City of Sarasota Firefighters' Pension Fund v. Inovalon Holdings, Inc.

IN THE SUPREME COURT OF THE STATE OF DELAWARE

CITY OF SARASOTA §
FIREFIGHTERS’ PENSION FUND, §
STEAMFITTERS LOCAL 449 § No. 305, 2023
PENSION FUND, and §
STEAMFITTERS LOCAL 449 §
RETIREMENT SECURITY FUND, § Court Below: Court of Chancery
§ of the State of Delaware
Plaintiffs Below, Appellants, §
§
v. § C.A. No. 2022-0698
§
INOVALON HOLDINGS, INC., §
KEITH R. DUNLEAVY, MERITAS §
GROUP, INC., MERITAS HOLDINGS, §
LLC, DUNLEAVY FOUNDATION, §
ANDRÉ HOFFMANN, CAPE §
CAPITAL SCSp, SICAR-INOVALON §
SUB-FUND, ISAAC S. KOHANE, §
MARK A. PULIDO, DENISE K. §
FLETCHER, WILLIAM D. GREEN, §
WILLIAM J. TEUBER, and LEE D. §
ROBERTS, §
§
Defendants Below, Appellees. §

Submitted: February 21, 2024
Decided: May 1, 2024

Before SEITZ, Chief Justice; VALIHURA, TRAYNOR, LEGROW, and GRIFFITHS,
Justices, constituting the Court en Banc.

Upon appeal from the Court of Chancery. REVERSED and REMANDED.

Ned Weinberger, Esquire (argued), Brendan W. Sullivan, Esquire, Labaton Sucharow LLP,
Wilmington, Delaware. Of Counsel: John Vielandi, Esquire, Labaton Sucharow LLP, New
York, New York. Jeremy Friedman, Esquire, David Tejtel, Esquire, Friedman Oster &
Tejtel PLLC, Bedford Hills, New York. Lee D. Rudy, Esquire, Eric L. Zagar, Esquire, J.
Daniel Albert, Esquire, Geoffrey C. Jarvis, Esquire, Grant D. Goodhart, III, Esquire,
Kessler Topaz Meltzer & Check, LLP, Radnor, Pennsylvania for Appellants.
Raymond J. DiCamillo, Esquire, Kevin M. Gallagher, Esquire (argued), Craig K. Ferrere,
Esquire, Richards, Layton & Finger, P.A., Wilmington, Delaware for Appellees Inovalon
Holdings, Inc., Isaac S. Kohane, Denise K. Fletcher and Lee D. Roberts.

William M. Lafferty, Esquire, Ryan D. Stottmann, Esquire, Alexandra M. Cumings,
Esquire, Morris Nichols Arsht & Tunnell LLP, Wilmington, Delaware. Of Counsel: Blair
Connelly, Esquire (argued), Latham & Watkins LLP, New York, New York. Kristin N.
Murphy, Esquire, Ryan A. Walsh, Esquire, Latham & Watkins LLP, Costa Mesa, California
for Appellees Mark A. Pulido, William D. Green, and William J. Teuber.

VALIHURA, Justice:

2
 INTRODUCTION

This is an appeal of the Court of Chancery’s bench ruling granting Defendants

Below-Appellees’ motions to dismiss in full. Plaintiffs Below-Appellants filed suit in the

Court of Chancery challenging an acquisition of Inovalon Holdings, Inc. (“Inovalon” or

the “Company”) by a private equity consortium led by Nordic Capital, a Swedish private

equity firm (the “Transaction”).1 Plaintiffs asserted several breach of fiduciary duty

claims, an unjust enrichment claim, and a claim alleging a breach of the Company’s charter.

Defendants argued that the claims must be dismissed because the Transaction satisfied the

elements of Khan v. M & F Worldwide Corp. (“MFW”),2 thereby subjecting the board’s

actions to business judgment review.

On appeal, Appellants challenge the Court of Chancery’s dismissal under the MFW

framework because: (i) the Company failed to condition the Transaction ab initio on the

approval of the special committee; and (ii) the vote of the minority stockholders was not

informed because the proxy disclosure (the “Proxy”) omitted material information.

Because we conclude that the Court of Chancery erred in holding that the vote of the

minority stockholders was adequately informed, we REVERSE the decision of the Court

of Chancery.

1
We refer to Nordic Capital, together with its affiliates, as “Nordic.”
2
88 A.3d 635 (Del. 2014), overruled on other grounds by Flood v. Synutra Int’l, Inc., 195 A.3d
754 (Del. 2018).

3
 I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND3

A. The Parties4

Plaintiffs Below-Appellants are City of Sarasota Firefighters’ Pension Fund,

Steamfitters Local 449 Pension Fund, and Steamfitters Local 449 Retirement Security

Fund (collectively, “Appellants”).5 Appellants were holders of Inovalon Class A Common

Stock at all times relevant to the Action.6

Defendant Below-Appellee Inovalon is a provider of cloud-based platforms related

to the healthcare industry with diverse capabilities for use in connection with healthcare

plans and providers, as well as life-sciences companies and pharmacy organizations.7

Defendant Below-Appellee Dr. Keith Dunleavy founded Inovalon in 1998, served as the

Company’s CEO through the 2021 Transaction, and currently serves as Inovalon’s CEO

following the Transaction.8 Dunleavy held a substantial amount of Inovalon stock both

personally and through his controlled companies, which are also named defendants in the

Complaint: Meritas Group, Inc. (“Meritas Group”); Meritas Holdings, LLC (“Meritas

3
The facts, except as otherwise noted, are taken from the Verified Class Action Complaint filed
on August 9, 2022 [hereinafter “Complaint” or “Compl.”] and the Court of Chancery’s telephonic
bench ruling on July 31, 2023 [hereinafter “Bench Ruling”]. See Opening Br., Ex. A. In this
procedural posture, they are presumed to be true.
4
When addressing the proceedings below, we refer to Appellants as “Plaintiffs” and Appellees as
“Defendants.”
5
A33 (Compl. ¶ 10).
6
Id.
7
A33 (Compl. ¶ 11). Inovalon is incorporated in Delaware and headquartered in Bowie, Maryland.
8
A33 (Compl. ¶ 12). Dunleavy also served as the Chair of Inovalon’s board of directors from the
board’s creation in 2006 through the Transaction. Id.

4
LLC”); and the Dunleavy Foundation (collectively, the “Dunleavy Defendants”).9

Defendant André Hoffmann served on Inovalon’s board from 2008 until July 2020

and owned a significant amount of Inovalon stock — amounting to 22.8% of Inovalon’s

outstanding voting power. He held the stock both personally and through his controlled

company, Cape Capital SCSp, SICAR-Inovalon Sub-Fund (“Cape Capital”) (collectively,

the “Hoffmann Defendants”).10

The Complaint also named as defendants Inovalon’s board that issued the Proxy —

Dunleavy, Isaac S. Kohane, Mark A. Pulido, Denise K. Fletcher, William D. Green,

William J. Teuber, and Lee D. Roberts (collectively, the “Director Defendants”).11 Pulido,

Green, and Teuber served on the special committee (the “Special Committee”).12

B. Background of Inovalon

1. Capitalization

Inovalon launched its IPO in 2015 at $27 per share. After the IPO, Inovalon had

9
Meritas Group is a Delaware corporation. Dunleavy is its sole officer and director. It owned
42,356,820 shares of Inovalon Class B stock at the time of the Transaction, and it rolled over
17,073,171 of those shares in the Transaction. Meritas LLC is a Delaware LLC that owned
7,470,435 shares of Inovalon Class B stock at the time of the Transaction. Dunleavy is the sole
non-member manager of the LLC. The Dunleavy Foundation is a Delaware non-profit
organization that owned 5,120,000 Inovalon Class B shares at the time of the Transaction. A33–
A35 (Compl. ¶¶ 13–16).
10
A35–A36 (Compl. ¶¶ 17–18). Cape Capital is a Luxembourg Company controlled by
Hoffmann. It rolled over 14,634,147 Class B shares in the Transaction. A36 (Compl. ¶ 19).
11
A36–A40 (Compl. ¶¶ 20–26); see also A227–A481 (Cumings Aff., Ex. 1) (Schedule 14A Proxy
Statement of Inovalon) (Oct. 15, 2021) [hereinafter “Proxy”].
12
A40 (Compl. ¶ 30). The Complaint also highlighted the longstanding professional and personal
relationships that certain board members had with Dunleavy and Hoffmann and some of the board
members’ compensation from Inovalon. A36–A40 (Compl. ¶¶ 20–26).

5
two classes of common stock: publicly traded Class A common stock that entitled its

holders to one vote per share; and non-publicly traded, super-voting Class B common stock

that entitled its holders to ten votes per share. Inovalon’s charter required that if there were

ever a change of control transaction, its Class A and Class B stockholders must be treated

equally — absent the differential treatment being approved by a separate vote of each

class.13

At the time of the Transaction, Dunleavy held 70.4% of Inovalon’s Class B stock

and less than 1% of its Class A stock both directly and indirectly through his controlled

entities. Despite owning less than 50% of Inovalon’s total outstanding shares, Dunleavy

controlled 64.1% of Inovalon’s total voting power. Hoffmann held the second largest block

of Inovalon’s Class B shares both personally and through Cape Capital. Hoffmann

controlled roughly 23% of Inovalon’s total voting power at the time of the Transaction.14

Together, Dunleavy and Hoffmann controlled approximately 86% of Inovalon’s

stockholder voting power at the time of the Transaction.

2. Inovalon’s Recent Successes

In recent years, Inovalon experienced substantial success.15 The Company reported

annual revenue of over $642 million in 2019 and $667.5 million in 2020. Other metrics

13
A41 (Compl. ¶ 33) (quoting Article IV Section D(2)(c) of Inovalon’s Second Amended and
Restated Certificate of Incorporation).
14
A42 (Compl. ¶ 36). Hoffmann retired from his position on the board in July 2020, but
maintained his Class B ownership.
15
A45 (Compl. ¶ 41) (detailing that Inovalon generates a substantial majority of its revenue
through the sales or subscription licensing of its platform solutions, as well as from related
arrangements for advisory, implementation, and support services).

6
demonstrated the Company’s strong financial health: year-over-year adjusted EBITDA

increased 23% in Q1 of 2021; cash flows from operations grew by 22% in 2020; and, as

Dunleavy noted, the Company was seeing “robust, expanding sales pipelines despite

successive quarters of very strong deal closures.”16

Much of Inovalon’s growth was fueled by several key acquisitions and partnerships.

Inovalon acquired Avalere Health, Inc. in 2015; Creehan Holding Co., Inc. in 2016; and

Ability in 2018. Additionally, Inovalon had recently executed partnerships with the United

States government, Walmart Inc., AstraZeneca plc, Humana Inc., and Cardinal Health,

Inc., among others.17 Following these developments, Inovalon reported a 17% increase in

revenue for the second quarter of 2021 over the second quarter of 2020 and, according to

the Complaint, “multiple market analysts assigned a target price for the Company of $45

per share.”18

C. Inovalon Explores its Strategic Options

Inovalon’s continued success did not go unnoticed. In late 2020, Thoma Bravo, LP,

an American private equity firm, expressed an interest in acquiring Inovalon. Dunleavy,

in response, met via teleconference with Thoma Bravo without any other board members

on December 2, 2020. Two days later, he informed Teuber that he had met with Thoma

Bravo and that he would handle future negotiations with the firm. On February 1, 2021,

16
A45–A46 (Compl. ¶¶ 42–43) (internal quotation marks and citation omitted).
17
A48 (Compl. ¶ 47). During the Covid-19 pandemic, Inovalon was able to partner with Medicare
and Medicaid Services to distribute software that helped Covid-19 vaccine administration across
the country.
18
A50 (Compl. ¶ 51).

7
Dunleavy met with a large technology company and, according to the Proxy, discussed

“future opportunities for strategic partnerships, commercial arrangements or other

transactions between [the technology company] and [Inovalon].”19 At an Inovalon board

meeting on February 11, 2021, Dunleavy “provided an overview of his engagement with

[Thoma Bravo] and [the technology company] to date . . . .”20 Following his presentation,

the board authorized Dunleavy to “engage in discussions with financial advisors who could

potentially assist the [board] with an exploration of various strategic alternatives, including

methods for raising strategic capital.”21 In April 2021, Nordic Capital entered the scene.

