragin

is the Chief Financial Officer of M. Klein & Company, LLC (“M. Klein & Co.”), a

global advisory firm whose managing partner is Klein.30 Mark Klein and Eck are

the managing member and a managing director of M. Klein & Co., respectively, and

Mark Klein is its majority partner.31 Abson, August, Mark Klein, McDermid, and

Mills served on the board of Churchill Capital Corp. II, another SPAC founded by

Klein. McDermid and Mills also served on the board of the original Churchill

Capital Corp., and all but Abson have served on the boards of multiple other SPACs

that Klein launched after Churchill.32

D. The Trust

Following its IPO, Churchill began its search for an acquisition opportunity.

The $1.1 billion raised in the IPO was held in a trust account throughout that process,

as is typical for a SPAC. The funds in that trust account were unavailable to

28
Compl. ¶ 60; Proxy at 248. McDermid held his interest in the Sponsor indirectly through
Emerson Collective. Proxy at 148, 248.
29
Compl. ¶ 60.
30
Id. ¶¶ 22, 29.
31
Id. ¶¶ 25, 28.
32
Id. ¶ 60.

9
Churchill “[u]nless and until [Churchill] complete[d] [an] initial business

combination.”33 Money could leave the trust account in one of three ways.

First, if Churchill failed to consummate a merger within the completion

window, the company would liquidate and the funds in the trust would be returned.

Each Class A stockholder would receive their pro rata share of the “aggregate

amount then on deposit in the trust account, including interest.”34

Second, if Churchill identified a target and proposed a business combination

within the completion window, each Class A stockholder could choose to exercise a

“redemption right.” This redemption right is a unique feature of a SPAC. After a

potential merger is disclosed but before the stockholder vote, Class A stockholders

have an option to redeem their stock for the $10 IPO price plus any interest that

accumulated in the trust.35 Class A stockholders could redeem their shares

regardless of whether they voted for or against the merger while retaining the

warrants that were included in the IPO units at no cost. Churchill’s certificate of

incorporation established the redemption right: “[p]rior to the consummation of the

33
Prospectus at 17; see Proxy at 4; Compl. ¶ 57.
34
Prospectus 26. This 100% redemption of the public shares would be net of certain
permitted withdrawals, such as capped fees to pay dissolution expenses and interest
disbursements to pay tax liabilities. Id. References to “public stockholders” or “Class A
stockholders” throughout the opinion those stockholders that had the opportunity to redeem
their shares once Churchill proposed a merger.
35
Compl. ¶ 44; see Proxy at 29.

10
initial Business Combination, [Churchill] shall provide all holders of Offering

Shares with the opportunity to have their Offering Shares redeemed upon the

consummation of the initial Business Combination.”36

Finally, any funds left in the trust after stockholders were given the

opportunity to redeem could be used “as consideration to complete [the] initial

business combination” or “as working capital to finance the operations of the target

business.”37

E. The Board Selects MultiPlan

Churchill’s search for an operating target company led it to Polaris Parent

Corp. (“MultiPlan”), the parent company of MultiPlan, Inc.38 MultiPlan is a

healthcare industry-focused data analytics and cost management solutions

provider.39 Negotiations between Churchill and MultiPlan began in the spring of

2020.40

36
Opening Br. in Supp. of Defs. Michael Klein, Jay Taragin, Jeremy Paul Abson, Glenn
R. August, Mark Klein, Malcolm S. McDermid, Karen G. Mills, Michael Eck, M. Klein &
Company, LLC, Churchill Sponsor III, LLC, and The Klein Group, LLC’s Mot. to Dismiss
(“Individual Defs.’ & Klein Entities’ Br.”) (Dkt. 19), Ex. D § 9.2(a) (“Certificate of
Incorporation”).
37
Prospectus at 73-74.
38
See Proxy at 2, 87, 102.
39
Compl. ¶ 8; Proxy at 4.
40
Proxy at 102-07.

11
 When a SPAC identifies its acquisition target, it typically commits its IPO

proceeds along with additional capital raised in a private investment round known

as a “PIPE” (private investment in public equity). On July 12, 2020, the Board

unanimously approved an Agreement and Plan of Merger, contemplating a de-SPAC

merger with MultiPlan.41 The merger agreement called for the payment of aggregate

consideration of cash and stock (valued at $10 per share) worth $5.678 billion to

MultiPlan’s stockholders.42 Following a series of transactions, MultiPlan would

become a wholly owned subsidiary of Churchill and Churchill would rename itself

MultiPlan Corporation (“Public MultiPlan”).43

The same day that the Board approved the merger, Churchill formally retained

defendant The Klein Group LLC as a financial advisor with respect to the merger.44

The Klein Group is a wholly owned subsidiary of defendant M. Klein & Co.45 It

received $30.5 million for its advisory services.46

41
Compl. ¶ 63; Proxy at 107.
42
Proxy at 4, 88. Technically, the stockholders that were compensated were those of
Polaris Investment Holdings, L.P., which sat above MultiPlan. See id. at 4, 87-88.
43
See Compl. ¶ 64; Proxy at 101.
44
Compl. ¶ 63.
45
Id. ¶ 31.
46
Id. ¶ 63.

12
 Also on July 12, 2020, Churchill, the Sponsor, and certain other parties

entered into an Investor Rights Agreement.47 Under the Investor Rights Agreement,

the Sponsor’s converted Class A shares would become subject to an 18-month lock-

up period.48 Additionally, the Sponsor, certain Board members, and Taragin entered

into a Sponsor Agreement, under which about 45% of the Sponsor’s converted Class

A shares and roughly 21% of the Private Placement Warrants would “unvest” post-

merger. These shares and warrants would revest if Public MultiPlan’s stock price

exceeded $12.50 for any 40 trading days in a 60-day period between one and five

years after the merger.49

The de-SPAC merger and related financing transactions were announced on

July 13, 2020.50 The merger implied a Public MultiPlan enterprise value of $11

billion.51 After closing and assuming no redemptions, the prior owners of MultiPlan

would own 60.5% of the post-merger entity. Churchill’s public Class A stockholders

would own 16%. The Sponsor and its affiliates (including many of Churchill’s

47
Proxy at 2.
48
Id. at 24. This lock-up period extended another that, as explained in Churchill’s
prospectus, kept the Sponsor from selling any founders shares until either a year had passed
since the initial business combination or the common stock closed at no less than $12 per
share for 20 days over a 30-day trading period. Prospectus at 15.
49
Proxy at 24-25, 100, 238.
50
Compl. ¶ 63; Proxy at 107.
51
Proxy at 104, 115.

13
directors) would—after the Class B shares converted to Class A shares—own

4.2%.52 The remaining 19.2% would be held by PIPE investors who together agreed

to buy shares (and associated warrants) worth $1.3 billion, in addition to taking on

$1.3 billion in convertible debt.53 The PIPE investors included entities related to

Klein, Abson, and August.54 The PIPE financing, when combined with non-

redemption agreements under which the Sponsor and certain insiders waived their

redemption rights, ensured that Churchill could satisfy all closing conditions and the

merger could be completed even if all public stockholders chose to redeem.55

Churchill set the record date for the special meeting to vote on the merger as

September 14, 2020 and issued its definitive proxy statement (the “Proxy”) on

September 18, 2020.56 The affirmative vote of a majority of Churchill’s

stockholders represented at the special meeting was required to approve the merger

(assuming a valid quorum).57

52
Compl. ¶ 65; Proxy at 27.
53
Proxy at 27, 188.
54
Id. at 117; see Compl. ¶ 49.
55
Proxy at 5-6, 11-12, 26-27. This assumed that the PIPE investments would be “funded
in accordance with their terms” and that signees to the non-redemption agreements would
adhere to their terms. Id. at 12.
56
Compl. ¶ 66.
57
Proxy at 13, 128; see supra note 4.

14
 The Proxy listed the “attractive valuation” and “opportunities for growth in

revenues, adjusted EBITDA and free cash flow” as reasons that the Board was

recommending the merger.58 It also described the “extensive due diligence”

conducted by the Board and Churchill management, including communications with

“senior leaders of several large customers of MultiPlan.”59

The Proxy disclosed that MultiPlan was dependent on a single customer—its

largest—for 35% of its revenues.60 It did not disclose that the customer was

UnitedHealth Group Inc. (“UHC”) or that UHC intended to create an in-house data

analytics platform called Naviguard. Naviguard would allegedly both compete with

MultiPlan and cause UHC “to move all of its key accounts from MultiPlan to

Naviguard by the end of 2022.”61 UHC had publicly discussed its plan for Naviguard

by June 2020.62

The Proxy was not accompanied by an independent third-party valuation or

fairness opinion.63 The financial analysis “primarily relied upon” by Churchill and

58
Compl. ¶ 68.
59
Id. ¶ 69.
60
Proxy at 162.
61
Compl. ¶¶ 12, 75.
62
Id. ¶ 85.
63
Id. ¶ 70; Proxy at 110.

15
included in the Proxy was prepared by Churchill management with assistance from

The Klein Group.64

The Proxy explained that “a holder of public shares may demand that

Churchill redeem such shares for cash if the business combination is

consummated.”65 Class A stockholders had to both exercise their redemption right

at least two days before the special meeting and cast a vote on the merger (either for

or against) to receive back their share of the trust.66 The Proxy stated that each share

was valued at approximately $10.04 as of the record date.67

F. The Merger Closes

Churchill stock closed on the record date at $11.09 per share. The implied

value of the Class B shares held by the Sponsor on that date—that is, their value

once converted to Class A common stock—was roughly $305 million. At that price,

Klein’s interests were worth roughly $230 million. The remaining board members

(other than Mark Klein) each held interests in founder shares worth at least $3

64
Proxy at 113-15; see Compl. ¶ 71.
65
Proxy at 29; see id. at 117.
66
Id. at 29.
67
Id.

16
million.68 Fewer than 10% of Churchill’s public investors opted to exercise their

redemption rights.69

On October 7, 2020, Churchill stockholders overwhelmingly voted to approve

the business combination.70 Churchill completed the merger on October 8, 2020.71

On November 11, 2020, an equity research firm published a report about

MultiPlan discussing, among other things, UHC’s formation of Naviguard.72 Public

MultiPlan’s stock fell to a then-closing low of $6.27 the following day.73 Public

MultiPlan stock also closed at $6.27 per share on April 8, 2021—the day before the

Complaint was filed.74

G. This Litigation

Plaintiffs Kwame Amo and Anthony Franchi have held shares of Churchill

(now Public MultiPlan) stock since before the record date for the de-SPAC merger.75

Amo filed a putative class action complaint against the defendants on March 25,

68
Compl. ¶ 67. These figures do not account for the effect of the Investor Rights
Agreement and Sponsor Agreement on the valuation.
69
Id. ¶ 14.
70
Id. ¶ 73. Roughly 93% of the present shares voted in favor of the transaction. MultiPlan
Corp., Current Report (Form 8-K), at 27 (Oct. 8, 2020). About 7% of shares voted against
it. Id.
71
Compl. ¶ 20.
72
Id. ¶ 75.
73
Id. ¶ 76.
74
Id.
75
Id. ¶ 19; C.A. 2021-0268-MTZ, Dkt. 1, ¶ 19.

