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Delaware Chancery Dismisses Globis v. Plumtree
While Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173,184 (Del. 1986) places paramount importance on directors' duty to seek the highest sale price once the board of directors determines their corporation is for sale, the fact that plaintiffs simply point to a less-than-ideal purchase price is not sufficient under Delaware law to trigger heightened scrutiny of the directors' actions during the sale process. In its Nov. 30, 2007 opinion in Globis Partners, L.P. v. Plumtree Software, Inc., et al. (2007 Del. Ch. LEXIS 169), the Delaware Court of Chancery dismissed at the pleading stage claims that directors failed to fulfill their duties under Revlon in connection with a sale of the corporation they oversaw because the complaint did not allege facts sufficient to rebut the business judgment rule. The opinion also clarified standards for merger-related disclosures in several distinct areas. While the decision is largely about inadequate pleadings, Globis is quite instructive as to directors' duties involved in the merger process, as well as effective pleadings practice. The plaintiff's conclusory allegations and failure to allege with particularity acts of director wrongdoing, as required under Delaware law, doomed Globis' attempt to secure a personal liability judgment against the defendant directors.
Background
The case relates to the purchase of Plumtree Software by BEA Systems. Purchase price negotiations between the two software companies were complicated when the Plumtree board learned that Plumtree was in breach of a contract with the U.S. General Services Administration (the 'GSA contract'), and that a significant liability would likely result from the breach. Accordingly, Plumtree lowered its selling price in order to induce BEA to proceed with the purchase.
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