1. Nordic Expresses an Interest in Acquiring Inovalon

On April 20, 2021, Nordic partner Daniel Berglund contacted an Inovalon

representative concerning a potential acquisition of the Company. In response, Inovalon’s

board invited J.P. Morgan Securities LLC (“J.P. Morgan”) to the May 3, 2021 board

meeting to present on strategic alternatives. During the board meeting, the board

authorized J.P. Morgan to explore a capital raise from a third-party and the exploration of

potential strategic partnerships. It did not, according to Plaintiffs, authorize J.P. Morgan

to explore an acquisition of the Company.22 Dunleavy met virtually with Nordic

representatives on May 26, 2021, while J.P. Morgan was conducting its initial outreach.

At this meeting, Nordic shared that one of its investment funds might be interested in a

19
A259 (Cumings Aff., Ex. 1) (Proxy at 22).
20
Id.
21
Id.
22
A53 (Compl. ¶ 59).

8
potential acquisition of Inovalon.23 J.P. Morgan was formally retained by Inovalon’s board

on June 2. The retention agreement authorized J.P. Morgan to explore a potential merger

and made J.P. Morgan’s payment contingent on Inovalon completing a transaction.24

A week later, at a board meeting on June 9, 2021, J.P. Morgan updated the board on

its outreach efforts concerning, first, potential equity and debt offerings and, second,

potential mergers.25 At the meeting, J.P. Morgan relayed that it had engaged with thirteen

parties, held management discussions with seven potential acquirers, and received

proposals from three parties.26 The board then approved J.P. Morgan’s continued

engagement with potential strategic partners and buyers. On June 11, 2021, Inovalon

retained the law firm Latham & Watkins LLP (“Latham”) to serve as its legal advisor.27

On June 24, Nordic signed a non-disclosure agreement (“NDA”) with Inovalon. At this

point, other parties who were interested in a possible merger were also in the mix: one had

submitted an indication of interest offering an acquisition price of $38 per share and at least

three other parties had expressed an interest in pursuing an acquisition.

On July 5, 2021, Dunleavy met with representatives of Nordic to discuss a potential

23
Specifically, Nordic’s fund — Nordic Capital Epsilon SCA, SICAV-RAIF — a Luxembourg
investment fund, would acquire Inovalon. A30 (Compl. ¶ 2).
24
A54–A55 (Compl. ¶ 62) (alleging that the retention agreement did not mention any form of
capital or debt raise; instead, it only addressed an acquisition or merger).
25
A55–A56 (Compl. ¶ 64).
26
Id. Nordic was not one of the parties that had met with Inovalon management or J.P. Morgan.
A56 (Compl. ¶ 65).
27
A56–A57 (Compl. ¶ 67) (Latham had previously worked with Nordic on unrelated mergers and
acquisitions). See id. (listing Latham’s prior representations of Nordic, including: (i) Nordic’s
early 2021 acquisition of Advanz Pharma; (ii) Nordic’s early 2021 merger with Bioclinica; and
(iii) Nordic’s portfolio company, Clario, in a late 2021 divestiture).

9
transaction. At this meeting, Nordic indicated that it would follow up with a written

indication of interest.28 During this meeting, Nordic informed Dunleavy that in similar

transactions, Nordic typically has requested that members of management participate in

equity rollovers of their investment.29 On July 6, Dunleavy received a communication

from Permira Advisors LLC (“Permira”) expressing a desire to submit an indication of

interest.30

On July 12, 2021, Nordic submitted a formal letter of interest to acquire Inovalon

for $43 per share.31 Nordic stated that it was confident it could fund 100% of the purchase

price with a mix of debt and equity but, if an equity rollover involving management were

necessary, a special committee would be required.32 It added that if an equity rollover were

part of a final transaction, the transaction must be approved by a “majority of [the

Company’s minority] shareholders[.]”33 Lastly, Nordic emphasized its commitment to

Inovalon’s existing management in executing their business plan.34

28
A58–A59 (Compl. ¶ 72).
29
Id. See also Rollover Equity, Wall Street Prep (last updated Feb. 20, 2024),
https://www.wallstreetprep.com/knowledge/rollover-equity/ (“Rollover equity refers to the exit
proceeds reinvested by a seller into the equity of the newly formed entity post-acquisition. An
equity rollover is therefore designed to align the economic incentives among participants in the
post-transaction entity.”). It is at this point, according to Plaintiffs, that “the specter of Dunleavy’s
overriding conflict of interest should have been clear to the Board, necessitating a special
committee to ensure a fair process.” A59 (Compl. ¶ 73).
30
A59 (Compl. ¶ 74) (adding that Dunleavy immediately forwarded Permira’s communication to
J.P. Morgan and, on July 7, Permira signed an NDA).
31
A59 (Compl. ¶ 75).
32
Id.
33
A547 (Cumings Aff., Ex. 6) (Nordic’s Letter of Interest) (July 12, 2021).
34
A60 (Compl. ¶ 76) (noting that Nordic’s letter explicitly stated: “the current management team
of Inovalon is critical for the future success of the Company” and that Nordic “would be committed
10
 In response to Nordic’s letter, the board convened the next day to consider Nordic’s

offer and compare it with a potential offer from Permira.35 Permira had verbally indicated

that it was prepared to submit a non-binding indication of interest with a target price per

share in the low $40s, payable in cash. Permira, however, needed an additional six weeks

to complete due diligence.

Given Permira’s noncommittal stance, Inovalon’s board authorized J.P. Morgan and

management to move forward with Nordic. The board instructed J.P. Morgan to propose

a price of at least $44 per share for 100% of Inovalon and a $3.5 billion equity commitment

from Nordic in exchange for an exclusivity agreement through August 2, 2021 (something

that Nordic requested in its letter).36 On July 14, 2021, Dunleavy again met with Nordic

and relayed the board’s instructions. Later that day, Nordic submitted an indication of

interest at $44 per share and again stated that it expected to obtain 100% financing for the

deal, which included a $3.5 billion equity commitment from Nordic as well as other equity

commitments of $2.55 billion from its co-investors (collectively, the “Equity Consortium”)

and debt financing of $1.75 billion.37 Nordic reiterated its commitment to current

management: “[f]or the avoidance of doubt, we do not foresee any changes to Inovalon’s

to supporting the management in executing on its business plan and strategy for the Company.”)
(internal quotation marks and citation omitted).
35
A60 (Compl. ¶ 77). It appears that the trial court mistakenly stated that this meeting occurred
on June 13 as opposed to July 13. Bench Ruling at 9.
36
A60–A61 (Compl. ¶ 78).
37
A61 (Compl. ¶ 80).

11
organization or employees following the completion of the Proposed Transaction.”38

Permira dropped out of consideration that same day.39 On July 16, Latham

(Inovalon’s counsel) met with Kirkland & Ellis LLP (Nordic’s counsel) and “discussed the

fact that [Inovalon’s] Board was meeting soon to consider and approve the establishment

of a special committee and also that they would each expect the special committee would

need to evaluate whether [Inovalon] should enter into any exclusivity arrangement with

[Nordic].”40

The board’s next meeting was July 18, 2021. At the meeting, Dunleavy relayed that

Nordic had “increasing confidence” that it could provide $3.5 billion in equity; the

potential for co-investors; and that Nordic had expressed a preference that Dunleavy roll

over a portion of his equity in connection with the proposed merger.41 In response to

Nordic’s preference for an equity rollover in a potential transaction, Latham reviewed with

the board its fiduciary duties.42 That day, the board appointed a Special Committee

consisting of: Teuber, Green, and Pulido. Teuber was appointed as chair two days later.

2. The Special Committee Oversees the Transaction

The Special Committee first convened on July 20, 2021. At that meeting, the

38
A62 (Compl. ¶ 81) (internal quotation marks and citation omitted).
39
A62 (Compl. ¶ 82) (noting that Permira dropped out because it was unable to conduct its due
diligence in light of how quickly the Transaction was moving).
40
A62–A63 (Compl. ¶ 83) (internal quotation marks and citation omitted).
41
A63–A64 (Compl. ¶ 85).
42
A64 (Compl. ¶ 86) (Latham proceeded to provide “an overview of the use and establishment of
a special committee in the context of transactions in which a[n] existing controlling shareholder
may form part of the consortium proposing to acquire 100% of the company.”) (internal quotation
marks and citation omitted).

12
Special Committee selected Latham as its legal advisor;43 planned to retain another

financial advisor in addition to J.P. Morgan; and concluded that it would be willing to

entertain Nordic’s exclusivity request if Nordic were willing to improve its offer. 44 The

Special Committee refrained from making a final decision regarding exclusivity until it

received more information concerning Nordic’s financing proposal.

The following day, July 21, 2021, Nordic formally requested that Dunleavy roll over

a portion of his equity into the post-Transaction entity. Dunleavy promptly informed the

Special Committee of this request. On July 22, the Special Committee held its second

meeting during which it learned that Latham “continued to communicate with the legal

counsel of [Nordic] as well as other potential parties that may participate as co-investors

with [Nordic].”45

On July 23, the Special Committee retained Evercore, Inc. (“Evercore”) as its

financial advisor. Evercore confirmed that it had no “material relationships” with

Inovalon.46 Evercore indicated that it would submit a written memorandum summarizing

its material relationships with potential counterparties. Evercore had worked with Nordic

in the past and Nordic had paid Evercore $9 million in advisory fees in the two years

43
See A263 (Cumings Aff., Ex. 1) (Proxy at 26) (stating that “although [Latham] had been retained
in June 2021 as counsel to the Company, [Latham] was not the Company’s historic counsel and
was independent of Company management and Dr. Dunleavy.”).
44
A65–A66 (Compl. ¶¶ 87–89).
45
A67 (Compl. ¶ 92) (internal quotation marks and citation omitted). Plaintiffs alleged that,
“[t]hus, by at least July 22, 2021, the Special Committee and/or Latham were likely aware of the
identity of some (if not all) of Nordic’s proposed co-investors who would later form the
Consortium.” Id.
46
A68 (Compl. ¶ 93).

13
preceding August 18, 2021. Additionally, Evercore concurrently advised Nordic in a

separate, unrelated transaction, which it later disclosed to the Special Committee. Evercore

also had conflicts with members of the Equity Consortium: it had collected “tens of

millions of dollars” in fees prior to the Transaction from members of the Equity

Consortium,47 and it was concurrently advising a member of the Equity Consortium in an

unrelated transaction. As to the concurrent representation, according to the Complaint,

“Evercore advised Insight on its fundraise for its Fund XII and Growth Buyout Fund

(valued at $20 billion), an engagement that seemingly began in or around May 2021 and

continued through the Transaction.”48 Evercore’s fee for its advisory services to the

Special Committee was $3 million, with an additional $7 million payment subject to the

Special Committee’s discretion.49

In the meetings that followed, the Special Committee repeatedly instructed Evercore

to review J.P. Morgan’s outreach efforts.50 On July 28, 2021, J.P. Morgan submitted a

47
A69 (Compl. ¶ 95) (referring to, in addition to Nordic, Insight Venture Partners, L.P. (“Insight”),
GIC Pte. Ltd. (“GIC”), and 22C Capital LLC (“22C”)). See also A290 (Cumings Aff., Ex. 1)
(Proxy at 53) (disclosing Evercore’s advisory fees from members of the Equity Consortium in the
preceding years).
48
A69–A70 (Compl. ¶ 96) (internal citations omitted).
49
A70 (Compl. ¶ 98). Plaintiffs interpreted this fee structure to mean that “Evercore’s fee was
entirely based upon a successful conclusion of a transaction[.]” A71 (Compl. ¶ 98).
50
A71 (Compl. ¶ 99) (noting that the “Committee discussed the importance of the review and
analysis by Evercore . . . of the buyer outreach and market check conducted by JP Morgan to
date.”) (internal quotation marks and citation omitted); A74 (Compl. ¶ 104) (detailing that on July
28, 2021, the Special Committee told Evercore to continue its review of J.P. Morgan’s process by
specifically “determin[ing] whether there were potential financial and strategic buyers that should
have been, but were not yet, contacted, and the extent to which JP Morgan engaged potential
buyers in meaningful dialogue.”) (internal quotation marks and citation omitted).