17
2021 and Franchi on April 9, 2021.76 The cases were consolidated on April 14,

2021.77

The consolidated Complaint advances four counts. Counts I, II, and III are

direct claims for breach of fiduciary duty against certain Churchill directors, officers,

and its controlling stockholder, respectively.78 The plaintiffs allege that the

defendants, putting their own interests above Churchill Class A stockholders’

interests, issued a false and misleading proxy that impaired Class A stockholders’

informed exercise of their redemption and voting rights.79 Count IV is an aiding and

abetting claim against The Klein Group.80

The defendants moved to dismiss the Complaint on May 3, 2021. 81 Briefing

on the motions was completed on September 10, 2021.82 I heard oral argument on

the motions on September 20, 2021.83

76
Dkt. 1; C.A. 2021-0268-MTZ, Dkt. 1.
77
C.A. 2021-0268-MTZ, Dkt. 15.
78
Compl. ¶¶ 99-123.
79
Id. ¶¶ 102-05, 109-11, 118-20.
80
Id. ¶¶ 124-30.
81
Dkts. 12, 13.
82
See Dkt. 30.
83
Dkts. 42, 43.

18
II. LEGAL ANALYSIS

The defendants have moved to dismiss the Complaint under Court of

Chancery Rule 23.1 for failure to plead demand futility and under Court of Chancery

Rule 12(b)(6) for failure to state a claim upon which relief can be granted. When

considering a motion to dismiss pursuant to Rule 12(b)(6):

(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 of
proof.”84

These “pleading standards for purposes of a Rule 12(b)(6) motion ‘are minimal,’”

and the operative test is “one of ‘reasonable conceivability,’” which asks “whether

there is a ‘possibility’ of recovery.”85

The Rule 12(b)(6) pleading standard necessarily informs my analysis of the

plaintiffs’ claims. Many of the defendants’ arguments would require the court to

weigh evidence or draw inferences in the defendants’ favor. But I can do neither on

84
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (quoting Kofron v. Amoco
Chems. Corp., 441 A.2d 226, 227 (Del. 1982)).
85
In re China Agritech, Inc. S’holder Deriv. Litig., 2013 WL 2181514, at *23-24 (Del. Ch.
May 21, 2013) (quoting Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27
A.3d 531, 536-37 (Del. 2011)).

19
a motion to dismiss.86 Rather than belabor these principles throughout this decision,

it should be understood that the plaintiffs’ well-pleaded factual allegations are

credited in full and that the plaintiffs are receiving the benefit of all reasonable

inferences.

The plaintiff-friendly pleading standard also bears upon my understanding of

the plaintiffs’ claims. As a general matter, the parties agree on the applicable

standards of conduct. There is no dispute that Churchill’s directors, officers, and

controlling stockholder owed fiduciary duties of care and loyalty to stockholders.

“[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.”87 The duty

of disclosure is an “application of the fiduciary duties of care and loyalty” implicated

when fiduciaries communicate with stockholders.88 “[W]here there is reason to

86
See Savor, 812 A.2d at 896 (noting that all inferences must be drawn in favor of the non-
moving party); Voigt v. Metcalf, 2020 WL 614999, at *9 (Del. Ch. Feb. 10, 2020) (“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.”).
87
Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993).
88
Dohmen v. Goodman, 234 A.3d 1161, 1168 (Del. 2020); see Stroud v. Grace, 606
A.2d 75, 84 (Del. 1992) (stating that “directors of Delaware corporations are under a
fiduciary duty to disclose fully and fairly all material information within the board’s control
when it seeks shareholder action”).

20
believe that the board lacked good faith in approving a disclosure, the violation

implicates the duty of loyalty.”89

But the parties disagree about whether those standards of conduct, as applied

to the plaintiffs’ allegations, give rise to severable claims or a holistic claim for

breach of fiduciary duty. The Complaint alleges that the defendants breached their

fiduciary duties by prioritizing their personal interests above the interests of Class A

stockholders in pursuing the merger and by issuing a false and misleading proxy,

harming stockholders who could not exercise their redemption rights on an informed

basis.90 The defendants aver that the plaintiffs’ fiduciary duty claims should be

viewed in four segments as (1) an overpayment claim, (2) a waste claim, (3) a

redemption-related disclosure claim, and (4) a voting-related disclosure claim. They

argue that the first two are subject to dismissal because they are derivative (or have

been “abandoned” by the plaintiffs), leaving only narrow disclosure claims for

adjudication.91 The plaintiffs reject that characterization of their claims, asserting

that the structure of the SPAC creates conflicts between the Sponsor and public

89
Pfeffer v. Redstone, 965 A.2d 676, 690 (Del. 2009) (quoting In re Tyson Foods, Inc., 919
A.2d 563, 597-98 (Del. Ch. 2007)).
90
See Compl. ¶¶ 102-05, 109-11, 118-20.
91
See Reply Br. in Supp. of MultiPlan Corporation’s Mot. to Dismiss the Verified Class
Action Compl. 3-6 (Dkt. 30).

21
stockholders and gives rise to a duty of loyalty claim that is inextricably intertwined

with their allegations about false and misleading disclosures.92

The parties’ diverging views about the fundamental nature of the plaintiffs’

claims are undoubtedly driven by the distinctive features of a SPAC. But the Rule

12(b)(6) standard that I must apply and the principles of Delaware law that I consider

while doing so are unchanged. Viewing the Complaint in the light most favorable

to the plaintiffs, the crux of the plaintiffs’ claims is that the defendants’ actions—

principally in the form of misstatements and omissions—impaired Churchill public

stockholders’ their redemption rights to the defendants’ benefit.93 In a value-

decreasing merger, non-redemptions would be valuable to those holding founder

shares. Because the public stockholders were allegedly not fully informed of all

material information about MultiPlan, they exchanged their right to $10.04 per

share—held in a trust for their benefit—for an interest in Public MultiPlan. This

plaintiff-friendly construction of the Complaint underpins my analysis of the breach

92
Pls.’ Omnibus Answering Br. in Opp’n to Defs.’ Mots. to Dismiss the Verified Class
Action Compl. (“Pls.’ Answering Br.”) 42-43 (Dkt. 27); Compl. ¶¶ 100-05, 108-13, 117-
22. The idea that the duty of loyalty is invoked by false and misleading disclosures
informing stockholder action is nothing new. See Pfeffer, 965 A.2d at 690; Jack B. Jacobs,
The Fiduciary Duty of Disclosure after Dabit, 2 J. Bus. & Tech. L. 391, 397 (2007) (“[T]he
fiduciary duty of disclosure, in its formative years, was strongly rooted in the fiduciary
duty of loyalty.” (citing Lawrence A. Hamermesh, Calling Off the Lynch Mob: The
Corporate Director’s Fiduciary Disclosure Duty, 49 Vand. L. Rev. 1087 (1996))).
93
See Compl. ¶¶ 102-05, 109-11, 118-20.

22
of fiduciary duty claims in Counts I through III and the aiding and abetting claim in

Count IV.

This opinion proceeds in three parts. First, I address certain threshold issues:

whether the plaintiffs’ claims are direct or derivative, whether they are governed by

contract, and whether they are “holder” claims. Second, I address the plaintiffs’

breach of fiduciary duty claims, including the standard of review. Finally, I address

the plaintiffs’ aiding and abetting claim.

A. Threshold Issues

The principal grounds for dismissal advanced by the defendants are that the

Complaint pleads derivative claims without alleging demand futility and seeks relief

that is duplicative of claims belonging to the Company. These arguments largely

rest on the premise that the plaintiffs have alleged a core duty of loyalty claim based

on the defendants’ overpayment for MultiPlan that should be viewed as “exclusively

derivative” under the Tooley analysis.94 Even if the claims are found to be direct,

the defendants maintain that dismissal is appropriate because the claims are

governed by contract or are incognizable holder claims. I address each argument in

turn.

94
El Paso Pipeline GP Co. v. Brinckerhoff, 152 A.3d 1248, 1265 (Del. 2016); see In re
J.P. Morgan Chase & Co. S’holder Litig., 906 A.2d 766, 768, 771-72 (Del. 2006).

