Turner v. Bernstein

GenDerm Corporation (GenDerm) was a private corporation with more than 11.5 million issued shares owned by more than 150 shareholders. However, voting control of the corporation was held by the board of directors. In October 1997, GenDerm executed a letter of intent regarding a merger with Medicis Pharmaceutical Corporation (Medicis) in which GenDerm would become a wholly owned subsidiary of Medicis. On December 1, the GenDerm board sought written consents approving the merger via a solicitation that was nominally addressed to all GenDerm shareholders but that was not actually sent to all the shareholders. Stuart Turner (plaintiff) and other shareholders never received the solicitation, which stated that the transaction was expected to close on December 3, a mere two days later. The solicitation also provided almost no information about the transaction, consisting of only a one-page letter, a consent form, a copy of the merger agreement, and a copy of a statutory provision allowing the shareholders to seek appraisal as an alternative to accepting the merger. The solicitation indicated that the board of directors had already approved the transaction and recommended that the shareholders accept it. In contrast, a seller’s report that GenDerm provided to Medicis in October contained substantial information that would have been useful to the GenDerm shareholders in deciding whether to accept the merger or to seek appraisal. Turner filed suit against Joel Bernstein (defendant) and other GenDerm directors, alleging that they breached their fiduciary duties by failing to provide shareholders with information material to deciding whether to approve the merger. Turner filed a motion for partial summary judgment on the question of the breach of fiduciary duty.