14
summary of relationships disclosure in which it disclosed business that it had previously

conducted with Nordic, which generated $15–$16 million in fees for J.P. Morgan. The

disclosure did not include J.P. Morgan’s prior business with members of the Equity

Consortium and other co-investors (whose identities were likely known at that time) that

generated tens of millions of dollars in fees.51 J.P Morgan disclosed those conflicts to the

board on August 30, 2021, two weeks after the parties had signed the merger agreement.

According to Plaintiffs, there was no indication that the Special Committee ever asked J.P.

Morgan whether it had any relationship with Nordic’s co-investors.

On July 30, 2021, Dunleavy informed the Special Committee that he and other

rollover participants (such as Hoffmann) had also hired Latham as their counsel in

negotiating their rollovers. During this period, Dunleavy informed the Special Committee

that he was willing to participate in an equity rollover of up to $400 million and Hoffmann

was willing to roll over up to $300 million in equity even though Nordic was not likely to

proceed unless Dunleavy agreed to roll over at least $700 million.52

On August 9, 2021, the Special Committee learned that Nordic had only raised $2.2

billion in equity financing for the acquisition — short of the projected $3.5 billion.

Consequently, on August 10, Nordic verbally informed J.P. Morgan that a price of $44 per

share was no longer feasible because of its failure to secure additional equity financing.

51
A74–A75 (Compl. ¶ 106). See also A75 (Compl. ¶ 108) (detailing that “since July 2019, JP
Morgan had received fees of $78 to $83 million from business with Insight, $250-$270 million
from business with GIC, and $20-$30 million from business with 22C.”) (internal citation
omitted). On July 28, 2020, Insight, one of Nordic’s co-investors, signed an NDA with Inovalon.
A75 (Compl. ¶ 106).
52
A78 (Compl. ¶ 113) (citing A265 (Cumings Aff., Ex. 1) (Proxy at 28)).

15
Therefore, Nordic planned to resubmit an updated indication of interest at $40.50 per share

and a requirement that Dunleavy increase his equity rollover to $1 billion.53

The Special Committee, upon learning of this development, determined that

accepting Nordic’s offer at $40.50 per share would not be in the best interest of the

Company and its stockholders and that it would also not approve any transaction in which

Dunleavy was required to roll over more than $700 million in equity. Later that day, Nordic

officially submitted its revised proposal of $40.25 per share (instead of $40.50), with a

combined rollover from both Dunleavy and Hoffmann of $1.1 billion. The Special

Committee concluded that the revised offer was not in the best interests of the Company

or its stockholders.

The Special Committee then instructed J.P. Morgan to engage with other interested

parties. After looking elsewhere, J.P. Morgan informed the Special Committee that other

buyers might be able to offer a price comparable to Nordic’s, but they required more time

for due diligence. Consequently, the Special Committee instructed J.P. Morgan to continue

negotiations with Nordic while simultaneously engaging with other potential buyers.

At an August 13, 2021 meeting, the Special Committee determined that the

Company should continue negotiating with Nordic to maintain Nordic’s commitment to

pursuing a transaction, “particularly at a price of $41 per share or higher,” as that “would

be in the best interest of the Company.”54 J.P. Morgan presented to the Special Committee

53
A266 (Cumings Aff., Ex. 1) (Proxy at 29).
54
A88 (Compl. ¶ 135) (internal quotation marks and citation omitted).

16
the state of its outreach attempts to other interested parties: one interested party indicated

that it could do a $41 per share offer; however, it required that Dunleavy roll over 80% of

the deal proceeds; another interested party had verbally indicated that $42 per share might

be too expensive; a third interested party stated that it could potentially approach $42 per

share; and two other parties expressed some interest.55

Later that same day, on August 13, 2021, Nordic submitted a revised offer of $41

per share, proposing equity rollovers from Dunleavy and Hoffmann of $700 million and

$542 million, respectively.56 The Special Committee, still not satisfied, instructed J.P.

Morgan to continue its outreach to other parties. Two days later, on August 15, Nordic

submitted its “best and final offer” of $41 per share, which contemplated a $700 million

equity rollover from Dunleavy and a $600 million equity rollover from Hoffmann. Nordic

also requested that the go-shop provision be eliminated from the proposed merger

agreement. In response, the Special Committee convened that day and instructed J.P.

Morgan to continue its outreach with other parties.

As of August 16, 2021, there were other remaining bidders that might have been

able to offer comparable prices to Nordic, but they needed more time for due diligence.

The Special Committee directed Latham to accept the deletion of the go-shop provision in

exchange for a smaller termination fee, a larger reverse termination fee, and an extended

55
A88–A89 (Compl. ¶ 136).
56
A89 (Compl. ¶ 137). The Plaintiffs allege that “[t]he Proxy falsely stated that the total required
rollover was only $1 billion (Dunleavy $700 million, Hoffmann $300 million).” Id. (internal
citation omitted).

17
outside date. At this point, according to Plaintiffs, Dunleavy continued to negotiate with

Nordic, and he told the board that the specific terms of his rollover agreement were not yet

acceptable to him. J.P. Morgan continued its market outreach. On August 17, “Dunleavy

advocated for the Transaction[]” at a board meeting.57

3. The Special Committee and the Board Approve the Transaction

At an August 18, 2021 meeting of the Company’s independent directors, J.P.

Morgan and Evercore orally opined that Nordic’s offer at $41 per share was fair, from a

financial point of view, to Inovalon’s public stockholders. The Proxy states that on this

date, Evercore delivered to the Special Committee an update to its written memorandum

“disclosing [its] material relationships with respect to several potential counterparties,

including [Nordic] and Dr. Dunleavy.”58 That same day, the Special Committee

recommended that the board approve the Transaction. The independent directors and the

audit committee approved the Transaction.59 Dunleavy and Hoffmann, and their affiliates,

concurrently executed agreements laying out the terms of their equity rollovers. Prior to

the Transaction, Dunleavy and Hoffmann held 11% and 9.4% of Inovalon’s shares,

respectively.60 Following the rollover agreements, Dunleavy and Hoffmann would hold

57
A95 (Compl. ¶ 150).
58
A268 (Cumings Aff., Ex. 1) (Proxy at 31).
59
The Proxy states that “the independent members of the Company Board (consisting of all
members of the Company Board other than Dr. Dunleavy, who recused himself) unanimously
approved and declared advisable the Merger Agreement . . . .”). A269 (Cumings Aff., Ex. 1)
(Proxy at 32).
60
A98 (Compl. ¶ 156).

18
15.6% and 13.4% of the post-Transaction entity, respectively.61

Annex B, a supplement to Dunleavy’s equity rollover agreement, was referred to as

the “MIP Term Sheet.”62 It outlined Nordic’s commitment to implement a management

incentive plan (or “MIP”) following the Transaction’s closing. Under the MIP term sheet,

the MIP would hold equity interests consisting of 8% of the fully diluted common equity

of the post-Transaction entity. Additionally, the MIP would grant 5% of the interests to

employees at closing and reserve an additional 3% for future issuances. Despite

Dunleavy’s equity rollover agreement stating that the post-Transaction entity would

implement a MIP consistent with the term sheet after closing,63 the MIP term sheet

explicitly stated that it was not legally binding, did not contain all of the terms and

conditions applicable, was subject to material change(s), and was “being distributed for

discussion purposes only.”64

4. Inovalon Issues its Proxy and the Minority Stockholders Approve the
Transaction

Inovalon filed the Proxy soliciting stockholder approval of the Transaction on

October 15, 2021. On November 5, 2021, it issued supplemental disclosures that stated

there were no discussions between Nordic’s and Inovalon’s management regarding post-

61
Id.
62
A611 (Cumings Aff., Ex. 14) (Annex B to Terms and Conditions of [the LP] Agreement).
63
A620 (Cumings Aff., Ex. 14) (Annex B to Terms and Conditions of [the LP] Agreement, at 9)
(“Upon or as soon as practicable after the Closing, the Company will implement a MIP on terms
and conditions consistent with those set forth in MIP Term Sheet attached as Annex I hereto.”).
64
A621 (Cumings Aff., Ex. 14) (Annex B, Project Ocala, Management Incentive Plan Term
Sheet).

19
Transaction employment other than those regarding Dunleavy’s equity rollover. 65 On

November 16, at a special class meeting of Inovalon stockholders, its Class A and Class B

stockholders voted separately to approve the merger, with over 99% of the Company’s

minority stockholders voting to approve the Transaction.66

D. Court of Chancery Proceedings

Following the Transaction’s approval, Plaintiffs made a demand for books and

records pursuant to Delaware General Corporation Law (“DGCL”) § 220.67 Inovalon

produced the responsive documents. Plaintiffs then filed the Complaint on August 9, 2022

asserting five counts. In Count I, Plaintiffs alleged that the Dunleavy Defendants breached

their fiduciary duties as controllers by negotiating disparate consideration in the merger.

In Count II, Plaintiffs alleged that the board breached their fiduciary duties by approving a

merger that was unfair to minority stockholders and by issuing a misleading proxy. In

Count III, Plaintiffs alleged that Dunleavy breached his fiduciary duty as CEO by

negotiating for himself non-ratable benefits.68 In Count IV, Plaintiffs alleged that the

Dunleavy Defendants and the Hoffmann Defendants were unjustly enriched by the

Transaction. Lastly, in Count V, Plaintiffs alleged that Inovalon and the board breached

the Company’s charter because the Transaction treated Class A and Class B stockholders

unequally in connection with an uninformed stockholder vote.

65
A102 (Compl. ¶ 165). The trial court mistakenly stated that Inovalon issued the supplemental
disclosures on November 15, as opposed to November 5. Bench Ruling at 19.
66
A117 (Compl. ¶ 188 n.186) (citing Inovalon’s Form 8-K (Nov. 16, 2021)).
67
Bench Ruling at 19.
68
A136–A137 (Compl. ¶¶ 242–47).

20
 Defendants moved to dismiss the Complaint under Rule 12(b)(6). The parties then

stipulated to a voluntarily dismissal of the Hoffmann Defendants without prejudice. The

motions were fully briefed as to the remaining defendants, and the court heard oral

argument on April 5, 2023.

Following oral argument, the court issued a bench ruling on July 31, 2023, in which

it held that the requirements of MFW were met and granted Defendants’ motions to dismiss

in their entirety with prejudice. Plaintiffs challenged only three of MFW’s requirements:

the ab initio requirement; the Special Committee’s duty of care; and the informed

stockholder vote requirement.

1. The Ab Initio Requirement

As to the ab initio requirement, Plaintiffs argued that Inovalon failed to condition

the Transaction ab initio on the approval of the Special Committee. The trial court first

determined that “MFW’s procedural requirements extend to one-sided conflicted controller

transactions.”69 It then relied on two decisions from this Court to determine the contours

of the ab initio requirement: Flood70 and Olenik.71 In Flood, this Court clarified that

MFW’s ab initio requirement is satisfied if the controller conditions its offer on the key

protections “at the germination stage” of the negotiations process — such as when the

committee is selecting its advisors, establishing its method of proceeding, and beginning

69
Bench Ruling at 22.
70
Flood, 195 A.3d 754.
71
Olenik v. Lodzinski, 208 A.3d 704 (Del. 2019).

21
diligence.72 In Olenik, this Court held that the plaintiff had pled facts to support a

reasonable inference that MFW’s procedural protections were not put in place early

enough, i.e. before substantive economic negotiation occurred.

The trial court here found that the conflicts did not arise until Nordic “formally”

requested that Dunleavy participate in an equity rollover as part of its written offer on July

21, 2021.73 This request did not occur until after the Special Committee had been formed

on July 18. Although Nordic had suggested that it would “expect” a similar equity rollover

in initial negotiations with Dunleavy on July 5, the rollover was not part of Nordic’s July

12 indication of interest to acquire Inovalon for $43 per share, or its July 14 $44 per share

offer, and the parties, at that stage, “had not made it to ‘advanced negotiations[.]’” 74 The

trial court was “content” that the MFW protections operated as they should have in this

circumstance.

2. The Special Committee’s Duty of Care

The trial court next addressed Plaintiffs’ contention that the Special Committee

breached its duty of care in three ways: (i) by selecting conflicted advisors; (ii) by allowing

Dunleavy and J.P. Morgan to negotiate directly with Nordic; and (iii) by forgoing the go-

72
Flood, 195 A.3d at 763.
73
Bench Ruling at 27.
74
Id. As the Chancellor observed, even in August 2021, the Special Committee “instructed J.P.
Morgan to actively engage in buyer outreach with other interested parties.” Id. at 13. Appellees
also argued to this Court that it would not have made sense to stop in the middle of an active
outreach process at that point — to form a Special Committee — when only one bidder had
expressed interest in a rollover. Oral Argument, at 30:45–31:30, https://vimeo.com/913043373.