23
 1. Whether the Claims Are Direct or Derivative

The plaintiffs’ claims are styled as direct claims asserted on behalf of a

putative class of Churchill stockholders. The defendants contend that the plaintiffs’

breach of fiduciary duty claims are quintessentially derivative and subject to

Rule 23.1. Because the plaintiffs did not make a pre-suit demand or allege demand

futility, the defendants argue that the Complaint must be dismissed.95

Resolving this issue requires the application of the test established in Tooley

v. Donaldson, Lufkin & Jenrette, Inc.96 Two questions form that test: “(1) who

suffered the alleged harm (the corporation or the suing stockholders, individually);

and (2) who would receive the benefit of any recovery or other remedy (the

corporation or the stockholders, individually)?”97 Under Tooley, the “[p]laintiffs’

classification of the suit is not binding.”98 The court must “look to all the facts of

the complaint and determine for itself” whether a claim is direct or derivative.99

95
Public MultiPlan’s initial fourteen-member board included only two former Churchill
directors. Proxy at 169-72. The remaining directors were unaffiliated with Churchill. Id.
96
845 A.2d 1031 (Del. 2004).
97
Id. at 1033.
98
Id. at 1035 (quoting Tooley v. Donaldson, Lufkin & Jenrette, Inc., 2003 WL 203060,
at *3 (Del. Ch. Jan. 21, 2003)).
99
Dieterich v. Harrer, 857 A.2d 1017, 1027 (Del. Ch. 2004).

24
 a. Who Suffered the Alleged Harm?

To show a direct injury under Tooley, a plaintiff “must demonstrate that the

duty breached was owed to the stockholder and that he or she can prevail without

showing an injury to the corporation.”100 In other words, “[t]he stockholder’s

claimed direct injury must be independent of any alleged injury to the

corporation.”101 Overpayment claims allege that corporate fiduciaries, in breaching

their duties, caused an exchange of assets or equity at a loss to the corporation.102

They are normally viewed as “exclusively derivative” under the Tooley analysis.103

Any harm to stockholders from an overpayment is indirect in the form of dilution to

the value of their stock.

But this is not a typical overpayment or dilution case. The Complaint centers

around the allegation that the Board impaired the public stockholders’ informed

100
Tooley, 845 A.2d at 1039.
101
Id.; see Brookfield Asset Mgmt., Inc. v. Rosson, 261 A.3d 1251, 1273 (Del. 2021)
(“Tooley’s first prong instead properly focuses on who suffered the alleged harm and
requires that the stockholder demonstrate that he or she has suffered an injury that is not
dependent on an injury to the corporation.”).
102
See In re TerraForm Power, Inc. S’holders Litig., 2020 WL 6375859, at *9 (Del. Ch.
Oct. 30, 2020) (“[C]orporate overpayment is the quintessence of a claim belonging to an
entity: that fiduciaries, acting in a way that breaches their duties, have caused the entity to
exchange assets at a loss.”); see Brookfield Asset Mgmt., 261 A.3d at 1266-67.
103
El Paso Pipeline, 152 A.3d at 1261; see id. at 1265 (explaining that a corporate
overpayment claim concerns a harm to the entity because “the corporation’s funds have
been wrongfully depleted” (quoting Protas v. Cavanagh, 2012 WL 1580969, at *6 (Del.
Ch. May 4, 2012))); see In re J.P. Morgan Chase, 906 A.2d at 768, 771-72.

25
exercise of their redemption right. Could this harm have run to the corporation? No.

Churchill had no such redemption right and the public stockholders’ funds held in

trust did not belong to Churchill until those stockholders opted not to redeem but to

invest in the post-merger combined entity. Therefore, the stockholders suffered a

harm independent of and not shared with Churchill. Assuming the truth of the well-

pleaded allegations in the Complaint and drawing all reasonable inferences in favor

of the plaintiffs, the plaintiffs have brought a direct claim stemming from the

defendants’ interference with a personal right of stockholders.

The parties’ arguments analogize the redemption right to stockholders’ right

to vote. Delaware courts regard “a wrongful impairment by fiduciaries of the

stockholders’ voting power or freedom” as causing “a personal injury to the

stockholders, not the corporate entity.”104 The Complaint asserts that both the

stockholder vote and redemption right—predicate steps to any initial business

104
In re Gaylord Container Corp. S’holders Litig., 747 A.2d 71, 79 (Del. Ch. 1999). In
other contexts, the Court of Chancery has viewed claims to redress conduct infringing upon
stockholders’ personal rights as direct in nature. See, e.g., Trenwich Am. Litig. Tr. v.
Ernst & Young, L.L.P., 906 A.2d 168, 212 (Del. Ch. 2006) (“[O]ur law has treated claims
by stockholders that corporate disclosures in connection with a stockholder vote or tender
were materially misleading as direct claims belonging to the stockholders who were asked
to vote or tender.”); Williams Cos. S’holder Litig., 2021 WL 754593, at *20 (Del. Ch.
Feb. 26, 2021) (finding claims concerning a rights plan that “infringe[d] on the
stockholders’ ability to communicate freely”—a “subsidiary” fundamental right—direct
under Tooley), aff’d, 2021 WL 5112495 (Del. Nov. 3, 2021) (TABLE).

26
combination—were impaired.105 But, given the mechanics of a SPAC, the latter

arguably takes on greater importance to stockholders.106 Redeeming public

stockholders retained the right (indeed, were obligated) to vote on the merger,

decoupling their voting and economic interests in the de-SPAC. They had no

obvious incentive to vote a deal down. The warrants received with Churchill IPO

units, which those stockholders would retain despite redeeming, would be worthless

absent a deal. And, if a deal went through, redeeming stockholders would receive

the value of their redemptions immediately.107

The defendants’ alleged interference with that redemption right—and with the

stockholder vote—took the form of purposefully and materially misleading

disclosures.108 For example, the Complaint states that the Proxy “fail[ed] to mention

105
New York Stock Exchange rules mandate that stockholders be given the option to
redeem if they vote “no” on an initial business combination. See Self-Regulatory
Organizations; New York Stock Exchange LLC, Exchange Act Release No. 81099, 82 Fed.
Reg. 13905 (Mar. 10, 2017). SPACs generally allow stockholders to redeem regardless of
how they vote. See Rodrigues & Stegemoller, supra note 5, at 35.
106
Rodrigues & Stegemoller, supra note 5, at 30-40 (arguing that the decoupling of voting
and economic interests renders SPAC stockholder votes “empty” and “a mere fig leaf”).
107
Prospectus at 26; Proxy at 14. Of course, stockholders could separately sell their
warrants.
108
The fiduciary duty that was allegedly breached was “owed to the stockholder” as
required by Tooley. 845 A.2d at 1039. In general, “the fiduciary relationship requires that
the directors act prudently, loyally, and in good faith to maximize the value of the
corporation over the long-term for the benefit of the providers of presumptively permanent
equity capital, as warranted for an entity with a presumptively perpetual life in which the
residual claimants have locked in their investment.” Frederick Hsu Living Tr. v. ODN
Hldg. Corp., 2017 WL 1437308, at *18 (Del. Ch. Apr. 14, 2017). Fiduciary principles
“do[] not protect special . . . rights.” Id. at *22. The redemption right was not unique,

27
the imminent departure of UHC, MultiPlan’s largest client, which provided 35% of

its revenues in 2019” despite disclosing that Churchill management

“communicate[d] with senior leaders of several large customers” during their

“extensive diligence.”109 Class A stockholders therefore could not make “a fully

informed decision [on] whether to redeem their shares ahead of the [m]erger.”110 As

discussed below, it is reasonable to infer from those allegations that the defendants’

disloyal conduct impaired stockholders’ redemption rights, giving rise to individual

claims.

b. Who Would Receive the Benefit of Any Recovery or
Other Remedy?

To maintain a direct claim, Tooley also requires that stockholders demonstrate

that they will benefit from the remedy sought.111 The plaintiffs seek, among other

things, an award of money damages to the putative class and a return of capital raised

from public stockholders.112 They, rather than the Company, would receive the

benefit of that recovery.

however, it was “a right shared equally with the common stock.” In re Trados Inc. S’holder
Litig., 73 A.3d 17, 39-40 (Del. Ch. Aug. 16, 2013) (“Trados II”).
109
Compl. ¶ 84.
110
Id. ¶ 83.
111
Tooley, 845 A.2d at 1036 (noting that in “individual suits, the recovery or other relief
flows directly to the stockholders, not to the corporation”).
112
Compl., Prayer for Relief ¶¶ G-K.

28
 The defendants argue that the plaintiffs can only recover indirectly through a

remedy to the corporation as a whole. In an overpayment case, the direct harm of

dilution is “merely the unavoidable result” of the central derivative harm: “the

reduction in value of the entire corporate entity, of which each share of equity

represents an equal fraction.”113 “The recovery—‘restoration of the improperly

reduced value’—flows to the corporation.”114 The stockholders would share in any

such recovery through their holdings in Public MultiPlan.115

Here, by contrast, Class A stockholders harmed through the impairment of

their redemption rights personally lost the opportunity to recover $10.04 before the

merger closed and any reduction in enterprise value occurred. Fully informed public

stockholders could have exercised their redemption rights and received $10.04 per

share rather than MultiPlan stock worth less.

The defendants insist that any monetary recovery would accrue to the

Company, rather than to stockholders individually. They cite to In re J.P. Morgan

Chase & Company Shareholder Litigation, where the Court of Chancery explained

that compensatory damages must be “logically and reasonably related to the harm

113
Gentile v. Rossette, 906 A.2d 91, 99 (Del. 2006).
114
El Paso Pipeline, 152 A.3d at 1261 (quoting Gentile, 906 A.2d at 99).
115
See id. at 1264 (“Were [the plaintiff] to recover directly for the alleged decrease in the
value of the Partnership’s assets, the damages would be proportionate to his ownership
interest. The necessity of a pro rata recovery to remedy the alleged harm indicates that his
claim is derivative.”).

