Document: Gaines v. Narachi, et al., C.A. No. 6784-VCN (Del. Ch. Oct. 6, 2011)
The Court of Chancery granted the plaintiff’s motion to expedite a claim (following reargument) alleging that the defendant directors breached their fiduciary duty of disclosure by not disclosing in a proxy statement the forecasted free cash flows underlying the DCF analysis conducted by their investment advisor in connection with a merger. Plaintiff, a stockholder of AMAG Pharmaceuticals, Inc. (“AMAG”), sought to enjoin a proposed merger between AMAG and Allos Therapeutics, Inc. (“Allos”) because the proxy statement failed to disclose the forecasted free cash flows utilized by Morgan Stanley in its DCF analysis. AMAG stockholders were not receiving cash in the merger, but rather stock in Allos. The Court acknowledged that the Delaware courts have held disclosure of such information was required in cash-out mergers because stockholders are being asked to decide whether to take a sum certain in exchange for their right to those future cash flows. Here, the Court held that it was expediting the claim because: (1) there was some confusion in the record whether management may have provided such projections to Morgan Stanley, who then excised them from the proxy statement; and (2) the standard for expedition was low.