Alessi v. Beracha

The Earthgrains Company offered to buy back company stock held by small-scale shareholders such as Margaret Alessi (plaintiff). Shortly after Alessi accepted the offer and sold her shares, Earthgrains announced that protracted and intense negotiations had culminated in Sara Lee Corporation’s agreement to buy Earthgrains at twice the per-share price Alessi had received for her shares. These negotiations had begun before Earthgrains offered to buy Alessi’s shares. Alessi filed suit in Delaware’s Court of Chancery, accusing Earthgrains’ directors and its chief executive officer, Barry Beracha (defendants), of withholding material information pertaining to the Sara Lee merger negotiations. Alessi’s case bore some similarities to Bershad v. Curtiss-Wright, in which the complaint charged Curtiss-Wright with having failed to inform its shareholders that would-be investors had asked whether Curtiss-Wright’s subsidiary was for sale. Curtiss-Wright’s directors answered that the subsidiary was not for sale, and no purchase offer was ever made. The Delaware Supreme Court held that, under these circumstances, any merger discussions were only casual and that Curtiss-Wright’s directors were not obligated to disclose those discussions to the shareholders. Beracha and the Earthgrains directors cited Bershad as authority for their argument that any merger discussions they failed to disclose were immaterial as a matter of law and moved to dismiss Alessi’s suit.