29
or injury for which compensation is being awarded.”116 In J.P. Morgan, the court

found that the plaintiffs could not tie a disclosure claim to their demand for $7 billion

of damages, which was “a logical and reasonable consequence (and measure) of the

harm caused to [J.P. Morgan] for being caused to overpay for [the target].” 117 But

the association between the monetary damages sought and the alleged harm suffered

by Class A stockholders who lacked information needed to exercise their redemption

rights is self-evident. That distinct purported injury can be assessed without

considering any overpayment (or lack thereof) by Churchill.

In an overpayment claim, the Company would presumably seek recovery from

the individual defendants and the Sponsor based on the difference between the

implied value of Public MultiPlan, given what Churchill paid MultiPlan

stockholders, and the true value of Public MultiPlan. The former value is irrelevant

to the direct harm, however, which is based instead on the $10.04 per share

redemption price.118 That is, the option to make an informed redemption decision

116
906 A.2d at 773; see Defendant MultiPlan Corporation f/k/a Churchill Capital Corp.
III’s Mot. to Dismiss the Verified Compl. 26-30 (Dkt. 13) (“MultiPlan Br.”).
117
906 A.2d at 773. The court also held that one could not “conflat[e] their individual
direct claim of liability for a duty of disclosure violation with the compensatory damages
flowing from the corporation’s separate and distinct underlying derivative claim for
waste.” Id. Again, however, the plaintiffs’ purported damages are separate.
118
A simple, stylized example may best illustrate the point. Assume that four public
investors each purchase one $10 unit in a SPAC IPO (consisting of one share and a
fractional warrant) and have a redemption right worth $10 per share. A sponsor holds a
founder share that will convert into a public share when the SPAC completes a merger. A
business combination is announced, and the post-merger entity is valued at $60 despite its

30
had a value to stockholders independent of any injury to the Company. Damages

for impairment of the redemption right flow to the stockholder—not Churchill.

The remedy for this direct harm does not implicate the type of double recovery

concerns recently discussed by the Delaware Supreme Court in Brookfield Asset

Management, Inc. v. Rosson.119 There, the court explained that the “double recovery

rule prohibits a plaintiff from recovering twice for the same injury from the same

tortfeasor” and rejected the appellees’ proposal that our law “devise a mechanism to

‘proportion’ the recovery for the overpaid funds between the plaintiffs if both

derivative and direct shareholders claim it.”120 But, again, because the potential

harm in this case is distinct and the recovery would flow directly to the public

“true” value being $30 because of issues that were omitted from the proxy statement. No
public stockholders therefore choose to redeem because they expect to hold shares worth
$12 after the business combination. The stockholders were harmed directly when the
hypothetical directors breached their fiduciary duties by issuing false and misleading
disclosures that prevented an informed exercise of redemption rights. The corporation was
then harmed when the funds remaining in the trust were used to overpay for an asset. The
derivative harm to the SPAC would be remedied by $10 of damages ($2 to each of the
stockholders, including the holder of the founder share), which would result in each of the
five stockholders seeing their post-merger share values increase from $6 per share to $8.
But the direct harm from the impairment of the redemption right stems from a right to $10
being converted into a $6 share. That recovery totals $16 ($4 to each of the public
stockholders). The separateness of the direct harm is even more apparent if the
hypothetical target was truly worth $45. In that scenario, the corporation would not have
an overpayment claim because it purchased something worth $45 for only $40. But the
public stockholders could claim that they were prevented from exercising a $10 redemption
right given that they were left with a share worth $9 instead.
119
261 A.3d at 1277.
120
Id.

31
stockholders, the plaintiffs would not recover twice for the same injury if an

overpayment claim was also pursued.

At bottom, the plaintiffs are not suing because Churchill did not combine with

MultiPlan on more favorable terms. They are suing because the defendants,

purportedly for self-serving purposes, induced Class A stockholders to forgo the

opportunity to convert their Churchill shares into a guaranteed $10.04 per share in

favor of investing in Public MultiPlan. That claim is direct.

2. Whether the Claims Are Governed by Contract

Even if the plaintiffs’ claims are direct, the defendants assert that they must

be dismissed because the redemption right is contractual. “It is a well-settled

principle that where a dispute arises from obligations that are expressly addressed

by contract . . . any fiduciary claims arising out of the same facts that underlie the

contract obligations [will] be foreclosed as superfluous.”121 Plaintiffs cannot

“‘bootstrap’ a breach of fiduciary duty claim into a breach of contract claim,” and

courts must dismiss such breach of fiduciary duty claims “where the two claims

overlap completely.”122 Because I cannot conclude that the plaintiffs’ fiduciary duty

121
Nemec v. Shrader, 991 A.2d 1120, 1129 (Del. 2010).
122
Bäcker v. Palisades Growth Cap. II, L.P., 246 A.3d 81, 109 (Del. 2021) (quoting
Grunstein v. Silva, 2009 WL 4698541, at *6 (Del. Ch. Dec. 8, 2009)); see id.
(“[B]ootstrapping case law only requires dismissal where a fiduciary duty claim wholly
overlaps with a concurrent breach of contract claim.”). In Bäcker, the defendants argued
that equitable relief in connection with an attempted board takeover was invalid because it
constituted extracontractual relief. Id. at 108. The court held that while “[t]he subject

32
claims would be subsumed within a contractual claim, I decline to grant dismissal

on that basis.

It is uncontested that Churchill’s certificate of incorporation provides

stockholders with the right to redeem.123 Churchill’s charter stated that “[p]rior to

the consummation of the initial Business Combination, [Churchill] shall provide all

holders of Offering Shares with the opportunity to have their Offering Shares

redeemed upon the consummation of the initial Business Combination . . . for cash

equal to the applicable redemption price per share.”124 But this dispute is not about

whether Class A stockholders received that opportunity. Churchill met its

contractual obligation and stockholders had the chance to redeem. Instead, the

plaintiffs argue that the defendants disloyally impaired that right by breaching their

duty to disclose.

The plaintiffs are not attempting to change the contours of their redemption

rights beyond those defined by Churchill’s charter. This case is therefore unlike

those where Delaware courts have held that a fiduciary duty claim could not be

matter of the voting agreement . . . overlapped with the [defendants’] inequitable
conduct . . . the court’s equitable award addressed harm flowing from the [defendants’]
deceptive conduct in their capacities as directors, not from a breach of contract in their
capacities as stockholders and parties to the voting agreement.” Id. at 109.
123
“Certificates of incorporation are regarded as contracts between the shareholders and
the corporation, and are judicially interpreted as such.” Alta Berkeley VI C.V. v. Omneon,
Inc., 41 A.3d 381, 385 (Del. 2012).
124
Certificate of Incorporation § 9.2.

33
maintained because it sought to enforce obligations governed by contract. In

Nemec v. Shrader, for example, the Delaware Supreme Court concluded that a claim

involving a company redeeming retired employees’ shares at book value before a

transaction that would materially increase the value of the employees’ stock was

“expressly addressed by contract.”125 Because the right to redeem the retired

stockholders’ shares was covered by a stock plan and “not one that attached to or

devolved upon all the Company’s common shares generally, irrespective of a

contract,” the court declined to expand the contract rights using fiduciary duties.126

The plaintiffs’ claims concern fiduciary duties owed in conjunction with a

contractual right. They allege that key information, which would have informed the

exercise of the right, was withheld or misrepresented.127 Churchill’s certificate of

incorporation does not speak to whether the Board was obligated to disclose all

125
991 A.2d at 1124-25, 1128-29.
126
Id. at 1128-29; see also Gale v. Bershad, 1998 WL 118022, at *5 (Del. Ch. Mar. 4,
1998) (determining that a claim challenging a company’s redemption of preferred stock at
an allegedly unfair value “ar[ose] out of the parties’ contractual, as opposed to fiduciary,
relationship”); Madison Realty P’rs 7, LLC v. AG ISA, LLC, 2001 WL 406268, at *6 (Del.
Ch. Apr. 17, 2001) (dismissing fiduciary duty claims where the determination of whether
capital contributions based on a partnership agreement could cease without contractually
required notice was “expressly treated” by that agreement); In re Gen. Motors Class H
S’holders Litig., 734 A.2d 611, 619 (Del. Ch. Mar. 22, 1999) (noting that breaching a
contractual provision for a particular class of stock was governed by contract and could not
be asserted as a claim for breach of fiduciary duty).
127
See, e.g., Compl. ¶¶ 83-89.

34
material information about a proposed merger when stockholders were deciding

whether to redeem.128

In Malone v. Brincat, the Delaware Supreme Court explained that “a board of

directors is under a fiduciary duty to disclose material information when seeking

shareholder action.”129 Here, the Board did not make a recommendation about how

stockholders’ rights to redeem should be exercised. But Class A stockholders were

required nonetheless to decide whether to request that their cash be returned to them

from the trust or to invest that cash in the proposed business combination.130 They

relied upon the Board to provide them with all material information in making that

choice. This call for action was a stockholder “investment decision[]” like

“purchasing and tendering stock or making an appraisal election,” to which

Delaware courts have applied the duty of disclosure.131 It is precisely the type of

128
See ODN, 2017 WL 1437308, at *24 (“[T]he fact that a corporation is bound by its valid
contractual obligations does not mean that a board does not owe fiduciary duties when
considering how to handles those contractual obligations . . . .”).
129
722 A.2d 5, 9 (Del. 1998) (citing Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135,
137-38 (Del. 1997)).
130
Compl. ¶¶ 13, 44.
131
In re CBS S’holder Class Action & Deriv. Litig., 2021 WL 268779, at *23 (Del. Ch.
Jan. 17, 2021) (quoting Dohmen, 234 A.3d at 1168); see also In re Orchard Enters., Inc.
S’holder Litig., 88 A.3d 1, 16-17 (Del. Ch. 2014) (“When directors submit to the
stockholders a transaction . . . which requires a stockholder investment decision (such as
tendering shares or making an appraisal action), the directors of a Delaware corporation
are required to disclose fully and fairly all material information within the Board’s control.”
(internal citation omitted)); In re Wayport, Inc. Litig., 76 A.3d 296, 314 (Del. Ch. 2013)