22
shop provision in the merger agreement.75 The trial court determined that none of these

arguments was persuasive.

The court first considered whether the Special Committee breached its duty of care

in its hiring and management of conflicted advisors. Starting with Latham, it held that

Latham’s prior month-long representation of Inovalon in June 2021 was “the kind of

relatively minor and infrequent representation that generally is difficult to conclude rises

to the level of a conflict that implicates a duty of care violation.”76 Moreover, Latham’s

prior representation was disclosed in the Proxy. The court was “slightly more trouble[ed]”

by Latham’s concurrent conflicts with Nordic on unrelated deals. Nonetheless, it

concluded that the allegations failed to cast doubt on the reasonableness and good faith

nature of the Special Committee’s decision to hire Latham because Latham represented

that it did not have any material conflicts and there were no facts suggesting gross

negligence by the Special Committee.

The court next focused on Plaintiffs’ allegations concerning Evercore’s conflicts.

Concerning Evercore’s and its affiliates’ prior dealings with Nordic and its affiliates on

unrelated transactions, the court recognized the business reality “that most financial

advisors have relationships with major private equity firms.”77 Evercore represented to the

Special Committee that it did not have any material conflicts and, in the court’s opinion,

its disclosures were adequately vetted by the Special Committee. Therefore, the trial court

75
Bench Ruling at 28–29.
76
Id. at 30.
77
Id. at 31.

23
concluded that Plaintiffs had not alleged that the Special Committee was grossly negligent

in retaining Evercore.

In analyzing J.P. Morgan’s alleged conflicts, the trial court summarily held that, like

Latham and Evercore, Plaintiffs failed to allege facts sufficient to show that the Special

Committee was grossly negligent in retaining J.P. Morgan. Despite J.P. Morgan’s alleged

concurrent and prior representations of Nordic-affiliated entities, the Special Committee

hired Evercore “to help with the process.”78 The Special Committee had received the

information it needed and “layered on advisory services from multiple advisors in order to

mitigate the possibility that any one immaterial conflict even could taint the process.”79

Therefore, the court was satisfied that the allegations did not sufficiently impugn the

Special Committee’s duty of care.

The trial court next addressed the claim that the Special Committee was grossly

negligent in allowing Dunleavy and J.P. Morgan to negotiate with Nordic given their

conflicts, and that it improperly delegated Inovalon’s entire negotiation to them. As to J.P.

Morgan, the court reasoned that it had already determined that the allegations surrounding

J.P. Morgan’s alleged conflicts were unpersuasive. As to Dunleavy, the trial court stated

that it did not find this argument persuasive either: “Dunleavy’s employment and equity

rollover terms remained fluid throughout the process, and his conflicts were disabled by

the MFW protections before substantive negotiations took place as to those issues.”80

78
Id.
79
Id. at 32.
80
Id. at 33.

24
 Addressing the Plaintiffs’ broader argument concerning the Special Committee’s

delegation of the negotiations to Dunleavy and J.P. Morgan, the trial court reiterated that

the Special Committee’s conduct must be evaluated under the “lens of due care[]” and,

often, “no single factor will completely resolve the analysis.”81 It determined that the

Special Committee “undertook substantial efforts to evaluate the potential field of buyers,

pushed Nordic to increase its offer from $40.25 per share to $41 per share, and limited

Dunleavy’s equity rollover.”82 The court then rejected the claim holding that “[m]aking

good faith decisions, while having J.P. Morgan carry out marching orders, does not rise to

the level of gross negligence.”83

Lastly, the trial court addressed Plaintiffs’ claim that the Special Committee’s

decision to eliminate the go-shop provision constituted gross negligence. The court

rejected the claim observing that “Delaware courts have held that foregoing a go-shop

[provision] or agreeing to a no-shop provision is not per se unreasonable.”84 Here, the

Special Committee eliminated the go-shop provision in exchange for concessions from

Nordic namely, a reduced seller termination fee, an increased buyer termination fee, and

an extended outside date.85 Plaintiffs’ argument thus boiled down to “their disagreement

81
Id.
82
Id. at 35.
83
Id.
84
Id. at 36.
85
Id. The trial court also noted that the Special Committee’s timing in dropping the go-shop
provision was relevant:
By this point, the special committee had instructed J.P. Morgan to conduct outreach
to over 30 potential bidders, 13 of which signed NDAs and three of which submitted
bids before declining to proceed. Despite all these efforts, no other bidder was
25
with the value that the special committee placed on these exchanged terms[.]”86

In summarizing its due care analysis, the court held that Plaintiffs’ allegations failed

to impugn the Special Committee’s duty of care. It held:

The special committee convened 23 times between July and August of 2021
and engaged with its advisors. It considered its advisors’ feedback. It
conducted extensive third-party outreach. When Nordic retracted its initial
bid and reduced its offer, the special committee successfully bid up the deal
price to $41 per share with favorable non-economic terms. So in these
circumstances, plaintiffs fail to plead facts making it reasonably conceivable
that the special committee acted with gross [negligence].87

3. The Sufficiency of the Stockholder Vote

Plaintiffs alleged that the Proxy was materially deficient in six ways in failing to

disclose: (i) J.P. Morgan’s and Evercore’s conflicts; (ii) the non-ratable benefits to

management from the Transaction; (iii) that Dunleavy and Nordic believed Inovalon was

worth at least $44 per share; (iv) that J.P. Morgan conducted third-party outreach, not

Evercore; (v) that Dunleavy’s and Hoffmann’s ownership interests increased in the post-

Transaction entity; and (vi) that there was continued third-party interest in acquiring

Inovalon. The trial court rejected each assertion.

First, the trial court summarily dispensed with the allegedly material omission of

J.P. Morgan’s and Evercore’s conflicts because it had already determined, in assessing the

willing to give Inovalon more than Nordic had offered. By conducting a market
check, the special committee apprised itself of any other potential third-party
interest before signing. So it’s not reasonably conceivable to me that agreeing to
drop the go-shop provision constituted gross negligence.
Id. at 37.
86
Id.
87
Id. at 37–38.

26
Special Committee’s alleged breach of the duty of care, that those conflicts were not

material.88

Second, the trial court addressed the Proxy’s omission of the MIP. It reasoned that

whether the MIP Term Sheet would have been a material omission depended on whether

it was better classified as a “concrete side deal” for Dunleavy or whether it was a proposed

but not concrete future business plan.89 It held that the MIP was “merely a term sheet that

the parties agreed to attempt to negotiate further.”90 Moreover, the term sheet explicitly

stated that it was not legally binding, it did not contain all of the terms and conditions

applicable, it was subject to material change(s), and it was being distributed for discussion

purposes only.91 The court reasoned that nothing in the merger agreement or ancillary

documents required that the MIP be implemented according to the parties’ positions laid

out in the term sheet and, at the time of the stockholders’ vote, “the MIP was still

gestational.”92

Third, the trial court addressed the Proxy’s omission of Dunleavy’s and Nordic’s

belief that Inovalon was worth at least $44 per share. It held that Plaintiffs failed to allege

any non-conclusory facts to support this allegation. The Proxy adequately disclosed that

88
Id. at 39 (holding that, “since I’ve already found that those allegations weren’t entirely
persuasive, I do not believe that the precise information that plaintiffs deem a disclosure deficiency
would have altered the total mix of information available to stockholders.”).
89
Id. at 40.
90
Id. at 42.
91
Id. See also A621 (Cumings Aff., Ex. 14) (Annex B, Project Ocala, Management Incentive Plan
Term Sheet).
92
Bench Ruling at 43.

27
Nordic’s second offer was $44 per share and that it later decreased that offer. The trial

court further reasoned that, although the Special Committee’s meeting minutes from

August 9, 2021 state that Dunleavy was “prepared” to set his equity rollover at $700 million

at $44 per share, this did not say anything about Dunleavy’s purported belief about

Inovalon’s value.

Fourth, the court addressed Plaintiffs’ allegations concerning the roles of J.P.

Morgan and Evercore in advising the Special Committee and whether the Proxy overstated

Evercore’s role, thereby giving the misleading impression that it was able to mitigate J.P.

Morgan’s conflicts. The trial court held that Plaintiffs’ position is hard to square with the

“practical realties[]” of the Transaction which included the fact that J.P. Morgan had a one-

month head start over Evercore and it was evident, based on the allegations, that Evercore

did, in fact, engage in the outreach process. Further, the court had already determined that

J.P. Morgan was not materially conflicted.

Fifth, the trial court focused on the Proxy’s omission of the fact that Dunleavy’s and

Hoffmann’s combined equity rollover increased from 20.4% of Inovalon’s pre-Transaction

equity to 29% of the post-Transaction equity. The Proxy disclosed Dunleavy’s and

Hoffmann’s individual rollover agreements, the number of shares they rolled over, and the

number of post-Transaction shares they received. The trial court did not view it as

necessary for the Company to disclose the precise percentages that Dunleavy and

Hoffmann would have received in the post-Transaction entity.

Sixth, and finally, the trial court turned its attention to the Proxy’s omission of

continued third-party interest in acquiring Inovalon. The Proxy stated that, as of August

28
13, 2021, “no potential counterparty had expressed an interest in offering a price at or above

$41 per share.”93 Plaintiffs pointed to J.P. Morgan’s August 13, 2021 presentation to the

Special Committee that identified three potentially interested parties. However, the court

determined that the Proxy disclosure was consistent with J.P Morgan’s presentation to the

Special Committee because none of the other supposedly interested parties had made a

better offer than Nordic’s (at $41 per share), and none of them ultimately made an actual

offer. It concluded that the Proxy’s omission of other nonbinding informal

communications was not material.

In sum, the trial court held that Plaintiffs failed to plead sufficient facts to

demonstrate that the Transaction did not comply with the MFW framework, and thus, the

Transaction was subject to business judgment review. Accordingly, the court held that

Plaintiffs failed to state a claim as to Counts I, II, and III.

Lastly, the trial court held that Plaintiffs’ remaining counts similarly rose and fell

with the MFW analysis. The court found that the unjust enrichment claim against the

Dunleavy Defendants in Count IV was predicated on the same facts that formed the basis

of Plaintiffs’ claims for breach of fiduciary duty against the Dunleavy Defendants.

Because those claims were deficient, so were the unjust enrichment claims. Count V

alleged that Inovalon and the board violated provisions of Inovalon’s charter requiring that

Class A and Class B shares be treated equally in a change-of-control transaction. Plaintiffs

argued that although Inovalon did conduct separate voting for Class A and Class B, these

93
A267 (Cumings Aff., Ex. 1) (Proxy at 30).

29
voters were uninformed and that therefore, the votes were invalid. The court dismissed

this count because it had already determined that the minority stockholders were

adequately informed by the Proxy when they voted to approve the Transaction.

E. Contentions on Appeal

Appellants argue that judicial cleansing is unavailable under the MFW framework

for two separate reasons. First, they say that Dunleavy engaged in substantive economic

negotiations with Nordic before the Special Committee’s formation — thereby violating

the ab initio requirement of the MFW framework. Because we reverse on the second

ground, we do not address this claim of error.

Instead, we focus our attention on Appellants’ second argument that judicial

cleansing under the MFW framework is unavailable because the Proxy omitted material

information that rendered the minority stockholders’ vote to approve the Transaction

uninformed. They base this claim on three allegedly material omissions in the Proxy

discussed below.

II. STANDARD OF REVIEW

“We review de novo the dismissal by the Court of Chancery of a complaint under

Rule 12(b)(6).”94

III. ANALYSIS

In the last decade, our Court has issued several decisions concerning certain

procedural devices that could alter the burden of proof in a conflicted transaction. In MFW,

94
Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001) (internal citation omitted).

