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Buttonwood Tree Value Partners, L.P. v. R.L Polk & Co. Inc.

Court of Chancery of Delaware

August 7, 2014

Buttonwood Tree Value Partners, L.P. et al.
v.
R.L Polk & Co., Inc. et al.,

Submitted: June 9, 2014

Dear Counsel:

This action involves allegations that the Plaintiffs were induced to sell shares of stock in, or in light of, a corporate self-tender for an inadequate price, due to misrepresentations by the corporation's board of directors, allegedly acting on behalf of controlling stockholders in violation of the directors' fiduciary duties. The Plaintiffs, in addition to bringing this action against the members of the board, also named the corporation itself as a defendant. A corporation owes no fiduciary duties to its owners, the stockholders, however; nor can it aid and abet the fiduciary breaches of those who direct its operations. Therefore, the claims against the corporation must be dismissed.

A. Background

The following facts are taken from the Complaint. R.L. Polk & Co., Inc. ("Polk, " or "the Company"), the country's oldest consumer marketing information company, was founded in 1870 by Ralph Lane Polk.[1] In 1922, Polk also became involved in the motor vehicle records business.[2] Polk, which is incorporated in Delaware and headquartered in Southfield, Michigan, "has been majority owned and controlled by the Polk family since its founding."[3]

As of March 31, 2011, the Company had 536, 397 common shares outstanding.[4] Of this stock, only 51, 020 shares, or approximately 9.51% of outstanding shares, were owned by public unaffiliated—that is, non-Polk family— stockholders.[5] Around this time, the Company began exploring the possibility of a self-tender. In March 2011, the Board hired Stout Risius Ross, Inc. ("SRR") to evaluate the fairness of the Company's proposed offer price of $810 per share.[6]On March 28, SRR issued a fairness opinion stating that this offer price was fair.[7] The self-tender was subsequently approved by the board and an Offer to Purchase was sent to stockholders.[8]

In the Offer to Purchase, dated March 31, 2011, the Company offered to purchase up to 37, 037 of its outstanding shares through a self-tender.[9] This Offer explained

[m]embers of the Polk family have expressed interest in tendering shares, owned or controlled by them. As a result, this share repurchase is intended to provide both the Polk family members as well as the non-family members an opportunity to tender shares for purchase by the Company. We have been advised that Polk family shareholders intend to tender approximately 10, 000 of the shares owned or controlled by them; however, they may tender more or fewer shares.[10]

Further, this Offer to Purchase noted:

The Board did not consider any of the following as there were no firm offers for: (1) the merger or consolidation of the Company with or into another company or vice versa; (2) the sale or other transfer of all or any substantial part of the assets of the Company; or (3) a purchase of our securities that would enable the holder to exercise control of the Company. In addition, the Polk family has not expressed interest in exploring any such transactions.[11]

Additionally, the Offer to Purchase provided that:

Except as described in this document, we currently have no plans, proposals or negotiations that relate to or would result in:
An extraordinary transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries;
A purchase, sale or transfer of an amount of our assets or any of our subsidiaries' assets that would be material to us and ...

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