35
collective action on which directors’ obligations to engage in full and fair disclosure

are premised.132 A fiduciary duty claim on that basis is not foreclosed simply

because the source of the right being exercised is contractual.133

3. Whether the Claims Are Holder Claims
The defendants’ final threshold argument is that even direct redemption-

related fiduciary duty claims must be dismissed because they are holder claims.134

(describing disclosures requiring “a stockholder investment decision” as a “request for
stockholder action”).
132
See Dohmen, 234 A.3d at 1171 (discussing the “collective action problem when a large
number of stockholders are considering a transaction and depend on directors to disclose
material facts bearing on the decision”); Latesco, L.P. v. Wayport, Inc., 2009 WL 2246793,
at *6 (Del. Ch. July 24, 2009) (explaining that where stockholders are asked to take
collective action, “it would be impractical, if not impossible, for each stockholder to ask
and have answered by the corporation its own set of questions regarding the decision
presented for consideration” and that “[i]n the absence of a fiduciary duty by the
corporation and its directors to engage in full and fair disclosure, stockholders would thus
be forced to make a decision in an information vacuum”). Unlike in Latesco, which
discussed stockholder action in the context of an individual stockholder transaction
involving certain corporate insiders, Churchill public stockholders could not “refuse” to
redeem until they were satisfied that sufficient information had been presented to them.
See id. There were “thousands” of public stockholders who held Churchill Class A shares
from the record date through closing. Compl. ¶ 93.
133
See, e.g., In re GGP, Inc. S’holder Litig., 2021 WL 2102326, at *11, *24-25 (Del. Ch.
May 25, 2021) (considering breach of fiduciary duty claims in connection with a
transaction approved by a stockholder vote); Firefighters’ Pension Sys. City Kansas City,
Mo. Tr. v. Presidio, Inc., 251 A.3d 212, 254-55, 260-61 (Del. Ch. 2021) (same); In re
Orchard Enters., 88 A.3d at 16-17, 29-32 (addressing breach of fiduciary duty claims in
the context of a transaction requiring stockholder approval).
134
See In re CBS, 2021 WL 268779, at *21 (“[C]lass action treatment of holder claims is
inappropriate under state law.”); Citigroup Inc. v. AHW Inv. P’ship, 140 A.3d 1125, 1132
(Del. 2016) (noting that holder claims may not be brought as a class action); MultiPlan
Br. 45-49.

36
A holder claim is “a cause of action by persons wrongfully induced to hold stock

instead of selling it.”135 A “textbook” example is a claim alleging that “material

omissions [in a proxy statement] deprived . . . public stockholders of the opportunity

to decide before [a] [m]erger whether to sell or hold their shares.”136

Holder claims are predicated on stockholder inaction.137 Delaware law

distinguishes between disclosures that require stockholder action and those that do

not, with only the latter requiring proof of causation, reliance, and damages.138

Because reliance is an individual question of law or fact that “will inevitably

predominate over common questions among class members,”139 Delaware courts

have held that class action treatment of holder claims is inappropriate.140

The plaintiffs have not advanced a holder claim. This dispute is not about

whether the alleged omissions induced Class A stockholders to hold on to their stock.

135
Citigroup, 140 A.3d at 1132 (quoting Small v. Fritz Cos., Inc., 65 P.3d 1255, 1256 (Cal.
2003) (emphasis in original)).
136
In re CBS, 2021 WL 268779, at *20.
137
Id. at *23 (“[A] holder claim is predicated on a stockholder’s claim that she did not act
at all.”). Further, a primary concern regarding holder claims is that stockholders are not
truly harmed by poor disclosures that induce them to hold because the stock price at which
the holder could have sold is artificially inflated by the incorrect disclosures. See Edward
T. McDermott, Holder Claims—Potential Causes of Action in Delaware and Beyond?, 41
Del. J. Corp. L. 933, 934 (2017). That issue is not present here, as the stockholders held a
right to redeem their shares at $10 plus interest.
138
In re CBS, 2021 WL 268779, at *23 (“Holder claims, at bottom, are grounded in
common law fraud or negligent misrepresentation.”); see Citigroup, 140 A.3d at 1132-38.
139
Gaffin v. Teledyne, Inc., 611 A.2d 467, 474 (Del. 1992).
140
See In re CBS, 2021 WL 268779, at *20.

37
Churchill’s public stockholders were faced with two choices: whether to exercise

their redemption right and whether approve the merger.141 The former choice was a

call for stockholder action in the form of an “investment decision,” not unlike

“purchasing and tendering stock or making an appraisal election.”142 And

stockholders could only redeem if they voted (either for or against) the merger.143

The public stockholders’ investment culminated thus: divest or invest in the

post-merger entity, approve or disapprove the merger. This is an active and

affirmative choice around which the SPAC structure revolved. The defendants

cannot escape liability for fiduciary duty breaches in connection with that choice by

charactering it as a passive holder decision.

141
Compl. ¶¶ 44, 66; see Proxy at 28 (“At the special meeting, stockholders will be asked
to consider and vote upon the business combination proposal . . . .”).
142
In re CBS, 2021 WL 268779, at *23 (quoting Dohmen, 234 A.3d at 1168).
143
Proxy at 29. Because the plaintiffs are not pursuing a holder claim, I need not consider
the open question of whether a holder claim is cognizable as an individual cause of action
in Delaware. See Citigroup, 140 A.3d at 1134-37 (describing the “numerous policy and
proof problems” inherent in holder claims); In re CBS, 2021 WL 268779, at *21 (“The
question remains whether [an individual holder] claim is (or ought to be) cognizable in
Delaware law. In my view of the law, it is not.”). Here, Class A stockholders’ reliance on
the Proxy can be reasonably inferred from the fact that stockholders acted—by either
redeeming or investing—following the disclosure. See Dohmen, 234 A.3d at 1168-69
(“[W]hen directors seek stockholder action, and the directors fail to disclose material facts
bearing on the decision, a beneficiary need not demonstrate other elements of proof . . . .”);
Malone, 722 A.2d at 12 (“An action for a breach of fiduciary duty arising out of disclosure
violations in connection with a request for stockholder action does not include the elements
of reliance, causation and actual quantifiable monetary damages.”).

38
 B. The Breach of Fiduciary Duty Claims

I next address the applicable standard of review and the plaintiffs’ claims for

breach of fiduciary duty as pleaded against Churchill’s directors, officers, and

controlling stockholder.

1. The Standard of Review

“When determining whether [defendants] have breached their fiduciary

duties, Delaware corporate law distinguishes between the standard of conduct and

the standard of review.”144 The standard of conduct—addressed above—“describes

what directors are expected to do and is defined by the context of the duties of loyalty

and care.”145 “The standard of review is the test that a court applies when evaluating

whether directors have met the standard of conduct.”146

Delaware’s default standard of review is the business judgment rule, which

“is a presumption that in making a business decision, the board of directors ‘acted

on an informed basis, in good faith and in the honest belief that the action was taken

in the best interests of the company.’”147 The plaintiffs allege that the business

judgment presumption has been rebutted, requiring the application of entire fairness,

144
Chen v. Howard-Anderson, 87 A.3d 648, 666 (Del. Ch. 2014).
145
Trados II, 73 A.3d at 35.
146
Id. at 35-36.
147
Solomon v. Armstrong, 747 A.2d 1098, 1111 (Del. Ch. 1999) (quoting Aronson v. Lewis,
473 A.2d 805, 812 (Del. 1984)), aff’d, 746 A.2d 277 (Del. 2000) (TABLE).

39
Delaware’s “most onerous standard of review.”148 The plaintiffs point to two

independent—and individually sufficient—reasons for why entire fairness applies.

One, the de-SPAC merger, including the opportunity to redeem, was a conflicted

controller transaction. Two, a majority of the Churchill Board was conflicted either

because the directors were self-interested or because they lack independence from

Klein. The plaintiffs have pleaded facts supporting a reasonable inference that entire

fairness applies on both bases.

a. The Conflicted Controller Allegations

The parties agree that Klein, through his control of the Sponsor, was

Churchill’s controlling stockholder.149 Entire fairness is not triggered by that fact

alone.150 The plaintiffs must also adequately plead that the controlling stockholder

engaged in a conflicted transaction. Delaware courts place conflicted controller

transactions implicating entire fairness into one of two categories: “where the

148
ODN, 2017 WL 1437308, at *26.
149
See Individual Defs.’ & Klein Entities’ Br. 4; Pls.’ Answering Br. 31; Compl. ¶¶ 34, 58,
116. The Complaint defines the “Controller Defendants” as Klein, M. Klein & Co., and
the Sponsor. Compl. ¶ 34. For simplicity, and given his overarching control of the entities,
this decision will refer to the controlling stockholder as Klein. As previously noted,
although the plaintiffs include M. Klein & Co. in that group, M. Klein Associates, Inc. is
the Sponsor’s managing member. See supra note 7.
150
E.g., IRA Tr. FBO Bobbie Ahmed v. Crane, 2017 WL 7053964, at *6 (Del. Ch. Dec. 11,
2017, revised Jan. 26, 2018) (explaining that the presence of a controller, without more,
does “not automatically subject [the controller’s conduct] to entire fairness review”); In re
Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *12 (Del. Ch. Oct. 24, 2014)
(“Entire fairness is not triggered solely because a company has a controlling stockholder.”).

