In re Zhongpin Inc. Stockholders Litigation

• Court: Court of Chancery of Delaware
• Decided: December 23, 2014
• Docket: CA 7393-VCN
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE

417 SOUTH STATE STREET JOHN W. NOBLE DOVER, DELAWARE 19901 VICE CHANCELLOR TELEPHONE: (302) 739-4397 FACSIMILE: (302) 739-6179

December 23, 2014

Seth D. Rigrodsky, Esquire S. Mark Hurd, Esquire Rigrodsky & Long, P.A. Morris, Nichols, Arsht & Tunnell LLP 2 Righter Parkway, Suite 120 1201 North Market Street Wilmington, DE 19803 Wilmington, DE 19801

Re: In re Zhongpin Inc. Stockholders Litigation C.A. No. 7393-VCN Date Submitted: December 18, 2014

Dear Counsel:

Defendants Raymond Leal, Yaoguo Pan, and Xiaosong Hu (collectively, the

“Special Committee Defendants”) seek certification of an interlocutory appeal of

this Court’s Memorandum Opinion1 of November 26, 2014 (the “Memorandum

Opinion”) and its implementing order. The Special Committee Defendants had

argued that claims against them should be denied because of the exculpatory

provision in Zhongpin Inc.’s charter adopted pursuant to 8 Del. C. § 102(b)(7).

The Court rejected that argument in the context of this entire fairness case and

1 In re Zhongpin Inc. S’holders Litig., 2014 WL 6735457 (Del. Ch. Nov. 26, 2014). In re Zhongpin Inc. Stockholders Litigation C.A. No. 7393-VCN December 23, 2014 Page 2

relied upon In re Cornerstone Therapeutics Inc. Stockholders Litigation.2 The

defendants in Cornerstone, who are in substantially the same position as the

Special Committee Defendants, sought an interlocutory appeal, which this Court

certified3 and which the Supreme Court accepted.4

The trial court’s decision to certify an interlocutory appeal is governed by

Supreme Court Rule 42. The grounds for certifying Cornerstone I for appeal and

for certifying the Memorandum Opinion for interlocutory appeal are substantially

the same. Briefly, the decision not to dismiss the claims against the Special

Committee Defendants determines a substantial issue because, if reversed, the

Special Committee Defendants may extricate themselves from this litigation as

parties. Second, the Memorandum Opinion establishes a legal right in that it

requires the Special Committee Defendants to remain as parties to this litigation

without the ability to assert currently their Section 102(b)(7) defense. Finally, the

Memorandum Opinion satisfies the requirements of Supreme Court Rule 42(b)(i)

2 2014 WL 4418169 (Del. Ch. Sept. 10, 2014) (“Cornerstone I”). 3 In re Cornerstone Therapeutics Inc. S’holders Litig., 2014 WL 4784250 (Del. Ch. Sept. 26, 2014) (“Cornerstone II”). 4 In re Cornerstone Therapeutics Inc. S’holders Litig., No. 564, 2014 (Del. Oct. 9, 2014) (ORDER). In re Zhongpin Inc. Stockholders Litigation C.A. No. 7393-VCN December 23, 2014 Page 3

by meeting the “conflicting decisions” criterion for certification of questions of law

as provided in Supreme Court Rule 41(b)(ii).

In addition, as a practical matter, resolution of whether a 102(b)(7) defense

is currently available would serve the considerations of justice5 and, potentially,

might significantly limit litigation costs and burdens for the Special Committee

Defendants.6 In sum, it is appropriate to certify the Special Committee

Defendants’ interlocutory appeal, despite the fact that, even if the Special

Committee Defendants are successful, this litigation will not be fully concluded.

An implementing order will be entered.7

Very truly yours,

/s/ John W. Noble

JWN/cap cc: Robert S. Saunders, Esquire Register in Chancery-K

5 See Del. Supr. Ct. R. 42(b)(v). 6 In short, the Court follows the reasoning of Cornerstone II in certifying an appeal. 7 With the granting of the Special Committee Defendants’ motion, it is unnecessary to address their motion to stay this proceeding pending resolution by the Supreme Court of the appeal in Cornerstone. The application to stay was presented as an alternative to the motion to certify an appeal.