30
a case involving a controller freeze-out transaction, we adopted the following standard:

To summarize our holding, in controller buyouts, the business judgment
standard of review will be applied if and only if: (i) the controller conditions
the procession of the transaction on the approval of both a Special Committee
and a majority of the minority stockholders; (ii) the Special Committee is
independent; (iii) the Special Committee is empowered to freely select its
own advisors and to say no definitively; (iv) the Special Committee meets its
duty of care in negotiating a fair price; (v) the vote of the minority is
informed; and (vi) there is no coercion of the minority.95

In In re Tesla Motors, Inc. S’holder Litig.,96 we reiterated that MFW’s procedural

protections must be “established prior to trial[.]”97 And when they are established, the

transaction is then afforded the deferential business judgment standard of review. Under

Delaware’s business judgment rule, “‘the board’s decision will be upheld unless it cannot

be attributed to any rational business purpose.’”98 In our most recent decision in In re

Match Grp., Inc. Derivative Litig.,99 we held that where a controlling stockholder stood on

both sides of a transaction with a controlled corporation and received a non-ratable benefit,

entire fairness was the presumptive standard of review.100

Here, Appellants assert that MFW “cleansing” is unavailable because the

95
MFW, 88 A.3d at 645 (emphasis in original). In Flood, we clarified that “[t]o avoid one of
Lynch’s adverse consequences—using a majority-of-the-minority vote as a chit in economic
negotiations with a Special Committee—MFW reviews transactions under the favorable business
judgment rule if ‘these two protections are established up-front.’” 195 A.3d at 762 (quoting MFW,
88 A.3d at 644) (emphasis added)).
96
298 A.3d 667 (Del. 2023).
97
Id. at 708 (quoting MFW, 88 A.3d at 646 (emphasis in original)).
98
Id. (quoting In re Walt Disney Co. Derivative Litig., 906 A.2d 27, 74 (Del. 2006) (internal
quotation marks and citation omitted)).
99
2024 WL 1449815 (Del. 2024).
100
Id. at *1.

31
stockholder vote was not fully informed. Appellants allege that the Proxy failed to

adequately disclose: (i) the MIP, a material and non-ratable benefit providing Dunleavy

and others with hundreds of millions of dollars in value; (ii) Evercore’s and J.P. Morgan’s

concurrent representations of Nordic and members of the Equity Consortium and their

respective affiliates, as well as J.P. Morgan’s fees earned from members of the Equity

Consortium and their affiliates in prior representations; and (iii) Evercore’s role in the

market outreach to potential bidders. We address each in turn.

A. The Proxy Adequately Disclosed the MIP

As to the MIP term sheet, Appellants challenge the trial court’s determination that

it would not have altered the “total mix” of information available to stockholders. 101 That

was because the MIP term sheet was best classified as a proposal, as opposed to a concrete

future business plan and, accordingly, did not require disclosure. This is a close call, but

we hold that the trial court did not err in rejecting this claim.

The existence of an equity incentive program for certain employees in the post-

Transaction entity was disclosed to stockholders. The Proxy provided a chronology of the

negotiation process prior to the Transaction. It stated that the Special Committee held

meetings with its advisors in which they discussed updates on “the Company’s

management’s proposal regarding treatment of equity incentives for employees[.]”102 The

Proxy indicated that Dunleavy was involved in these discussions: “[a]t the end of the

101
Bench Ruling 39–43 (discussing City Pension Fund for Firefighters and Police Officers in the
City of Miami v. The Trade Desk, Inc., 2022 WL 3009959 (Del. Ch. 2022)).
102
A264 (Cumings Aff., Ex. 1) (Proxy at 27).

32
meeting, the Special Committee invited Dr. Dunleavy to join the meeting to provide his

views to the Special Committee regarding the potential treatment of equity incentive

compensation in connection with a potential sale transaction.”103 Additionally, an FAQ

document that was attached as an exhibit to a supplemental proxy filing104 disclosed that

“there will be a profit share equity unit incentive program that will give eligible associates

access to the upside of the Company.”105 The Proxy’s Q&A section also urged readers to

review the Form 13E-3 and related exhibits.106

Appellants point to the Special Committee’s meeting minutes claiming that the

Proxy’s references to equity incentives for employees refer exclusively to the treatment of

unvested equity under existing employee incentive programs in the Transaction as opposed

to the MIP. But, the minutes could be more broadly read as they state:

Dr. Dunleavy presented a detailed summary of his proposed treatment of
unvested outstanding equity for employees. Dr. Dunleavy stated that in his
view the proposed acceleration of vesting and escrow arrangement to support
future payments of incentive compensation would be crucial to achieving the
continued focus and engagement of key Company employees required to
deliver the performance of the Company anticipated as reflected in
management’s projections.107

Following discussion, members of the Special Committee concluded that Dr.
103
A266 (Cumings Aff., Ex. 1) (Proxy at 29).
104
A670 (Cumings Aff., Ex. 24) (Additional Proxy Soliciting Material on Schedule 14A) (Aug.
19, 2021). As noted by Appellees, the proxy supplement was filed publicly two months before the
Proxy, it was available on the SEC’s website, the Company’s website, and to any stockholder that
requested a copy from the Company. Answering Br. at 41–42.
105
A673 (Cumings Aff., Ex. 24) (Additional Proxy Soliciting Material on Schedule 14A) (Aug.
19, 2021).
106
A256 (Cumings Aff., Ex. 1) (Proxy at 19).
107
A597 (Cumings Aff., Ex. 13) (Minutes of a Meeting of the Special Committee dated August 2,
2021) (emphasis added).

33
 Dunleavy’s proposal would provide sufficient incentives to key Company
employees to increase the likelihood that conditions to closing will be
satisfied and anticipated future performance will be achieved in each case
without compromising the benefits of a transaction to the Company’s
stockholders. The Special Committee instructed Latham to revise the draft
merger agreement . . . and authorized Dr. Dunleavy to discuss his proposal
with representatives of Nordic Capital.108

Appellants also point out that Annex B to Dunleavy’s rollover agreement states that

the Company will implement a MIP consistent with the term sheet.109 Annex B was

omitted from the Proxy. But Annex B to the term sheet explicitly stated that “[t]his Term

Sheet is not legally binding, does not contain all of the terms and conditions applicable to

the contemplated arrangements described herein, is subject to material change and is being

distributed for discussion purposes only.”110 The Proxy did contain the form of rollover

agreement that revealed that Dunleavy was rolling over $700 million in equity. 111 The

stockholders therefore knew that he would have a significant stake in the resulting entity.

The Proxy also explicitly stated that Dunleavy would continue as CEO in the post-

Transaction entity.112 Thus, although the exact terms of the MIP were not disclosed in the

108
Id. (emphasis added).
109
Opening Br. at 35. Appellants argue that the “MIP was a legally binding Transaction Term[]”
because the LP Agreement provided that “[u]pon or as soon as practicable after the Closing, the
Company will implement a MIP on terms and conditions consistent with those set forth in [the]
MIP Term Sheet.” Reply Br. at 9 (emphasis in original) (internal quotation marks and citation
omitted).
110
A621 (Cumings Aff., Ex. 14) (Annex B, Project Ocala, Management Incentive Plan Term
Sheet).
111
A469 (Cumings Aff., Ex. 1) (Annex A to Rollover Agreement).
112
A228 (Cumings Aff., Ex. 1) (Proxy Introduction) (“Dr. Dunleavy will continue to be a
substantial shareholder in the Company, serve on the Company Board and continue as Inovalon’s
CEO.”).

34
Proxy, the stockholders were reasonably informed of the existence of equity incentives that

would be provided to certain employees, including Dunleavy, who would continue in the

post-Transaction entity.

B. The Proxy Failed to Adequately Disclose the Nature and Extent of the Special
Committee’s Advisors’ Conflicts

Appellants contend that the trial court erred when it rejected their disclosure claims

concerning J.P. Morgan’s and Evercore’s conflicts with Nordic and members of the Equity

Consortium.113 The trial court summarily held: “I’ve already discussed one of those

categories, J.P. Morgan and Evercore’s conflicts. And since I’ve already found that those

allegations weren’t entirely persuasive, I do not believe that the precise information that

plaintiffs deem a disclosure deficiency would have altered the total mix of information

available to stockholders.”114 Thus, the trial court decided that the Special Committee was

not grossly negligent in retaining and managing its advisors and then summarily dispensed

with the disclosure issues by relying on that duty of care analysis.

In Brookfield,115 we held that the trial court’s duty of care analysis did not

adequately address the separate disclosure issues which required an assessment of the

materiality of the conflicts from the perspective of the stockholders. In this case, we

similarly hold that the trial court’s due care analysis concerning the retention and

management of the advisors did not sufficiently address all of the disclosure issues — some

113
Opening Br. at 41.
114
Bench Ruling at 38–39.
115
City of Dearborn Police and Fire Revised Ret. Sys. v. Brookfield Asset Mgmt., Inc., 2024 WL
1244032 (Del. 2024).

35
of which arose after the advisors’ retention.116

“‘Materiality is to be assessed from the viewpoint of the ‘reasonable’ stockholder,

not from a director’s subjective perspective.’”117 A special committee’s advisor’s conflicts

are uniquely important considerations for minority stockholders when deciding how to

vote: “it is imperative for the stockholders to be able to understand what factors might

influence the financial advisor’s analytical efforts . . . .”118 Moreover, “‘[b]ecause of the

central role played by investment banks in the evaluation, exploration, selection, and

implementation of strategic alternatives,’” Delaware courts have required full disclosure

of investment banker compensation and potential conflicts.119 As we explain below, we

hold that the Proxy failed to adequately disclose Evercore’s and J.P. Morgan’s conflicts.

1. Evercore’s Concurrent Conflicts

We first address Appellants’ contention that the Proxy failed to adequately disclose

Evercore’s concurrent conflicts. Regarding Evercore and its affiliates, the Proxy disclosed

116
We note that our decision in Brookfield came after the Court of Chancery had decided both
Brookfield and this case and thus, the court did not have the benefit of our decision in Brookfield
when deciding the similar issues here.
117
Millenco L.P. v. meVC Draper Fisher Jurvetson Fund I, Inc., 824 A.2d 11, 18 (Del. Ch. 2002)
(quoting Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270, 1277 (Del. 1994)).
118
Brookfield, 2024 WL 1244032, at *17 (internal quotation marks and citation omitted). See also
In re John Q. Hammons Hotels Inc. S’holder Litig., 2009 WL 3165613, at *16 (Del. Ch. 2009)
(“There is no rule . . . that conflicts of interest must be disclosed only where there is evidence that
the financial advisor’s opinion was actually affected by the conflict.”); Millenco L.P., 824 A.2d at
15 (“[T]he relevant inquiry is not whether an actual conflict of interest exists, but rather whether
full disclosure of potential conflicts of interest has been made.”) (internal quotation marks and
citation omitted).
119
Brookfield, 2024 WL 1244032, at *17 (quoting In re Del Monte Foods Co. S’holders Litig., 25
A.3d 813, 832 (Del. Ch. 2011)).

36
the following:

During the period January 1, 2019 to August 18, 2021, Evercore and its
affiliates have not been engaged to provide financial advisory or other
services to the Company and Evercore has not received any compensation
from the Company during such period. During the period January 1, 2019 to
August 18, 2021, Evercore and its affiliates have provided financial advisory
services to Nordic Capital X and/or certain of its affiliates and received fees
for the rendering of these services in the amount of approximately $9 million.
During the period January 1, 2019 to August 18, 2021, Evercore and its
affiliates have provided financial advisory services to GIC and certain of its
affiliates and received fees for the rendering of these services in the amount
of approximately $46 million. During the period January 1, 2019 to August
18, 2021, Evercore and its affiliates have provided financial advisory
services to Insight and certain of its affiliates and received fees for the
rendering of these services in the amount of approximately $57 million.
Evercore may provide financial advisory or other services to the Company
and the Acquiror and their respective affiliates, including Nordic Capital X,
GIC, Insight and their respective affiliates, in the future, and in connection
with any such services Evercore may receive compensation.120

Evercore provided its initial summary of relationships disclosure on July 29, 2021.

It disclosed that it had received approximately $45 million in fees from GIC, but failed “to

disclose that it had provided $57 million in services to Insight over the preceding two

years.”121 Evercore provided an updated conflicts disclosure on August 18, 2021.122

Evercore acknowledged that during the period from January 1, 2019 to August 18, 2021,

it had earned investment banking advisory fees from Insight and GIC. Those fees were

disclosed in the Proxy.123 Evercore also disclosed to the Special Committee that it

120
A290 (Cumings Aff., Ex. 1) (Proxy at 53) (emphasis added).
121
A75 (Compl. ¶ 107) (internal citation omitted).
122
A1136 (Cumings Aff., Ex. 33) (Evercore Summary of Relationships) (Aug. 18, 2021).
123
A69 (Compl. ¶ 95) (citing A290 (Cumings Aff., Ex. 1) (Proxy at 53)).