40
controller stands on both sides” and “where the controller competes with the

common stockholders for consideration.”151

The first category is not relevant in this case. Klein did not stand on both sides

of the merger, which was an arms-length transaction between two unaffiliated

parties. In terms of the second category, a controller competes with common

stockholders when the controller (1) “receives greater monetary consideration for its

shares than the minority stockholders”; (2) “takes a different form of consideration

than the minority stockholders”; or (3) receives “a ‘unique benefit’ by extracting

‘something uniquely valuable to the controller, even if the controller nominally

receives the same consideration as all other stockholders’” to the detriment of the

minority.152

The defendants focus on the first two forms of competition though the

plaintiffs’ allegations concern the third. The defendants maintain that Klein did not

compete with Churchill’s public stockholders because he did not receive any greater

or different consideration than other Churchill stockholders in the merger. The Class

151
In re Crimson Expl., 2014 WL 5449419, at *12.
152
IRA Tr., 2014 WL 5449419, at *6 (quoting In re Crimson Expl., 2014 WL 5449419,
at *13); see In re Viacom Inc. S’holders Litig., 2020 WL 7711128, at *11 (Del. Ch. Dec.
29, 2020); In re Synthes, Inc. S’holder Litig., 50 A.3d 1022, 1034 (Del. Ch. 2012) (“[T]he
plaintiffs must plead that [the alleged controller] had a conflicting interest in the Merger in
the sense that he derived a personal financial benefit ‘to the exclusion of, and detriment to,
the minority stockholders.’” (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720
(Del. 1971))).

41
B shares were converted, as part of the merger, into the same Class A shares held by

public stockholders. In that regard, Klein participated in the business combination

on the same terms as all other Churchill stockholders.153 But, for purposes of

deciding the motions to dismiss, I cannot overlook that the defendants’ argument

rests on the assumption that Churchill completed a business combination. The

plaintiffs’ claims, however, center around a misalignment of interests during a prior

step in the de-SPAC transaction process.

The well-pleaded allegations in the Complaint highlight a benefit unique to

Klein at the point when Class A stockholders held redemption rights backed by a

trust that Class B stockholders could not access, and Klein (who controlled the

Sponsor) had an economic interest in 70% of the Class B shares. Both the Class B

shares and the Private Placement Warrants held by the Sponsor would be worthless

if Churchill did not complete a deal.154 As of the record date, the Private Placement

153
Klein may have further aligned himself with Class A stockholders. The Proxy disclosed
that an entity affiliated with Klein, Garden State Capital Partners LLC, invested into the
de-SPAC through the PIPE. See Proxy at 31, 100-01 (stating that Garden State purchased
8,500,000 shares of Churchill Class A common stock at a 1% discount to the $10 price
paid by non-PIPE investors). Neither party briefed this fact, which is outside the pleadings
in any case and does not influence my decision on the motions to dismiss. Regardless, I
cannot assume that Klein’s interest in Garden State is such that the value of his founder
shares post-merger would be negated by losses borne by Garden State in the event of a
value-decreasing merger to the extent that he would prefer no deal.
154
Compl. ¶¶ 30, 79. See Klausner, Ohlrogge, & Ruan, supra note 5, at 13 (“While a SPAC
sponsor and board would prefer a good deal over a bad deal, they can do very well in a
value-decreasing deal—and they would lose everything in a liquidation. The shareholders,
however, are better off with a liquidation than a value-decreasing merger.”).

42
Warrants were worth roughly $51 million and the founder shares were worth

approximately $305 million, representing a 1,219,900% gain on the Sponsor’s

$25,000 investment.155 These figures would have dropped to zero absent a deal.

Churchill’s public stockholders, on the other hand, would have received

$10.04 per share if Churchill had failed to consummate a merger and liquidated.

Instead, those that did not redeem received Public MultiPlan shares that were

allegedly worth less.156

In brief, the merger had a value—sufficient to eschew redemption—to

common stockholders if shares of the post-merger entity were worth $10.04. For

Klein, given the (non-)value of his stock and warrants if no business combination

resulted, the merger was valuable well below $10.04. This is a special benefit to

Klein.

It can also be reasonably inferred that Klein gained a unique benefit from the

redemption offer itself—it brought him one step closer to consummating a

transaction that allegedly benefitted him to the detriment of Class A stockholders.

Further, in a value-decreasing deal where the post-merger entity is expected to be

155
Proxy at 116; Compl. ¶¶ 9, 67. The plaintiffs’ calculations overlook the effect of the
lock-up and “unvestment” of Class B shares. But, as discussed below, Klein would receive
significant financial upside even considering the effects of the Sponsor Agreement and
Investor Rights Agreement.
156
Certificate of Incorporation § 9.2(d); Proxy at 14, 29.

43
worth less than $10.04 per share, issuing a share at $10.04—the effective result of a

stockholder choosing not to redeem a Churchill share—is value enhancing to the

existing stockholders. It is also patently harmful to the ones giving up $10.04 for

something less valuable. Because of his founder shares, Klein effectively competed

with the public stockholders for the funds held in trust and would be incentivized to

discourage redemptions if the deal was expected to be value decreasing, as the

plaintiffs allege.

The defendants assert that the founder shares’ lock-up and the “unvestment”

of 45% of the founder shares undercut the plaintiffs’ claim that Klein was interested

or received a windfall from doing “any” deal.157 Although the lock-up and

“unvestment” lowered the value of the alleged windfall that the defendants received,

I cannot conclude on a motion to dismiss that it would negate it. Klein held

20,710,281 founder shares. Even the vested 55% of those shares, if hypothetically

valued at $5 and discounted back 18 months at an aggressive 20% per year, are worth

more than $40 million dollars.

157
The defendants state in their brief that “nearly 60%” of the Sponsor’s shares would
unvest upon the closing of the merger and only revest “if, at some time one year after the
[Merger] but before five years . . . [Public MultiPlan’s] Class A common stock exceeds
$12.50 for any 40 trading days in a 60 consecutive day period.” Individual Defs.’ & Klein
Entities’ Br. 19-20. The actual number, however, appears to be about 45%. See Proxy at
100, I-5, I-16.

44
 The defendants also argue that, because Churchill had 19 months left in its

completion window to consummate a merger, Klein (and the directors) would have

pursued other deals if they believed the MultiPlan merger would be value

decreasing. But it is logical to expect that MultiPlan was identified as the best target

given that Churchill pursued the merger in the first place. Time left in the

completion window does not change the potential for misaligned incentives.

MultiPlan could have been viewed as an attractive target for Class B stockholders

even if the resulting post-merger entity proved less valuable for Class A stockholders

than if Churchill had liquidated.

The defendants also advance an overarching equitable argument: that the

plaintiffs should be estopped from challenging the same economic incentives that

were disclosed to them before they invested in Churchill. For example, investors

purchasing Churchill IPO units knew that the Sponsor was receiving founder shares,

that those shares were purchased for $25,000, and that they would expire worthless

in the absence of a business combination.158 In In re SmileDirectClub, Inc.

Derivative Litigation, the Court of Chancery held that because a prospectus

disclosed specific insider transactions that would dilute public stockholders post-

158
See Prospectus at 14-16.

45
IPO, the plaintiff was barred from suing “by reason of its knowledge of the alleged

wrong when it purchased the stock.”159

In this case, the structure of the SPAC—and Klein’s incentives—were

disclosed in the prospectus but the transaction at issue was not. Public stockholders

who invested in Churchill agreed to give the Sponsor an opportunity to look for a

target company with the understanding that they retained an option to make a

redemption decision. They did not, however, agree that they did not require all

material information when the time came to make that choice. The defendants’

argument might be persuasive if it had been made about the Proxy and the plaintiffs

had opted not to redeem despite adequate disclosures—but that is not the universe

alleged in the Complaint.

The defendants further contend that the Sponsor’s promote (in the form of

founder shares) cannot trigger entire fairness because this “structural feature” would

appear in “any de-SPAC transaction” and “was not unique to the [a]cquisition.”160

That this structure has been utilized by other SPACs does not cure it of conflicts.

159
2021 WL 2182827, at *12 (Del. Ch. May 28, 2021) (quoting 7547 P’rs v. Beck,
1995 WL 106490, at *3 (Del. Ch. Feb. 24, 1995)).
160
Individual Defs.’ & Klein Entities’ Br. 30.

46
Nor does the technical legality of the de-SPAC mechanics. Under Delaware law,

“[c]orporate acts must be ‘twice-tested’—once by the law and again in equity.”161

The potential conflict between Klein and public stockholders resulting from

their different incentives in a bad deal versus no deal is sufficient to pass the

“reasonably conceivable” threshold. The allegation that Klein caused Churchill to

retain The Klein Group as its financial advisor in connection with the merger and

related financing for a $30.5 million payment bolsters that conclusion.162 Entire

fairness is therefore the applicable standard of review.

b. The Conflicted Board Allegations

The standard of review can also change from business judgment to entire

fairness when a complaint “allege[s] facts supporting a reasonable inference that

there were not enough sufficiently informed, disinterested individuals who acted in

good faith when taking the challenged actions to comprise a board majority.”163

161
Sample v. Morgan, 914 A.2d 647, 672 (Del. Ch. 2007); see generally Schnell v. Chris-
Craft Indus., Inc., 285 A.2d 437, 439 (Del. 1971) (“[I]nequitable action does not become
permissible simply because it is legally possible.”); ODN, 2017 WL 1437308, at *10
(“Delaware follows the ‘twice tested’ framework when evaluating challenges to corporate
acts.”).
162
Compl. ¶¶ 31, 81; see In re Delphi Fin. Gp. S’holder Litig., 2012 WL 729232, at *13
(finding that a controller’s interests were not aligned with public stockholders where he
had misaligned incentives including that he owned the financial advisory firm hired to
advise the company). The defendants’ argument that the fee was “routine” and did not
“create inherent conflicts” would require the court to draw inferences in their favor. See
Individual Defs.’ & Klein Entities’ Br. 34-35.
163
ODN, 2017 WL 1437308, at *26.

