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Motion for Summary Judgment Granted Where Shareholders Ratified Internal Recapitalization

Rosser v. New Valley Corporation, et al., C.A. No. 17272-N, 2005 WL 1364624 (Del. Ch. May 27, 2005) Defendants filed a motion for summary judgment where Plaintiff alleged proposed internal recapitalization favored director shareholders. Plaintiff challenged the adequacy of the fairness opinion, the disclosures to shareholders and the sufficiency of the Proxy Statement because it failed to disclose separate valuations of New Valley's various assets and lines of business The Court of Chancery granted the Defendants' motion for summary judgment. The Plaintiff claimed that a proposed plan of recapitalization was unfair to Class B Preferred shareholders because it stripped away most of those shares' value for the benefit of Class A Preferred shareholders and constituted self-dealing because Brooke Group and New Valley's officers and directors were substantial holders of Class A Preferred stock. The Defendants asserted that the recapitalization was approved and, thus, ratified by a vote of disinterested and informed shareholders representing a majority of each of the three classes of stock. In response to the ratification argument, the Plaintiff asserted that the vote was tainted because New Valley's Proxy Statement failed to disclose all material information regarding the proposed transaction. The Defendants, relying upon the defense of shareholder ratification, sought summary judgment with respect to both the Plaintiff's challenge to the Plan and her challenges to the disclosures which survived their motion to dismiss: (1) the Proxy Statement failed to disclose that PMG's opinion did not evaluate the fairness of the Plan as it related to each individual class of stock;(2) the Proxy Statement failed to disclose the identity of the shareholders who first suggested the recapitalization to New Valley; and (3) the Proxy Statement failed to disclose the value of New Valley's various assets or lines of business. The Court granted Defendants' Motion. To be sent a PDF copy of this opionion, please click here. Authored by: Liza Haley Sherman 302.888.6940 Share


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