STEPHEN J. APPEL, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
DAVID J. BERKMAN, STEPHEN J. CLOOBECK, RICHARD M. DALEY, FRANKIE SUE DEL PAPA, JEFFREY W. JONES, DAVID PALMER, HOPE S. TAITZ, ZACHARY D. WARREN, ROBERT WOLF, and CENTERVIEW PARTNERS LLC, Defendants.
ORDER GRANTING MOTIONS TO DISMISS
MONTGOMERY-REEVES, VICE CHANCELLOR.
Plaintiff Stephen J. Appel was a stockholder of Diamond
Resorts International ("Diamond" or the
"Company") at all relevant times;
Defendants David J. Berkman, Stephen J. Cloobeck, Richard M.
Daley, Frankie Sue Del Papa, Jeffrey W. Jones, David Palmer,
Hope S. Taitz, Zachary D. Warren, and Robert Wolf were
directors of Diamond at all relevant times (collectively,
save Cloobeck, the "Director Defendants");
Defendant Centerview Partners LLC ("Centerview")
was the financial advisor to Diamond's strategic review
committee that reviewed the transaction (the "Strategic
Review Committee") and the Diamond board;
non-party Apollo Global Management LLC ("Apollo")
acquired Diamond in a two-step merger under 8 Del C.
§ 251(h) at $30.25 per share, which closed on September
Plaintiff challenges the process by which the Diamond board
and Defendant Cloobeck, the largest stockholder, negotiated
the transaction, the failure of the board to disclose all
material information to the Diamond stockholders regarding
the tender offer, and the alleged knowing concealment by
Centerview of its true relationship with Apollo;
the Director Defendants, Centerview, and Cloobeck have
separately moved to dismiss, and I have reviewed the
parties' briefs and the applicable law;
THEREFORE, THE COURT HEREBY FINDS AND ORDERS:
motions to dismiss are GRANTED.
considering a motion to dismiss under Rule 12(b)(6),
"(i) all well-pleaded factual allegations are accepted
as true; (ii) even vague allegations are
'well-pleaded' if they give the opposing party notice
of the claim; [and] (iii) the Court must draw all reasonable
inferences in favor of the non-moving party." In re
Gen. Motors (Hughes) S'holder Litig., 897 A.2d 162,
168 (Del. 2006). While I must draw all reasonable inferences
in Plaintiff's favor, I need not "accept as true
conclusory allegations 'without specific supporting
factual allegations.'" Id. (quoting In
re Santa Fe Pc. Corp. S'holder Litig., 669 A.2d 59,
65-66 (Del. 1995)). "[D]ismissal is inappropriate unless
the 'plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of
proof.'" Id. (quoting Savor, Inc. v.
FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).
Corwin v. KKR Financial Holdings LLC, the Delaware
Supreme Court held that "when a transaction not subject
to the entire fairness standard is approved by a fully
informed, uncoerced vote of the disinterested stockholders,
the business judgment rule applies." 125 A.3d 304, 309
(Del. 2015). In In re Volcano Corp. Stockholder
Litigation, this Court held that the same policy reasons
dictate that "the acceptance of a first-step tender
offer by fully informed, disinterested, uncoerced
stockholders representing a majority of a corporation's
outstanding shares in a two-step merger under Section 251(h)
has the same cleansing effect under Corwin."
143 A.3d 727, 747 (Del. Ch. 2016). Where the business
judgment rule under Corwin applies, claims are
dismissed unless there is a showing of waste.
Sciabacucchi v. Liberty Broadband Corp., 2017 WL
2352152, at *15 (Del. Ch. May 31, 2017); Singh v.
Attenborough, 137 A.3d 151, 151-52 (Del. 2016).
"In that light, there are two limitations on the
application of Corwin: the vote must be fully
informed, and be uncoerced." Sciabacucchi, 2017
WL 2352152, at *15. If the vote is uninformed, the Court
cannot assume "that stockholders determined the
transaction was beneficial, in light of the actual facts;
thus, an uninformed vote has no ratification effect."
Id. Similarly, if a vote is coerced, the Court
cannot rely on the fact that the "stockholders have made
a determination that the transaction at issue is
beneficial, only that, under whatever coercive factors exist,
they are better accepting the transaction than the
Here, the first-step tender offer expired on September 1,
2016, with approximately 81.26% of the Company's
outstanding shares tendered. Compl. ¶ 118. On September
2, 2016, the merger was consummated under Section 251(h).
Id. Plaintiff has not argued that waste occurred or
pled that the tender offer was coerced. Thus, in order to
avoid dismissal, Plaintiff must show that the vote was not
"Although a plaintiff generally bears the burden of
proving a material deficiency when asserting a duty of
disclosure claim, a defendant bears the burden of
demonstrating that the stockholders were fully informed when
relying on stockholder approval to cleanse a challenged
transaction." In re Volcano Corp. S'holder
Litig., 143 A.3d 727, 748 (Del. Ch. 2016). The Court,
however, in In re Solera Holdings Inc. Stockholder
Litigation held that "a plaintiff challenging the
decision to approve a transaction must first identify a
deficiency in the operative disclosure document, at which
point the burden would fall to defendants to establish that
the alleged deficiency fails as a matter of law in order to
secure the cleansing effect of the vote." 2017 WL 57839,
at *8 (Del. Ch. Jan. 5, 2017). Information is material if
there is "a substantial likelihood that the undisclosed
information would significantly alter the total mix of
information already provided." Berger v. Pubco
Corp., 2008 WL 2224107, at *3 (Del. Ch. May 30, 2008)
(quoting Skeen v. Jo-Ann Stores, Inc., 750 A.2d
1170, 1174 (Del. 2000)), rev'd on other grounds,976 A.2d 132 (Del. 2009). "[O]mitted facts are not