47
Here, the plaintiffs allege that all of the Board members were self-interested in the

Merger, not independent from Klein, or both.

i. Director self-interestedness

The plaintiffs assert that the director defendants, excluding Mark Klein, were

interested in the merger because of their economic interests in the Sponsor.164

Directors are self-interested in a transaction when they “expect to ‘derive any

[material] personal financial benefit from it in the sense of self-dealing.’”165 If the

majority of the Board “labors under actual conflicts of interest,” entire fairness

applies.166

As with Klein, the plaintiffs allege that the director defendants would benefit

from virtually any merger—even one that was value diminishing for Class A

stockholders—because a merger would convert their otherwise valueless interests in

Class B shares into shares of Public MultiPlan. According to the Complaint, based

on the $11.09 closing price of Churchill common stock as of the record date, the

directors’ (other than Mark Klein) interests in the Sponsor had an implied market

value of: $3.3 million for each of Abson, Mills, and Eck; $8.7 million for McDermid,

164
Compl. ¶¶ 6, 60; Pls.’ Answering Br. 12; Proxy at 248.
165
Calesa Assocs., L.P. v. Am. Cap., Ltd., 2016 WL 770251, at *11 (Del. Ch. Feb. 29,
2016) (quoting Orman v. Cullman, 794 A.2d 5, 23 (Del. Ch. 2002)).
166
Trados II, 73 A.3d 17 at 44.

48
and $43.6 million for August.167 As Chancellor Chandler aptly remarked in Orman

v. Cullman, it would be “naïve to say, as a matter of law, that $3.3 million is

immaterial.”168

The defendants, again, maintain that the founder shares aligned the directors’

interests with public stockholders with respect to maximizing Churchill’s long-term

value. “Delaware courts recognize that stock ownership by decision-makers aligns

those decision-makers’ interests with stockholder interests; maximizing price.”169

But, as discussed above, this argument ignores the diverging interests between

insider Class B stockholders and public Class A stockholders lacking the benefit of

full information when faced with the choice of a bad deal or liquidation.170

A hypothetical value-decreasing transaction illustrates the point. The fewest

number of founder shares indirectly held by a director defendant (excluding Mark

Klein) was 294,985.171 If Public MultiPlan turned out to be worth just $5 per share,

one applied a significant discount rate because of the Class B lock-up, and one

167
Compl. ¶ 67; but see supra note 68.
168
794 A.2d at 31.
169
In re BioClinica, Inc. S’holder Litig., 2013 WL 5631233, at *5 (Del. Ch. Oct. 16, 2013).
170
See AP Servs., LLP v. Lobell, 2015 WL 3858818, at *5 (N.Y. Sup. Ct. 2015) (holding
that allegations that SPAC directors held stock and warrants that would be rendered
worthless absent a de-SPAC merger were sufficient at the pleading stage to rebut the
presumption of the business judgment).
171
Compl. ¶ 67; Proxy at 248.

49
accounted for the Sponsor shares that unvested, the directors holding the fewest

amount of founder shares would still hold shares worth over half a million dollars

post-merger. In that scenario, Class A stockholders would be left with $5 per share

rather than the $10.04 they would have received had Churchill liquidated (or had

they been fully informed and chosen to redeem). A greater than half-million-dollar

payout is presumptively material at the motion to dismiss stage. The defendants may

“ultimately be correct . . . that it was not material” to the directors but, at this point,

the court can reasonably infer that a majority of the directors were self-interested.172

ii. Director independence

The plaintiffs also assert that a majority of the Board was conflicted because

the directors were not independent from Klein.173 A director “subject to the

interested party’s dominion or beholden to that interested party” lacks

172
Frank v. Elgamal, 2012 WL 1096090, at *11 (Del. Ch. Mar. 30, 2012); Voigt, 2020 WL
614999, at *15 (noting that although “[s]pecific information about the wealth of particular
individuals is not generally available,” “the magnitude” of the compensation the director
received was “sufficiently large to support an inference of materiality at the pleading
stage”).
173
See Trados II, 73 A.3d at 44-45.

50
independence.174 If a majority of the board approving a transaction lacks

independence, entire fairness is the applicable standard of review.175

Klein appointed each of the directors to the Board and retained the unilateral

power to remove them.176 “[B]eing nominated or elected by a director who controls

the outcome is insufficient by itself to reasonably doubt a director’s independence

because ‘that is the usual way a person becomes a corporate director.’”177 For most

of the Board members, their directorships at Churchill also carried with them

significant financial upsides given that they were compensated with interests in the

Sponsor. As addressed above, it is reasonable to infer that those interests were

material. But the allegations in the Complaint do not end there.

The plaintiffs further allege that Abson, August, Mark Klein, McDermid, and

Mills were all beholden to Klein because he had appointed them to serve as directors

of other “Churchill” SPACs, providing them founders shares with the potential for

more “multi-million-dollar payday[s]” like those discussed above.178 Other than

174
In re BGC P’rs, Inc. 2019 WL 4745121, at *6 (Del. Ch. Sept. 30, 2019) (quoting
Marchand v. Barnhill, 212 A.3d 805, 818 (Del. 2019)); Orman, 794 A.2d at 24 (noting that
a lack of independence can be show by facts establishing “that the directors are ‘beholden’
to [the controller] or so under their influence that their discretion would be sterilized”
(quoting Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993))).
175
See Trados II, 73 A.3d at 43.
176
Compl. ¶ 59.
177
McElrath v. Kalanick, 224 A.3d 982, 995 (Del. 2020) (quoting Aronson, 473 A.2d at
816).
178
Compl. ¶¶ 23-27, 60-61.

51
Abson, those individuals were on at least five other Churchill SPAC boards.179 It is

conceivable that those directors would “expect to be considered for directorships” in

future Klein-sponsored SPACs and that the founder shares they would receive from

those positions were material to them.180

The plaintiffs raise additional allegations to impugn the independence of Mark

Klein and Eck. Mark Klein (managing member of M. Klein & Co.) is Klein’s

brother.181 Eck is a managing director at M. Klein & Co., which Klein controls,

where Eck has been employed since 2016.182

Taking those allegations as true, the directors each had a personal or

employment relationship with or received lucrative business opportunities from

Klein. “[O]ur law is not blind to the practical realities of serving as a director of a

179
Id. ¶ 60.
180
Caspian Select Credit Master Fund Ltd. v. Gohl, 2015 WL 5718592, at *6-7 (Del. Ch.
Sept. 28, 2015) (discussing a controller’s appointment of directors to various boards and
inferring that the directors “expect to be considered for directorships . . . in the future”).
181
Compl. ¶ 25; see Marchand, 212 A.3d at 818 (“When it comes to life’s more intimate
relationships concerning friendship and family, our law cannot ‘ignore the social nature of
humans’ or that they are motivated by things other than money, such as ‘love, friendship,
cand collegiality.’” (quoting In re Oracle Corp. Deriv. Litig., 824 A.2d 917, 938 (Del. Ch.
2003))).
182
Compl. ¶¶ 21, 28. See, e.g., Beam v. Stewart, 833 A.2d 961, 977-78 (Del. Ch. 2003)
(finding that a director had a “material interest in her own continued employment” and that
the controller’s ability to affect that employment raised doubts about the director’s
independence); Del. Cty. Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 1022-24 (Del. 2015)
(noting that a director’s job as an executive at a subsidiary of a corporation over which the
controller had “substantial influence, as the largest stockholder, director, and Chairman”
required a pleading stage inference that the director was not independent).

52
corporation with a controlling stockholder,”183 and “[a] director may be considered

beholden to . . . another when the allegedly controlling entity has the unilateral

power . . . to decide whether the challenged director continues to receive a

benefit.”184 “Although the actual extent of these relationships is not altogether clear

at this point in the litigation, the existence of these interests and relationships is

enough to defeat a motion to dismiss.”185

2. The Breach of Fiduciary Duty Claim Against the Directors

Count I of the Complaint alleges that the directors breached their fiduciary

duties by “prioritizing their own personal, financial, and/or reputational interests and

approving the Merger, which was unfair to public Class A stockholders” and by

“issuing the false and misleading Proxy,” which harmed the public stockholders who

did “not exercis[e] their redemption rights.”186 As previously discussed, this claim

invokes both the duty of loyalty and disclosure duties implicating director loyalty.

The Complaint states a non-exculpated breach of fiduciary duty claim against each

of the directors.

When entire fairness applies, the defendant fiduciaries have the burden “to

demonstrate that the challenged act or transaction was entirely fair to the corporation

183
In re BGC, 2019 WL 4745121, at *7.
184
Orman, 794 A.2d at 25 n.50.
185
In re New Valley Corp., 2001 WL 50212, at *8 (Del. Ch. Jan. 11, 2001).
186
Compl. ¶¶ 102-04.

53
and its stockholders.”187 The two aspects of that test—fair price and fair dealing—

“must be examined as a whole since the question is one of entire fairness.”188 Fair

price “relates to the economic and financial considerations of the proposed merger,

including all relevant factors: assets, market value, earnings, future prospects, and

any other elements that affect the intrinsic or inherent value of a company’s

stock.”189 Fair dealing “embraces questions of when the transaction was timed, how

it was initiated, structured, negotiated, disclosed to the directors, and how the

approvals of the directors and the stockholders were obtained.” 190 Because the

inquiry is fact intensive, “it is rare the court will dismiss a fiduciary duty claim on a

Rule 12(b)(6) motion when entire fairness is the governing standard of review.”191

This case is no exception.

Critically, I note that the plaintiffs’ claims are viable not simply because of

the nature of the transaction or resulting conflicts. They are reasonably conceivable

because the Complaint alleges that the director defendants failed, disloyally, to

187
In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 52 (Del. 2006).
188
Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983).
189
Id.
190
Id.
191
Tornetta v. Musk, 250 A.3d 793, 812 (Del. Ch. 2019); see Hamilton P’rs, L.P. v.
Highland Cap. Mgmt., L.P., 2014 WL 1813340, at *12 (Del. Ch. May 7, 2014) (“The
possibility that the entire fairness standard of review may apply tends to preclude the Court
from granting a motion to dismiss under Rule 12(b)(6) . . . .”); Orman, 794 A.2d at 15 n.36
(Del. Ch. 2002) (“Th[e] conclusion [that entire fairness applies] normally will preclude
dismissal of a complaint on a Rule 12(b)(6) motion to dismiss . . . .”).