37
concurrently represented Nordic on a potential unrelated transaction.124 Plaintiffs alleged,

citing a press release, that this apparently referred to Nordic’s exit in Vizrt Group to a new

Nordic-led consortium.125

They further alleged that Evercore concurrently was advising Insight on its

fundraise for its Fund XII and Growth Buyout Fund (valued at $20 billion).126 They alleged

that Evercore alluded to this representation in its August 18, 2021 memorandum.127 There

Evercore acknowledged that “an affiliate of Evercore is currently providing confidential

financial advisory services to one of the Relevant Parties on a matter that is unrelated to

[Inovalon].128 On appeal, Appellants reassert their contention that the Proxy failed to

adequately disclose Evercore’s concurrent representation of (i) Nordic on its exit in Vizrt

Group and (ii) Insight on its fundraise.129

Appellees assert that the following Proxy’s reference to Evercore’s concurrent

124
A1137 (Cumings Aff., Ex. 33) (Evercore Summary of Relationships) (Aug. 18, 2021) (stating
that, “[i]n addition, we note that one of Evercore’s affiliated businesses has been in discussions
with Nordic Capital regarding a potential transaction that is unrelated to the Company or this
engagement. Such discussions may result in an active engagement in the near term with potential
customary fees.”).
125
A68 (Compl. ¶ 94).
126
A69–A70 (Compl. ¶ 96).
127
See generally, A68 (Compl. ¶ 94) (“Evercore belatedly admitted to the Board in its conflict
disclosure that while it was representing the Committee it was also exploring concurrent
engagements with Nordic[.]”); A69 (Compl. ¶ 96) (“Evercore acknowledged that it was providing
confidential financial advisory services—concurrent with its work for the Special Committee on
the Transaction—to one of the Relevant Parties [to the Transaction] on a matter that is unrelated
to the Company.”) (internal quotation marks and citation omitted).
128
A1138 (Cumings Aff., Ex. 33) (Evercore Summary of Relationships) (Aug. 18, 2021).
129
Opening Br. at 44; see also A109 (Compl. ¶ 177) (alleging that “Evercore’s engagements with
Nordic and Insight, which were concurrent with Evercore’s engagement by the Special Committee
on the Transaction, were not disclosed to stockholders in the Proxy.”).

38
conflicts was sufficient: “Evercore may provide financial advisory or other services to the

Company and the Acquiror and their respective affiliates, including Nordic Capital X, GIC,

Insight and their respective affiliates, in the future, and in connection with any such

services Evercore may receive compensation.”130 The question is whether this disclosure

adequately addressed Evercore’s concurrent conflicts with Nordic and with Insight, a

member of the Equity Consortium.

In Brookfield, we held that a similar use of “may” in a proxy disclosure was

materially misleading because it failed to provide adequate notice to stockholders of a

special committee’s financial advisor’s then-existing material conflict with a transaction

counterparty.131 In this case, it was similarly misleading for the Proxy to state that Evercore

“may” provide advisory services to Nordic and Insight when, in fact, it was providing such

services, and thus there was an actual concurrent conflict. Evercore’s concurrent

representation, in unrelated transactions, of Nordic, the bidder of the Company, and Insight,

a co-investor, were material facts.132 Accordingly, we hold that the Proxy failed to

adequately disclose Evercore’s concurrent conflicts.

130
A290 (Cumings Aff., Ex. 1) (Proxy at 53) (emphasis added).
131
Brookfield, 2024 WL 1244032, at *18 (holding that “[t]he use of ‘may’ in the Proxy is
misleading because [the financial advisor] had indeed already invested nearly half a billion
dollars[,]” and that “[t]his misleading language also makes it less likely that a stockholder would
have been prompted to locate [the financial advisor]’s [counterparty] holdings in its publicly filed
form 13F.”) (internal citation omitted).
132
See, e.g., id. at *18 (observing that “an advisor’s concurrent engagement with a transaction
counterparty can present legitimate concerns regarding the advisor’s objectivity[.]”); In re PLX
Tech. Inc. S’holders Litig., 2018 WL 5018535, at *43 (Del. Ch. 2018) (a “[financial advisor]’s
ongoing relationship with [a potential bidder] gave it a powerful incentive to maintain good will
and not push too hard during the negotiations.”) (internal quotation marks and citations omitted),
aff’d, 211 A.3d 137, 2019 WL 2144476 (Del. 2019) (ORDER).

39
 We reject Appellees’ argument that these conflicts did not require disclosure

because they involved affiliates of Evercore.133 First, as Appellants point out, the

Complaint alleged that Evercore itself — as opposed to its affiliates — was involved in the

challenged representations. The Complaint cites a press release regarding the Nordic/Vizrt

Group transaction that stated that “Nordic Capital was advised in the process by, among

others, Evercore as financial advisor[.]”134 Appellants argue further that Evercore stated

on its website that it advised Insight on the fundraise.135 Even if the entities retained were

affiliates of Evercore, under Delaware law, there is no brightline rule holding that the work

performed by affiliates, or fees received and paid by affiliates, insulates the retained entity

from disclosure requirements.136 Rather, the materiality standard is the operative test as

133
See Answering Br. at 48–49 (“To be sure, Evercore did not concurrently represent Nordic or
other Consortium members while advising the Committee. As Plaintiffs admit, any concurrent
work was performed by Evercore’s affiliates, not Evercore itself, on entirely unrelated matters.
No additional disclosure obligation arises in these circumstances.”) (emphasis in original) (internal
quotation marks and citations omitted).
134
Reply Br. at 16–17. See also A68–A69 (Compl. ¶ 94, n.68) (citing to Press Release), Nordic
Capital exits investment in Vizrt Group to a new Nordic Capital-led consortium to further support
successful growth journey (Dec. 28, 2021), https://www.nordiccapital.com/news-views/press-
releases/nordic-capital-exits-investment-in-vizrt-group-to-a-new-nordic-capital-led-consortium-
to-further-support-successful-growth-journey/.
135
Reply Br. at 16–17 (citing A69–A70 (Compl. ¶ 96, n.73)).
136
Our Court has acknowledged that work performed by an affiliate of a retained entity may
present a conflict of interest:
In our view, the Special Committee established to negotiate the purchase of the
block of NL stock did not function independently . . . . The Special Committee’s
advisors did little to bolster the independence of the principals. The financial
advisor . . . was recommended by [a member of the Special Committee] and [was]
quickly retained by the full Special Committee. In the past, an affiliate bank of [the
financial advisor] had derived significant fees from [controller’s] controlled
companies and at the time of the transaction was affiliated with [a member of the
Special Committee]’s current employer.

40
applied to the well-pled allegations. In addition to the fact that one or more of the

representations at issue are alleged to have involved Evercore, as opposed to its affiliates,

we note that the Proxy refers to “Evercore and its affiliates” when discussing Evercore’s

potential conflicts. On this record, we are persuaded that even if some of the work was

performed by Evercore’s affiliates, the Proxy failed to adequately disclose these concurrent

conflicts.137

2. J.P. Morgan’s Concurrent Conflicts

Appellants also challenge the Proxy’s omission of J.P. Morgan’s concurrent

conflicts. The Proxy disclosed the following information concerning J.P. Morgan’s

conflicts:

During the two years preceding the date of J.P. Morgan’s opinion, neither
J.P. Morgan nor its affiliates have had any other material financial advisory
or other material commercial or investment banking relationships with the
Company, Parent, Meritas Group, Inc., which holds approximately 30% of
the capital stock of the Company, GIC Pte. Ltd., Insight Venture Partners,
L.P. or 22C Capital LLC. During the two years preceding the date of J.P.
Morgan’s opinion, J.P. Morgan and its affiliates have had and continue to
have commercial or investment banking relationships with certain affiliates
of Parent, including Parent’s parent company, Nordic Capital X, as well as
certain affiliates of each of GIC Pte. Ltd., Insight Venture Partners, L.P. and
22C Capital LLC, for which J.P. Morgan and such affiliates have received,
or will receive, customary compensation. In addition, J.P. Morgan’s
commercial banking affiliate is an agent bank and a lender under
outstanding credit facilities of certain affiliates of GIC Pte. Ltd. and certain
affiliates of Insight Venture Partners, L.P., for which it receives customary
compensation or other financial benefits. In addition, J.P. Morgan and its
affiliates hold, on a proprietary basis, less than 1% of the outstanding
common stock of the Company. During the two year period preceding

Kahn v. Tremont Corp., 694 A.2d 422, 429–30 (Del. 1997) (emphasis added).
137
See A290 (Cumings Aff., Ex. 1) (Proxy at 53).

41
 delivery of its opinion ending on August 18, 2021, the aggregate fees
recognized by J.P. Morgan from Nordic Capital X were approximately $15.2
million. During the two year period preceding delivery of its opinion ending
on August 18, 2021, J.P. Morgan did not recognize any fees from the
Company or Parent. In the ordinary course of their businesses, J.P. Morgan
and its affiliates may actively trade the debt and equity securities or financial
instruments (including derivatives, bank loans or other obligations) of the
Company for their own accounts or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities or other financial instruments.138

According to the Complaint, J.P. Morgan concurrently represented Nordic on at

least two other transactions: (i) Nordic’s offer of its Intrum AB (publ) shares to

institutional investors in June 2021; and (ii) Nordic’s potential sale of Veonet GmbH,

announced in September 2021 and valued at $2.4 to $3 billion.139 Additionally, J.P.

Morgan “also appeared to be concurrently representing” GIC, a member of the Equity

Consortium, on two other transactions: (i) representing GIC portfolio company Pagaya on

its backdoor listing through an $8.5 billion merger with special purpose acquisition vehicle

(“SPAC”) EJF Acquisition Corp., which was announced on September 15, 2021; and (ii)

GIC’s $240 million investment in Arctic Green Energy, which was announced in late July

2021.140

We address Appellants’ contention that the amounts of the undisclosed fees from

J.P. Morgan’s concurrent representations were material facts requiring disclosure.

Appellants cite a number of cases suggesting that when a financial advisor faces a conflict,

138
A283 (Cumings Aff., Ex. 1) (Proxy at 46) (emphasis added).
139
A105 (Compl. ¶ 171).
140
A105–A106 (Compl. ¶ 171).

42
both the relationship and the amount of fees should be disclosed. 141 Most recently, in

Brookfield, we held that a financial advisor’s nearly half a billion-dollar holding in a

counterparty to the transaction was material and should have been specifically disclosed

because it would have been relevant to a stockholder in assessing that advisor’s

objectivity.142 Similarly, in Rodden v. Bilodeau, the Court of Chancery held that it was

reasonably conceivable that payments in the two years preceding the merger to its financial

advisor totaling $9 million (consisting of $4.9 million by the target and $4.1 million by the

acquirer) would be deemed material because disclosure of those payments would help the

target’s stockholders to “contextualize the magnitude of the [financial advisor]’s conflict

of interest.”143

Again, there is no hard and fast rule that requires financial advisors to always

disclose the specific amount of their fees from a counterparty in a transaction. 144 Rather,

141
See Kihm v. Mott, 2021 WL 3883875, at *18 (Del. Ch. 2021) (“When a financial advisor faces
a conflict, this Court has generally required disclosure of the relationship itself and the amount of
fees the advisor received.”) (emphasis added) (citing In re Saba Software, Inc. S’holder Litig.,
2017 WL 1201108, at *11 (Del. Ch. 2017) (“What was material, and disclosed, was the prior
working relationship and the amount of fees.”)), aff’d, 276 A.3d 462, 2022 WL 1054970 (Del.
2022) (ORDER).
142
Brookfield, 2024 WL 1244032, at *17. See also RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816,
860 (Del. 2015) (“[I]t is imperative for the stockholders to be able to understand what factors might
influence the financial advisor’s analytical efforts . . . .”) (internal quotation marks and citation
omitted).
143
Rodden v. Bilodeau, C.A. No. 2019-0176, at 20–21 (Del. Ch. Jan. 27, 2020) (TRANSCRIPT).
There, the Vice Chancellor also concluded that references to “customary fees” would have been
meaningful to stockholders in calculating the amount of past fees only if they knew what fees
would be customary for the kind of work performed. The court was “not inclined to assume that
level of familiarity among [the target’s] stockholders on this record.” Id. at 21.
144
See, e.g., Assad v. Botha, 2023 WL 7121419, at *6 (Del. Ch. 2023) (“Generally, the disclosure
of the specific fees a financial advisor received from unrelated work for a transactional
counterparty is immaterial where the relationship and its rough scale are disclosed.”).

