Court of Chancery Dismisses Aiding and Abetting Claim Against NetSuite’s Fiduciaries for Role in Alleged Overpayment by Oracle
In re Oracle Corp. Derivative Litig, Consol. C.A. No. 2017-0337-SG (Del. Ch. June 22, 2020)
At the pleadings stage, a claim for aiding and abetting a breach of fiduciary duty requires that it is reasonably conceivable that the alleged aider and abettor knowingly provided substantial assistance in the breach of fiduciary duty. This decision reflects that substantial assistance in an alleged conspiracy of silence might not meet the reasonably conceivable standard if public statements and securities filings contain sufficient information about the underlying course of conduct.
After years of gradually increasing competition, Oracle Corporation acquired NetSuite, Inc. Oracle’s founder and chairman was also the co-founder and controlling stockholder of NetSuite. Oracle stockholders brought fiduciary duty claims, alleging that Oracle overpaid for NetSuite, and also brought aiding and abetting claims against NetSuite’s fiduciaries for their role in the alleged overpayment. Two allegations drove the aiding and abetting claims: a preliminary conversation among senior representatives for each company concerning a tentative price range for a potential acquisition (purportedly creating a price collar), and a separate conversation among principals concerning an assurance to NetSuite officers that the NetSuite business would remain intact post-closing. The companies’ initial federal securities filings did not mention a price range from the preliminary conversation. Subsequently, NetSuite amended its filing by attaching a letter from a large stockholder that expressed concerns regarding the preliminary conversation having served as a price collar that might have resulted in the undervaluation of NetSuite.
Plaintiff alleged that NetSuite’s fiduciaries had failed to disclose the price collar and the post-closing assurances as part of a conspiracy of silence that misled Oracle’s independent decisionmakers into acquiring NetSuite at an inflated price. The Court held, however, that based on their content, it was not reasonably conceivable that NetSuite’s public disclosures and statements constituted the substantial assistance required for an aiding and abetting claim. Even if NetSuite’s amended public filings did not contain the specificity that might have been required to comply with disclosure duties to NetSuite’s stockholders, the Court reasoned that they did contain the relevant substance of the price range discussion, and thus gave notice to the Oracle board that an early unauthorized price conversation had occurred prior to formation of a special committee. Likewise, NetSuite’s public statements and its public filings already contained references to the post-closing plans for NetSuite and, therefore, also provided the Oracle board with an opportunity to act if there were concerns that the alleged post-closing structure may have influenced the development of the deal.Share