54
disclose information necessary for the plaintiffs to knowledgeably exercise their

redemption rights. This conclusion does not address the validity of a hypothetical

claim where the disclosure is adequate and the allegations rest solely on the premise

that fiduciaries were necessarily interested given the SPAC’s structure. The core,

direct harm presented in this case concerns the impairment of stockholder

redemption rights. If public stockholders, in possession of all material information

about the target, had chosen to invest rather than redeem, one can imagine a different

outcome.

The Complaint contains well-pleaded allegations that false and misleading

disclosures impaired Class A stockholders’ exercise of their option to redeem. Like

disclosures in the context of a tender offer, Churchill’s disclosures were “unilateral

and not counterbalanced by opposing points of view,” placing an even more exacting

duty to disclose upon fiduciaries in possession of the information.192 The Proxy did

not disclose that MultiPlan’s largest customer was UHC and that UHC was

developing an in-house alternative to MultiPlan that would both eliminate its need

for MultiPlan’s services and compete with MultiPlan. Information is material “if

there is a substantial likelihood that a reasonable shareholder would consider it

192
Eisenberg v. Chi. Milwaukee Corp., 537 A.2d 1051, 1057, 1059 (Del. Ch. 1987)
(remarking that “[s]hareholders are entitled to be informed of information in the
fiduciaries’ possession that is material to the fairness of the price”).

55
important in deciding how to vote”193—or, in this instance, in deciding whether to

redeem—such that it would be viewed as “significantly alter[ing] the ‘total mix’ of

information made available.”194 Based on the plaintiffs’ allegations, it is reasonably

conceivable that a Class A stockholder would have been substantially likely to find

this information important when deciding whether to redeem her Churchill shares.

In Weinberger v. UOP, the Delaware Supreme Court explained that the entire

fairness standard incorporates a requirement of compliance with the duty of

disclosure into the fair dealing aspect of the test.195 Given the allegations of the

Complaint, it is reasonably conceivable that the defendants failed to meet this

standard. Of course, discovery may determine whether the transaction was unfair

with regard to the disclosures and perhaps in other ways. But for purposes of the

motions to dismiss, the alleged disclosure violations sufficiently give rise to a lack

of overall fairness.196

193
Morrison v. Berry, 191 A.3d 268, 282 (Del. 2018) (quoting Rosenblatt v. Getty Oil Co.,
493 A.2d 929, 944 (Del. 1985)).
194
Id. at 283.
195
457 A.2d at 710; see Voigt, 2020 WL 614999, at *24; Rabkin v. Philip A. Hunt Chem.
Corp., 498 A.2d 1099, 1104 (Del. 1985) (“[The] duty of fairness certainly incorporates the
principle that a cash-out merger must be free of fraud or misrepresentation . . . .”).
196
The defendants raise various reasons why the court should give little weight to the
allegations about UHC-related disclosures. For example, the defendants maintain that the
November 11, 2020 report that highlighted these issues was “shown to be false,” Individual
Defs.’ & Klein Entities’ Br. 5-6, and that the firm who issued the report has been accused
of market “deception,” MultiPlan Br. 15-16. These arguments rely on documents beyond
those I can consider on a motion to dismiss and would require the court to weigh evidence.
See In re New Valley, 2001 WL 50212, at *6 (declining to consider documents “neither

56
 3. The Breach of Fiduciary Duty Claim Against the Controlling
Stockholder
Count III of the Complaint alleges that the “Controller Defendants” breached

their fiduciary duties “by agreeing to and entering into the Merger without ensuring

that it was entirely fair” to the public stockholders who were harmed by not

exercising their redemption rights.197 Given Klein’s control of the Class B shares

and his ties to the Board, it is reasonably conceivable that he “had the power to

control, influence, and cause—and actually did control, influence, and cause—the

Company to enter into the Merger.”198 This count states a claim against Klein for

many of the same reasons that the plaintiffs have stated a claim against the directors.

The role (if any) of Klein as a controlling stockholder in the alleged impairment of

stockholders’ redemption rights cannot be resolved at the pleading stage.

4. The Breach of Fiduciary Duty Claim Against the Officers

Count II of the Complaint is brought against Klein, in his capacity as an

officer, and Taragin as Churchill’s CFO. The Complaint alleges that the “Officer

Defendants” breached their fiduciary duties by “prioritizing their own personal,

integral to, nor effectively incorporated into, the plaintiffs’ complaint” despite the
defendants claiming “errors in plaintiffs’ interpretation and mischaracterization” of the
documents). Parties “cannot try the issue of fairness on a dismissal motion.” Shandler v.
DLJ Merch. Banking, Inc., 2010 WL 2929654, at *12 n.108 (Del. Ch. July 26, 2010); see
In re New Valley, 2001 WL 50212, at *7 (declining to conduct an entire fairness analysis
where the plaintiffs had “alleged facts sufficient to plead an entire fairness claim”).
197
Compl. ¶ 120.
198
Id. ¶ 118.

57
financial, and/or reputational interests and approving the Merger, which was unfair

to public Churchill Class A stockholders.”199 In addition, they “breached their duty

of candor by issuing the false and misleading Proxy, as well as making false and

misleading statements during [an] August 18, 2020 analyst day presentation.”200

The Complaint is replete with allegations regarding Klein—although the

capacity in which he was acting is unspecified. Taragin presents a different matter.

The plaintiffs describe Taragin’s role and his ties to other Klein affiliated entities.201

But they do not make a single allegation about actions that could expose him to

liability. Taragin’s title as CFO of multiple Klein-backed entities does not absolve

the plaintiffs of having to plead facts sufficient to raise doubt as to whether Taragin

fulfilled his fiduciary duties. He is therefore dismissed from this action.

C. The Aiding & Abetting Claim

Finally, the plaintiffs allege, in Count IV, that The Klein Group aided and

abetted breaches of fiduciary duty.202 For the claim to proceed, the Complaint must

allege facts that demonstrate four elements: “‘(1) the existence of a fiduciary

relationship, (2) a breach of the fiduciary’s duty, . . . (3) knowing participation in

that breach by the defendants,’ and (4) damages proximately caused by the

199
Id. ¶ 110.
200
Id. ¶ 111.
201
See id. ¶¶ 22, 54.
202
Id. ¶¶ 124-30.

58
breach.”203 As discussed above, the Complaint pleads facts sufficient to meet the

first, second, and fourth elements. That leaves the third element, “knowing

participation,” to be considered.

“Knowing participation . . . requires that the third party act with the

knowledge that the conduct advocated or assisted constitutes . . . a breach.”204 The

plaintiffs allege that The Klein Group “knew that [the MultiPlan valuation analyses]

were materially misleading, and that the Director Defendants and the Controller

Defendants stood to profit immensely from the consummation of the Merger . . .

even if the Merger was unfair to public Class A stockholders.”205

At this stage in the case, Klein’s knowledge on these matters can be imputed

to The Klein Group.206 In Louisiana Municipal Police Employees’ Retirement

System v. Fertitta, the court remarked that “[i]t would elevate form too far over

substance to suggest, in the procedural posture of a Rule 12(b)(6) motion, that it is

not a reasonable inference that facts known to [the controller] were also known to

[controlled entities].”207 The Klein Group is not just a “corporate shell[], created for

203
Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001) (quoting Penn Mart Realty
Co. v. Becker, 298 A.2d 349, 351 (Del Ch. 1972)).
204
Id. at 1097.
205
Compl. ¶ 127.
206
Klein controls and is the managing partner of M. Klein & Co., The Klein Group’s parent.
See id. ¶¶ 21, 31.
207
2009 WL 2263406, at *7 n.27 (Del. Ch. July 28, 2009).

59
no other purpose than to facilitate related transactions of the fiduciary,” as was the

case in Fertitta.208 That distinction does not, however, change the important parallel

that The Klein Group is an entity controlled by Klein, who the plaintiffs allege

understood and benefitted from conflicts inherent in the SPAC. It is reasonably

conceivable that The Klein Group “participated in the board’s decision[] . . . or

otherwise caused the board to make the decision[] at issue”: approve the merger

while withholding material information from stockholders.

The defendants contend that knowing participation cannot be established

because there are no allegations in the Complaint that The Klein Group “actively

concealed information [from the Board] to which it knew the Board lacked access,

or promoted the failure of a required disclosure by the Board.”209 But unlike the

precedent the defendants rely on, The Klein Group was not an independent third-

party advisor. It was an entity controlled by Churchill’s controlling stockholder to

(allegedly) provide a “patina of financial analysis.”210 The motions to dismiss are

therefore denied with regard to the aiding and abetting claim.

208
Id.
209
Houseman v. Sagerman, 2014 WL 1600724, at *9 (Del. Ch. April. 16, 2014).
210
Mot. to Dismiss Hr’g Tr. Sept. 20, 2021, at 97 (Dkt. 43).

60
III. CONCLUSION

For the reasons discussed above, the motions to dismiss are denied except as

to Taragin in Count II. Additionally, MultiPlan Corporation is dismissed as a party

to this action.211

211
The plaintiffs did not name Public MultiPlan as a party in any count to the Complaint.
This is not a derivative action where the entity would typically be listed as a nominal
defendant. To the extent that the company must be named for remedial purposes at a later
stage of the case, as the plaintiffs asserted at oral argument, they may move to add it as a
party at that time. See, e.g., Chester Cty. Ret. Sys. v. Collins, 2016 WL 7117924, at *3
(Del. Ch. Dec. 6, 2016) (granting motion to dismiss where “[a]lthough the plaintiff named
the Company as a defendant, it did not assert any claims against the Company”), aff’d, 165
A.3d 286 (Del. 2017) (TABLE).

61