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RBC Capital Markets, LLC v. Jervis

Delaware Supreme Court
129 A.3d 816 (Del. 2015)


Facts

Rural/Metro Corporation hired RBC Capital Markets, LLC (defendant) to assist the corporation in its sale to Warburg Pincus. Warburg also hired RBC to facilitate the loan needed for the transaction. Thus, if the sale went through, RBC was to be paid significant fees by both Rural and Warburg. Certain of Rural’s directors had self-interests in the transaction for a variety of reasons. Rural’s special committee for the transaction had doubts about the sufficiency of Warburg’s offer, but RBC lowered its valuation analysis of Rural to improve the perception of Warburg’s bid. Just before the close of the transaction, RBC had discussions with other entities, attempting to gain some of Warburg’s buy-side financing business. The proxy statement about the transaction failed to disclose any of RBC’s conflicts of interest. Rural shareholders (plaintiffs) brought suit, alleging that the Rural directors violated their duty of loyalty. The plaintiffs joined RBC in the suit for aiding and abetting the claimed breach. The directors settled the claims against them for a total of $11.6 million. The trial court ruled in favor of the plaintiffs on the aiding and abetting claim. RBC was held liable for $76 million. RBC appealed.

Rule of Law

Issue

Holding and Reasoning (Valihura, J.)

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