43
the materiality standard governs whether a financial advisor’s exact amount of fees

collected from a counterparty to a transaction requires disclosure.145 In this case, the

Plaintiffs alleged that J.P. Morgan concurrently represented two separate counterparties to

the Transaction — Nordic and GIC — on unrelated transactions while representing the

Special Committee. The Proxy disclosed the existence of these representations, but it did

not disclose the specific amount of fees that J.P. Morgan stood to earn from these

representations:

During the two years preceding the date of J.P. Morgan’s opinion, J.P.
Morgan and its affiliates have had and continue to have commercial or
investment banking relationships with certain affiliates of Parent, including
Parent’s parent company, Nordic Capital X, as well as certain affiliates of
each of [GIC], [Insight], and [22C Capital], for which J.P. Morgan and such
affiliates have received, or will receive, customary compensation. In
addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a
lender under outstanding credit facilities of certain affiliates of [GIC] and
certain affiliates of [Insight], for which it receives customary compensation
or other financial benefits.146

We conclude that the Proxy’s statement that J.P. Morgan will receive “customary

compensation” in connection with these four concurrent representations is not sufficient.

First, absent disclosure of the amount of the fees, the stockholders could not compare J.P.

Morgan’s concurrent fees from counterparties with the fees collected from the Company

145
In re Micromet, Inc. S’holders Litig., 2012 WL 681785, at *12 (Del. Ch. 2012) (“Nevertheless,
Plaintiffs claim that this partial disclosure requires supplementation to provide the actual amounts
received by [the financial advisor]. They fail to provide any persuasive explanation, however, as
to why the actual amount of fees paid by [the target company] to [the financial advisor] would be
material to shareholders or to cite any Delaware case law mandating such disclosures. This is not
a situation in which [the target company], apart from [the acquirer], would be a potential source of
future business.”).
146
A283 (Cumings Aff., Ex. 1) (Proxy at 46) (emphasis added).

44
in this Transaction — approximately $42 million.147 This lack of disclosure prevented

stockholders from contextualizing and evaluating J.P. Morgan’s concurrent conflicts of

interest.148 We hold that it is reasonably conceivable that J.P. Morgan’s concurrent

conflicts with counterparties to the Transaction would have altered the total mix of

information available to stockholders and, therefore, should have been disclosed.149

3. J.P. Morgan’s Prior Representations Were Not Adequately Disclosed

We turn next to J.P. Morgan’s prior representations of Nordic and members of the

147
Id. (“For financial advisory services rendered in connection with the Merger, the Company has
agreed to pay J.P. Morgan an estimated fee of $42 million, $3.0 million of which became payable
to J.P. Morgan at the time J.P. Morgan delivered its opinion and the remainder of which is
contingent and payable upon the consummation of the Merger.”).
148
Disclosure of a special committee’s advisor’s conflicts of interest enables minority stockholders
to weigh that advisor’s opinion in light of those conflicts:
Omitting those advisors’ conflicts was materially misleading. The Proxy failed to
disclose that [financial advisor #1] was providing services to [counterparty] while
advising the Transaction Committee, and that [financial advisor #1]’s services to
[counterparty] netted it hundreds of millions of dollars. It also failed to disclose
that [financial advisor #2], retained to provide a fairness opinion, received $14.2
million in fees from [counterparty] engagements. This information would certainly
help [target] stockholders contextualize the financial advisors’ potential conflict of
interest. A more balanced disclosure . . . would have significantly altered the total
mix of information available to the individual . . . stockholder.
Allen v. Harvey, 2023 WL 7122641, at *7 (Del. Ch. 2023) (internal quotation marks and citations
omitted).
149
See Tornetta v. Maffei, C.A. No. 2019-0649, at 18–19 (Del. Ch. Feb. 23, 2021) (TRANSCRIPT)
(determining that a financial advisor’s alleged concurrent representation of a counterparty on an
unrelated transaction was a material fact requiring disclosure because that representation was
“twice the size” of the transaction at issue and the financial advisor’s fees from the concurrent
representation “represented the largest source of [that advisor]’s revenues[.]”); see also In re Art
Tech. Grp., Inc. S’holders Litig., C.A. No. 5955, at 101–102 (Del. Ch. Dec. 20, 2010)
(TRANSCRIPT) (holding that, given the nature of a disclosure in the proxy concerning a financial
advisor’s prior advisory services to a counterparty to the transaction, there needed to be a
supplemental disclosure of that advisor’s fees from the counterparty “given the magnitude of the
fees on the [counterparty]’s side[.]”).

45
Equity Consortium.150 Appellants argue that the Proxy failed to adequately disclose nearly

$400 million in fees that J.P. Morgan had earned from members of the Equity Consortium

in the two years preceding the Transaction.151 Instead, it only explicitly disclosed that J.P.

Morgan received $15.2 million in fees from Nordic in that same two-year span.152 As noted

above, the trial court summarily rejected the claim.153

We hold that the Proxy failed to adequately disclose J.P. Morgan’s prior conflicts

with members of the Equity Consortium.154 In contrast to the approximately $15.2 million

150
Appellees assert that the prior fees that Appellants claim were omitted “were those [J.P.
Morgan] purportedly earned from Consortium members’ affiliates.” Answering Br. at 52
(emphasis in original) (internal citation omitted). Appellants counter that the Complaint cites press
releases indicating that all four concurrent engagements directly involved J.P. Morgan, and that
three of those engagements related to work performed directly for an Equity Consortium member
or Nordic, not one of their affiliates (i.e., its work for Nordic on two transactions and GIC on its
Arctic Green investment). A105–106 (Compl. ¶ 171). Based on the record before us, we are not
persuaded that Appellees’ attempted distinction regarding affiliates of Equity Consortium
members should alter our materiality analysis.
151
Opening Br. at 45.
152
Id.
153
Bench Ruling at 38–39.
154
This issue was highlighted at oral argument:
The Court: It does say customary compensation in the Proxy. So your position is
the actual amounts have to be disclosed? There are cases that say that the actual
amount is not always necessary to be disclosed. Right?
Appellants’ Counsel: Well, that is certainly right your Honor, but I think when
you look at the context . . . I think the fair reading of the Proxy, a reasonable
stockholder who picks it up would say, “okay, J.P. Morgan is earning
approximately $45 million from this Transaction from the Company, and they have
earned a small fraction of that in the preceding two years from Nordic.” And sure,
what does customary mean? I think the strong implication from the Proxy is that
past fees pale in comparison to what J.P. Morgan is earning from this Transaction
when it is actually the opposite, when [past fees from members of the Equity
Consortium] are many, many, many, many, many times greater than what J.P.
Morgan is earning from the Company for advising them on the sale.”
Oral Argument, at 17:07–18:23, https://vimeo.com/913043373.

46
in advisory fees received from Nordic,155 J.P. Morgan, in the same time period, received

nearly $400 million in fees from members of the Equity Consortium: (i) $250 million to

$270 million from GIC; (ii) $78 million to $83 million from Insight; (iii) and $20 million

to $30 million from 22C Capital.156 Instead of explicitly disclosing J.P. Morgan’s fees

ranging from $348 to $383 million received from members of the Equity Consortium in

the same time period , the Proxy stated that:

During the two years preceding the date of J.P. Morgan’s opinion, J.P.
Morgan and its affiliates have had and continue to have commercial or
investment banking relationships with certain affiliates of Parent, including
Parent’s parent company, Nordic Capital X, as well as certain affiliates of
each of GIC Pte. Ltd., Insight Venture Partners, L.P. and 22C Capital LLC,
for which J.P. Morgan and such affiliates have received, or will receive,
customary compensation. In addition, J.P. Morgan’s commercial banking
affiliate is an agent bank and a lender under outstanding credit facilities of
certain affiliates of GIC Pte. Ltd. and certain affiliates of Insight Venture
Partners, L.P., for which it receives customary compensation or other
financial benefits.157

Although the Proxy stated that J.P. Morgan has “had and continue[d] to have

commercial or investment banking relationships” with Nordic and members of the Equity

Consortium, for which it and its affiliates will receive “customary compensation[,]” this

155
A283 (Cumings Aff., Ex. 1) (Proxy at 46).
156
A104 (Compl. ¶ 170).
157
A283 (Cumings Aff., Ex. 1) (Proxy at 46). According to Plaintiffs, J.P. Morgan’s initial
conflicts disclosure on July 28, 2021, listed only business it had previously conducted with Nordic
which generated fees of $15–16 million. A74–A75 (Compl. ¶ 106). That disclosure omitted the
relationships with Equity Consortium members. The Special Committee allegedly did not inquire
about such relationships. It was not until August 30, 2021, two weeks after the merger agreement
was executed, that J.P. Morgan informed the Special Committee that “it had in fact earned up to
nearly $400 million in fees from Nordic and its co-investors in just the last two years (ending June
30, 2021 no less).” A120–A121 (Compl. ¶ 196). Appellants argue that although J.P. Morgan
identified those fees as relevant in its disclosure memorandum, “[t]he Board simply chose to omit
them.” Reply Br. at 20.

47
disclosure created a misleading impression as to the “rough scale” of the omitted fees.158

The undisclosed fees were roughly twenty-five times the disclosed fees and ten times the

fees earned in the Transaction. By disclosing the amount of fees earned in the prior two

years from Nordic — namely $15.2 million — stockholders could be misled into thinking

that the undisclosed fees earned in the concurrent representations were of a similar

magnitude.

C. The Proxy’s Description of Evercore’s Role in the Market Outreach

Finally, we address the Proxy’s disclosure of Evercore’s role in the third-party

market outreach. Appellants contend that J.P. Morgan was solely responsible for

conducting market outreach and, consequently, the Proxy misleadingly implied that

Evercore had a substantive role in conducting market outreach.159 They contend that the

allegedly false statements were material “because they gave stockholders the misleading

impression that Evercore mitigated [J.P. Morgan]’s conflicts, ostensibly legitimizing a

tainted market check conducted solely by conflicted Dunleavy’s representative.”160

158
Pfeffer v. Redstone, 965 A.2d 676, 689 (Del. 2009) (Even if a proxy statement discloses certain
material information, it can still be insufficient if the way in which it presents this information
creates a false impression: “[i]t is well settled that ‘[W]hen fiduciaries undertake to describe
events, they must do so in a balanced and accurate fashion, which does not create a materially
misleading impression.’”) (quoting Clements v. Rogers, 790 A.2d 1222, 1240 (Del. Ch. 2001));
Zirn v. VLI Corp. 681 A.2d 1050, 1058 (Del. 1996) (observing that the goal of disclosure is “to
provide a balanced and truthful account of those matters which are discussed in a corporation’s
disclosure materials.”); see also Assad, 2023 WL 7121419, at *6.
159
Opening Br. at 48.
160
Id. (internal citation omitted).

48
 Plaintiffs presented the following chart in their Complaint161 in an attempt to

illustrate the Proxy’s overstatement of Evercore’s role in the market outreach process:

Proxy Special Committee Minutes

On August 11, 2021, the Special August 11, 2021 Special Committee
Committee . . . instructed the Minutes:
representatives of J.P. Morgan and
Evercore to reach out to a specified list of Following discussion with JP Morgan,
other potential buyers and strategic Evercore Group L.L.C., independent
partners, in addition to those that had been financial advisor to the Special Committee
contacted previously, to assess whether (“Evercore”), and Latham & Watkins LLP,
another party would be willing to offer a independent legal advisor to the Special
price that exceeded Nordic Capital X’s Committee (“Latham”), the Special
updated proposal. The Special Committee Committee indicated that JP Morgan
also instructed the representatives of J.P. should actively expand and engage in
Morgan and Evercore to re-solicit interest buyer outreach and negotiations with
of the strategic and private equity bidders potential buyers other than Nordic Capital
who had previously shown interest in as quickly as possible.163
exploring a transaction with the Company,
including PE Firm B.162

Between August 11, 2021 and August 13, August 12, 2021 Special Committee
2021, . . . As instructed by the Special Minutes:
Committee, representatives of Evercore
and J.P. Morgan also reached out to 10 JPM Update. Representatives of J.P.
potential counterparties, including PE Morgan Securities LLC, financial advisor
Firm B and Company D as well as other to the Company (“JP Morgan”) . . .
strategic counterparties and financial reported on the progress in the past 24
sponsors, to gauge their interest in a hours of, among other things, (i)
potential acquisition of the Company at a negotiations with Nordic Capital and
price at or above $41.00 per share.164 sources of equity financing in connection
with funding the transaction and (ii) the
buyer outreach and negotiations conducted
with potential buyers other than Nordic

161
A109–A112 (Compl. ¶ 178).
162
A266–A267 (Cumings Aff., Ex. 1) (Proxy at 29–30) (emphasis added).
163
A698 (Cumings Aff., Ex. 26) (Minutes of a Meeting of the Special Committee dated August
11, 2021) (emphasis added).
164
A267 (Cumings Aff., Ex. 1) (Proxy at 30) (emphasis added).

