Morrison v. Berry

In October 2015, Apollo Global Management LLC (Apollo) expressed interest in purchasing The Fresh Market (TFM). Apollo indicated that it had an exclusive partnership with TFM’s founder, Ray Berry, and his son, Brett Berry (defendants), and had discussed an equity rollover with the Berrys. On October 15, 2015, TFM’s board (defendants) met to review Apollo’s proposal and authorized the formation of a strategic transaction committee (the committee). At the meeting, Ray denied having any relationship with Apollo. However, in a November 28, 2015 email, Ray’s counsel indicated that Ray had made an agreement with Apollo in October. In early 2016, TFM announced plans to go private in a transaction involving a tender offer by an Apollo-controlled entity. TFM filed Schedule 14D-9 disclosures articulating the board’s reasons for recommending that TFM’s stockholders accept the tender offer. The 14D-9 included a description of the events leading to the transaction but (1) omitted the November 28 email’s reference to an October agreement between Ray and Apollo, (2) omitted previous statements by Ray expressing a preference for a transaction involving Apollo, (3) omitted a threat by Ray to sell his shares if TFM’s board did not commence a sale, and (4) did not fully explain why the committee had been formed in October 2015. TFM’s 14D-9 incorporated by reference Apollo’s public disclosure concerning the TFM transaction. TFM stockholder Elizabeth Morrison (plaintiff) suspected based on the disclosures that TFM’s directors had breached their fiduciary duties during the sale process. The tender offer subsequently closed as scheduled, with 68.2 percent of the outstanding shares tendered. Morrison sued the Berrys and TFM’s directors in the Delaware Court of Chancery, alleging breach-of-fiduciary-duty clams. The Berrys and TFM’s directors moved to dismiss, asserting that under the Delaware Supreme Court’s holding in Corwin v. KKR Financial Holdings, LLC, the merger should be reviewed under the deferential business-judgment rule because the tender offer had been accepted by a majority of TFM’s stockholders. The chancery court granted the motion to dismiss. Morrison appealed.