Ford v. VMware, Inc.

2017 WL 1684089 (2017)

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Ford v. VMware, Inc.

Delaware Court of Chancery
2017 WL 1684089 (2017)

  • Written by Rose VanHofwegen, JD

Facts

Minority shareholder Francis Ford brought a derivative action on behalf of VMware, Inc. (plaintiff) against former controlling shareholder EMC Corporation, EMC’s directors, and acquirer Denali Holding Co. and its affiliates (collectively, defendants) alleging EMC sold control of VMware to a known looter. Originally EMC owned 81 percent of VMware. Instead of selling VMware directly to Denali, EMC merged with Denali, giving it control of VMware. Ford’s complaint made conclusory allegations that EMC knew Denali would siphon cash out of VMware and force it into unfair business relationships but did not allege any facts showing that had actually occurred. Instead, the complaint alleged at most that Denali planned to use VMware’s cash to repay Denali’s debt at some point in the future. Taken together, the allegations suggested that acquiring VMware was central to Denali deciding to acquire EMC and that Denali wanted to integrate VMware with its other businesses, but not that Denali intended to strip away VMware’s assets for its own benefit. EMC, its directors, and Denali and its affiliates moved to dismiss the complaint for failure to state a claim under Delaware law.

Rule of Law

Issue

Holding and Reasoning (Laster, J.)

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