Document: In re TPC Group Inc. Shareholders Litigation, C.A. No. 7865-VCN (Del. Ch. Apr. 10, 2014)
In this Letter Opinion, the Delaware Court of Chancery analyzed a merger agreement in which Defendant Seller agreed to sell all of its outstanding common stock for $40 per share. Plaintiffs filed a complaint alleging breach of fiduciary duties and requested a preliminary injunction of the merger. Soon after, the terms of the merger were revised to increase the per-share consideration to $45. The Plaintiffs then withdrew their complaint and submitted a fee application seeking $3.15 million to compensate them for increasing the merger consideration. The Managing Director of the acquiring company (the “MD”) submitted an affidavit stating the Plaintiffs’ lawsuit had no role in the decision to increase the merger consideration. But, in a subsequent deposition the MD testified that he did believe raising the per share offer would make the plaintiffs litigation more difficult. When the MD tried to correct this answer after the deposition, the Plaintiffs argued that the alteration should be stricken pursuant to the “sham affidavit” doctrine.
The court, cautioning that the Delaware Supreme Court has not yet endorsed or defined the proper application of the sham affidavit doctrine, set forth the following requisite elements to invoke the doctrine: (1) prior sworn deposition testimony; (2) given in response to unambiguous questions; (3) yielding clear answers; (4) later contradicted by sworn affidavit statements or sworn errata corrections; (5) without adequate explanation; and (6) submitted to the court in order to defeat an otherwise properly supported motion for summary judgment. The court found that even if the doctrine applied, it would not bar the correction because the answer that the MD sought to correct was given in response to an ambiguous question. Accordingly, the court permitted the alteration.