49
 Capital.
***
Following discussion with JP Morgan, the
Special Committee indicated that JP
Morgan should simultaneously continue
negotiations with Nordic Capital and
continue the buyer outreach and
negotiations with potential buyers other
than Nordic Capital to determine whether
a transaction with a new consortium of
investors to sell the Company on equal or
more favorable terms was likely to be
feasible in a reasonable period of time.165
The Special Committee held a meeting on August 13, 2021 Special Committee
August 13, 2021 . . . Representatives of Minutes:
J.P. Morgan and Evercore also provided
an update on their outreach to other JPM Update; Additional Outreach. [JP
potential counterparties that may be Morgan] proceeded to present an update
interested in an acquisition of the on the expanded buyer outreach and
Company. Representatives of J.P. Morgan negotiations conducted with potential
and Evercore reported that certain buyers other than Nordic Capital,
potential counterparties declined to including new buyers who had not
participate further in a sale process, other previously been contacted.
potential counterparties responded with * * *
varying degrees of interest, but no potential Following discussion with Evercore and JP
counterparty had expressed an interest in Morgan, the Special Committee indicated
offering a price at or above $41.00 per that JP Morgan should simultaneously
share.166 . . . (ii) continue to reach out to and
negotiate with potential buyers other than
Nordic Capital, in particular the three
potential buyers who were conducting
preliminary analyses.
* * *
The Special Committee indicated that the
Company should . . . (ii) continue to
engage in active buyer outreach through

165
A706 (Cumings Aff., Ex. 28) (Minutes of a Meeting of the Special Committee dated August
12, 2021) (emphasis added).
166
A267 (Cumings Aff., Ex. 1) (Proxy at 30) (emphasis added).

50
 JP Morgan.167

After extensive discussions [at the August [At the August 16 Committee meeting]
16 Special Committee meeting], and representatives of Evercore presented . . .
noting: (1) the extensive bidder outreach an overview of the buyer outreach, market
activity by J.P. Morgan and Evercore check, and negotiations conducted by JP
since May 2021 (including outreach to over Morgan, including the continued and
30 potential bidders, 14 of which signed expanded outreach conducted following
confidentiality agreements and Nordic Capital’s revised offer reducing the
commenced due diligence) . . . the Special price from the previous $44 per share
Committee determined that it would be . . . .169
reasonable to accept the removal of the “go * * *
shop” provision . . .168 [At the August 17 Committee meeting] Mr.
Hiltz remarked that while a go-shop
provision would be beneficial to the
Company by allowing the Company to
meaningfully negotiate with other parties
during the go-shop period, given the robust
buyer outreach, market check, and
negotiations conducted by JP Morgan,
including the continued and expanded
outreach conducted following Nordic
Capital’s revised offer reducing the price
from the previous $44 per share, and the
Bloomberg article in late July, the real-
world benefits of such a provision were in
his view likely to be limited.170

167
A710–A711 (Cumings Aff., Ex. 29) (Minutes of a Meeting of the Special Committee dated
August 13, 2021) (emphasis added).
168
A268 (Cumings Aff., Ex. 1) (Proxy at 31) (emphasis added).
169
A716 (Cumings Aff., Ex. 30) (Minutes of a Meeting of the Special Committee dated August
16, 2021) (emphasis added).
170
A722 (Cumings Aff., Ex. 31) (Minutes of a Meeting of the Special Committee dated August
17, 2021) (emphasis added).

51
Appellees respond that Appellants have “cherry-picked” statements to create an inaccurate

impression. Based upon our review of the Proxy and the minutes, the chart persuades us

that the answer lies somewhere in between the two positions but is closer to Appellants’

version.

The Proxy does suggest that Evercore had at least an oversight role in the process

even though J.P. Morgan, according to the minutes, was directly involved in the contacts

and negotiations with Nordic and other potential bidders. The Proxy states, for example:

On July 25, 2021, at a meeting of the Special Committee attended by
representatives of J.P. Morgan, Evercore and [Latham], J.P. Morgan
presented a detailed preliminary summary of the bidder outreach conducted
and indications of interest received to date and the criteria used to seek out
these potential bidders. After J.P. Morgan left the meeting, the Special
Committee discussed the presentation and its overall assessment of bidder
outreach extensively with representatives of Evercore and [Latham].171

During this meeting [on August 1, 2021], the members of the Special
Committee and [Latham] updated the independent directors of the Board
who are not on the Special Committee about the Special Committee’s
activities, Evercore’s views regarding the outreach to potential acquirers of
the Company conducted by J.P. Morgan and Nordic Capital X’s ongoing due
diligence efforts and equity and debt financing activities.172

The meeting minutes of the Special Committee and the board of directors suggest

that Evercore assisted in a review and analysis of that process:

171
A264 (Cumings Aff., Ex. 1) (Proxy at 27).
172
A266 (Cumings Aff., Ex. 1) (Proxy at 29).

52
 July 25, 2021 Meeting Minutes/Special Committee:

Members of the Special Committee discussed the importance of the review
and analysis by [Evercore], independent financial advisor to the Special
Committee, of the buyer outreach and market check conducted by [J.P.]
Morgan to date.173

....

August 6, 2021 Meeting Minutes/Independent Directors:

[An Evercore Representative] reported that Evercore has been focused on,
among other matters, (i) reviewing the [J.P. Morgan] Process in connection
with considering [an] exclusivity arrangement with Nordic Capital as well as
proposing a “go-shop” provision in the merger agreement and (ii) conducting
a valuation analysis of the Company . . . reviewing the 10-year financial
model prepared by [J.P.] Morgan . . . .174

....

August 12, 2021 Meeting Minutes/Special Committee:

Noting that the Company is not required to enter into any transaction, with
Nordic Capital or otherwise, to sell the Company, the Special Committee
discussed with Latham and Evercore potential alternative transactions
available to the Company, including a transaction to sell the Company to a
different consortium of investors or not to enter into any transaction . . . .
Questions were asked by members of the Special Committee and answered
by representatives of Latham and representatives of Evercore.175

....

173
A702 (Cumings Aff., Ex. 27) (Minutes of a Meeting of the Special Committee dated July 25,
2021).
174
A1045 (Sullivan Aff., Ex. F) (Minutes of a Meeting of the Independent Directors dated August
6, 2021).
175
A705 (Cumings Aff., Ex. 28) (Minutes of a Meeting of the Special Committee dated August
12, 2021).

53
 August 13, 2021 Meeting Minutes/Special Committee:

The Special Committee further indicated that Evercore, as independent
financial advisor to the Special Committee, should coordinate with [J.P.]
Morgan and offer to the extent helpful, to be directly involved in such
discussion with Nordic Capital and other potential buyers.176

....

August 16, 2021 Meeting Minutes/Special Committee:

Among other matters, representatives of Evercore presented (i) a summary
of the premia and transaction multiples implied by the Current Merger
Consideration, (ii) an overview of the buyer outreach, market check, and
negotiations conducted by [J.P.] Morgan, including the continued and
expanded outreach conducted following Nordic Capital’s revised offer
reducing the price from the previous $44 per share . . . .177

....

August 17, 2021 Meeting Minutes/Special Committee:

[A J.P. Morgan Representative] proceeded to present an update on the
expanded buyer outreach and negotiations conducted by [J.P.] Morgan, with
the participation of [Evercore], independent financial advisor to the Special
Committee[.]178

The minutes depict Evercore’s role as more of an analytical and supervisory one. If the

minutes are accurate, as alleged in the Complaint (and chart), then the Proxy does appear

176
A711 (Cumings Aff., Ex. 29) (Minutes of a Meeting of the Special Committee dated August
13, 2021). Appellants interpret this passage to mean that up until that point, Evercore had not been
involved in such discussions with Nordic and other potential buyers.
177
A716 (Cumings Aff., Ex. 30) (Minutes of a Meeting of the Special Committee dated August
16, 2021).
178
A722 (Cumings Aff., Ex. 31) (Minutes of a Meeting of the Special Committee dated August
17, 2021).

54
to overstate the role that Evercore played in the outreach efforts in mid-August 2021.179

There is nothing wrong with J.P. Morgan taking the lead. As the Chancellor

observed, J.P. Morgan was involved in the negotiations a month before Evercore was

retained by the Special Committee.180 But J.P. Morgan had certain conflicts and the trial

court based its dismissal of this claim partly on its view that J.P. Morgan was not

conflicted.181 Here, we have held that the Proxy failed to adequately disclose conflicts

relating to both Evercore and J.P. Morgan. The Proxy’s suggestions of a more active role

for Evercore takes on added significance in a scenario where J.P. Morgan, as the lead

advisor, faced conflicts. The Proxy’s version of the facts suggests that Evercore was in a

better position than it actually was to mitigate any effects of J.P. Morgan’s conflicts. The

trial court recognized the importance of this mitigation role when it said that “[t]o the extent

that the special committee perceived [J.P. Morgan’s] conflicts, they hired Evercore to help

with the process.”182 According to the Complaint, Evercore’s mitigation role was affected

not only by its own conflicts but also by its secondary and more limited role in the outreach

process. It would not be a stretch to say that it is reasonably conceivable that the alleged

179
The minutes even break-out the market outreach discussion with a separate heading — “JPM
Update.” See generally A698 (Cumings Aff., Ex. 26) (Minutes of a Meeting of the Special
Committee dated August 11, 2021); A706 (Cumings Aff., Ex. 28) (Minutes of a Meeting of the
Special Committee dated August 12, 2021); A710 (Cumings Aff., Ex. 29) (Minutes of a Meeting
of the Special Committee dated August 13, 2021).
180
As noted by the trial court, “[i]t makes sense that J.P. Morgan would continue to spearhead
with Evercore’s involvement. It also makes sense that J.P. Morgan would be the one to pick up
the phone and initiate contact once they had already started the process.” Bench Ruling at 45–46.
181
Id. at 45 (observing that Plaintiffs “rely on the characterization of J.P. Morgan as conflicted[,]”
but that the court “already concluded that that’s not a very persuasive argument.”).
182
Id. at 31.

55
facts could make a difference to stockholders in analyzing and weighing the advice of the

advisors and in evaluating the overall effectiveness of the market outreach.

As we cautioned in Appel v. Berkman, “when a board chooses to disclose a course

of events or to discuss a specific subject, it has long been understood that it cannot do so

in a materially misleading way, by disclosing only part of the story, and leaving the reader

with a distorted impression.”183 Rather, “[d]isclosures must provide a balanced, truthful

account of all matters they disclose.”184 And “[p]artial disclosure, in which some material

facts are not disclosed or are presented in an ambiguous, incomplete, or misleading manner,

is not sufficient to meet a fiduciary’s disclosure obligations.”185

In view of our reversal of the trial court’s dismissal of the claims concerning the

advisors’ conflicts, we need not “pile on” another basis for reversal. Suffice it to say that

the Proxy’s description of Evercore’s role in the market outreach efforts do not sit

comfortably with the corresponding accounts set forth in the minutes. Boards, committees,

and their advisors should take care in accurately describing the events and the various roles

played by board and committee members and their retained advisors.

In sum, because the Proxy was deficient in its failure to disclose certain of the

Special Committee’s advisors’ conflicts of interest, we REVERSE the Court of Chancery’s

dismissal of the Complaint.

183
180 A.3d 1055, 1064 (Del. 2018).
184
Id. (internal quotation marks and citation omitted).
185
Id. (internal quotation marks and citation omitted).

56
 IV. CONCLUSION

For the reasons set forth herein, we REVERSE the decision of the Court of Chancery

and remand for further proceedings consistent with this opinion.

57