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In re TPC Group Inc. Shareholders Litigation

Court of Chancery of Delaware

April 10, 2014

In re TPC Group Inc. Shareholders Litigation

Submitted: April 3, 2014

Christine S. Azar, Esquire Labaton Sucharow LLP 300 Delaware Ave., Wilmington, DE 19801

S. Mark Hurd, Esquire Morris, Nichols, Arsht & Tunnell LLP Suite 1225 1201 N. Market Street Wilmington, DE 19801

Ronald N. Brown, Esquire Skadden, Arps, Slate, Meagher & Flom LLP One Rodney Square Wilmington, DE 19801

Raymond J. DiCamillo, Esquire Richards, Layton & Finger, P.A.One Rodney Square Wilmington, DE 19801

Dear Counsel:

The Plaintiffs in this stockholder class action have moved to strike entry number 12[1] to the Errata Sheet[2] of Neil A. Wizel ("Wizel" and the "Motion to Strike"). Wizel is a managing director of Defendant First Reserve Corporation ("First Reserve"). The Plaintiffs seek to contradict an earlier Wizel affidavit with his subsequent deposition testimony (but without the revision of this Errata Sheet entry) in support of their fee application for purportedly creating a corporate benefit—an increase in merger consideration—while prosecuting this action.

In August 2012, Defendant TPC Group Inc. ("TPC") entered into a merger agreement with affiliates of Defendants First Reserve and SK Capital Partners (together, the "PE Group") in which the PE Group would acquire the outstanding common stock of TPC for $40 per share in cash, or approximately $850 million, including net debt (the "Merger").[3] The Plaintiffs filed complaints in this Court in September 2012, and then an amended complaint in October, alleging that the TPC board of directors (the "Board, " and together with the PE Group, the "Defendants") breached their fiduciary duties in agreeing to the Merger and that the PE Group aided and abetted those breaches. The Plaintiffs moved for a preliminary injunction of the Merger, and the Court scheduled a hearing for November 28, 2012. The parties conducted expedited discovery, culminating in the Plaintiffs' serving their expert report on the PE Group on October 29 and then their opening brief in support of their preliminary injunction motion on November 3.

In the meantime, Innospec Inc. ("Innospec"), a potential strategic acquirer, submitted a non-binding proposal to the Board to acquire the outstanding common stock of TPC at a price between $44 to $46 per share. That proposal was publicly announced on October 8, 2012. Under the terms of the merger agreement, the Board permitted Innospec to conduct certain due diligence on TPC. After additional negotiations following Innospec's proposal, the PE Group and TPC revised the terms of the Merger to increase the per-share consideration from $40 to $45, representing an approximate $79 million increase in the purchase price.

The revised terms of the Merger were publicly announced on November 8, 2012. The Plaintiffs withdrew their preliminary injunction motion in light of the increased Merger consideration and various supplemental disclosures. Soon thereafter, in December 2012, Innospec announced that it would not submit a binding offer for TPC. Within two days, TPC's stockholders approved the Merger. The Plaintiffs voluntarily dismissed their amended complaint in February 2013 and then submitted a fee application in March.

Out of their total fee application for $3.9 million, the Plaintiffs seek $3.15 million as compensation for contributing to the increase in the Merger consideration.[4] In opposition to the fee application, the Defendants submitted an affidavit of Wizel in which he stated that the litigation in this Court had no role in the PE Group's decision to increase the Merger consideration.[5] During additional discovery conducted in support of their application, the Plaintiffs deposed Wizel on October 22, 2013. At his deposition, Wizel testified:

Q. And after the price was increased by $5 a share, did you have any independent view of what that meant for the litigation?
A. No. I – I didn't consider it, no.
Q. Did you think that it would make the pursuit of the litigation more difficult?
A. I'm sure – I'm sure that I did – that did occur to me. It would make sense.[6]

Nine days after his deposition, Wizel submitted the Errata Sheet seeking to correct his answer from "I'm sure – I'm sure that I did – that did occur to me. It would make sense." to "I didn't think about it, but it would make sense."[7] In explaining the reasons for this revision, Wizel stated that he "[m]isunderstood [the] question during testimony, " that the given answer was not correct, and that answers to other, similar questions reflect accurate testimony.[8]

The Plaintiffs contend that this entry on the Errata Sheet should be stricken under the principles of the "sham affidavit" doctrine.[9] They argue that Wizel should not be permitted to create a factual dispute over whether he thought that the $5 per share increase in the Merger consideration would make the Plaintiffs' action in this Court more difficult to pursue.[10] The PE Group, in response, contends that the sham affidavit doctrine does not apply, especially not to this procedural situation.[11] Even if the Court recognized the doctrine, the PE Group argues, the Motion to Strike should be denied because the Plaintiffs have failed to demonstrate the requisite elements for it to apply here to the Errata Sheet.[12]

The Delaware Supreme Court has yet to endorse or define the proper application of the sham affidavit doctrine.[13] To the extent the doctrine may be recognized in Delaware, it would require the Court to find certain elements before striking an affidavit or part thereof:
(1) prior sworn deposition testimony; (2) given in response to unambiguous questions; (3) yielding clear answers; (4) later contradicted by sworn affidavit statements or sworn errata corrections; (5) without adequate explanation; and (6) submitted to the court in order to defeat an otherwise properly supported motion for summary judgment.[14]

The Court concludes that, even if the sham affidavit doctrine applies, [15] it would not bar the Errata Sheet correction at issue because the answer that Wizel seeks to correct was given in response to an ambiguous question. Specifically, the question about Wizel's thoughts was ambiguous because it was not limited to a single period of time: it could have referred to before the PE Group increased its offer, but it could also have referred to after the increase.[16] The ambiguity is particularly evident when considering the preceding question, which explicitly limited the period of time to which that question referred as "after the price was increased by $5 a share." The Court reaches this conclusion even though neither Wizel nor his counsel objected to this particular question as ambiguous during the deposition.[17]

Under these circumstances, because Wizel seeks to correct his unclear testimony given to an ambiguous question in a timely and reasonable manner, [18]entry number 12 to the Errata Sheet correction of his deposition is consistent with Court of Chancery Rule 30(e). Accordingly, the Plaintiffs' Motion to Strike is denied.[19]


Very truly yours,


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