Herbert Silverberg v. Amit D. Munshi

• Court: Court of Chancery of Delaware
• Decided: January 10, 2022
• Docket: C.A. No. 2021-0018-PAF
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE PAUL A. FIORAVANTI, JR. LEONARD L. WILLIAMS JUSTICE CENTER VICE CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734

January 10, 2022

P. Bradford deLeeuw, Esquire deLeeuw Law LLC 1301 Walnut Green Road Wilmington, DE 19807

Re: Herbert Silverberg v. Amit D. Munshi et al., C.A. No. 2022-0018-PAF

Dear Counsel:

I have reviewed the Verified Stockholder Class Action Complaint (the

“Complaint”) and the Motion to Expedite Proceedings (the “Motion to Expedite”).

I decline to schedule a hearing on the Motion to Expedite because the Complaint

does not state a colorable claim. The Complaint and Motion to Expedite, filed on

January 5, 2022, seek an order enjoining a special meeting of stockholders of

Arena Pharmaceuticals, Inc., (“Arena” or the “Company”) scheduled for February

2, 2022 in connection with the proposed merger of Arena and a subsidiary of

Pfizer, Inc. (the “Merger”).

The Complaint asserts a single claim for breach of the director defendants’

fiduciary duties for alleged omissions in the definitive proxy statement

disseminated to stockholders in connection with the proposed Merger. The sole Herbert Silverberg v. Amit D. Munshi et al., C.A. No. 2022-0022-PAF January 10, 2022 Page 2 of 4

claim asserts that the proxy statement fails to disclose unspecified information

provided to the board’s financial advisor.

To obtain expedited proceedings, a plaintiff must “articulate[] a sufficiently

colorable claim and show[] a sufficient possibility of a threatened irreparable

injury, as would justify imposing on the defendants and the public the extra (and

sometimes substantial) costs” of an expedited proceeding. Giammargo v. Snapple

Beverage Corp., 1994 WL 672698, at *2 (Del. Ch. Nov. 15, 1994). Although the

“colorable claim” threshold is low, it is not nonexistent.

The Complaint alleges that the Company provided certain information to the

financial advisor to Arena’s board of directors, upon which information the

financial advisor relied in presenting its fairness opinion to the board. Compl. ¶¶

28, 29, 33. The information provided to the financial advisor included financial

projections prepared by Arena’s management. Id. ¶ 28. The Complaint

acknowledges that the fairness opinion, the projections, and the financial advisor’s

analyses are disclosed in the proxy statement. Id. ¶¶ 30–32.1 The Complaint

alleges, however, that all of the other information provided to the financial advisor

1 The proxy statement, and the preliminary proxy statement that was filed on December 23, 2021, both disclosed the financial projections, including unlevered free cash flows. The court can take judicial notice of these public filings. See Wal-Mart Stores, Inc., 860 Herbert Silverberg v. Amit D. Munshi et al., C.A. No. 2022-0022-PAF January 10, 2022 Page 3 of 4

must be disclosed, and the failure to do so “renders the statements in the [opinion

of the financial advisor] section of the Proxy Statement materially misleading . . .

.” Id. ¶ 31.

The Complaint does not allege that the financial projections disclosed in the

proxy statement are false or materially misleading. Instead, the Complaint and

Motion to Expedite are premised upon the general, unsupported assumption that all

information provided to a board’s financial advisor is material information that

must be disclosed in connection with a request for stockholder action. The Motion

to Expedite cites no authority supporting such a proposition of law.

“[S]tockholders are entitled to a fair summary of the substantive work

performed by the investment bankers upon whose advice the recommendations of

their board as to how to vote on a merger or tender rely.” In re Pure Res., Inc.,

S’holders Litig., 808 A.2d 421, 449 (Del. Ch. 2002). The Complaint does not

allege that the disclosure of the financial advisor’s analysis is false or materially

misleading. The Motion to Expedite cites three cases for the proposition that

management’s financial projections upon which the financial advisor relied for its

fairness opinion constitute material information that should be disclosed to

A.2d at 320 n.28 (Del. 2004) (holding that the court may take judicial notice of public documents such as SEC filings required by law to be filed). Herbert Silverberg v. Amit D. Munshi et al., C.A. No. 2022-0022-PAF January 10, 2022 Page 4 of 4

stockholders in connection with a vote on a merger.2 Those cases are inapposite

here, because the financial projections have been disclosed.

Although our court is well known for being responsive to plaintiffs seeking

expedited proceedings in order to obtain injunctive relief, a plaintiff must first

plead a colorable claim and demonstrate a sufficient threat of irreparable harm

warranting the costs of expedited proceedings. The Complaint does not cross that

minimal threshold, and I decline to impose the burden and expense on defendants

of having to brief a motion to expedite that is facially without merit. “It is within

the discretion of this Court to grant or deny an application to expedite

proceedings.” Corp. Prop. Assocs. 8, L.P. v. AmerSig Graphics, Inc., 1993 WL

499005, at *1 (Del. Ch. Nov. 17, 1993). In the exercise of my discretion, the

Motion to Expedite is denied.

IT IS SO ORDERED.

Very truly yours,

/s/ Paul A. Fioravanti, Jr.

Vice Chancellor

2 Motion to Expedite ¶ 12 (citing In re BioClinica, Inc. S’holder Litig., 2013 WL 673736 (Del. Ch. Feb. 25, 2013); Maric Capital Master Fund, Ltd. v. Plato Learning, Inc., 11 A.3d 1175, 1178 (Del. Ch. 2010), In re Netsmart Techs., Inc., S’holders Litig., 924 A.3d 171, 203 (Del. Ch. 2007)).