[Cite as Zalvin v. Ayers, 2020-Ohio-4021.]
IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO
JOEL ZALVIN, : APPEAL NO. C-190285 TRIAL NO. A-1804888 Plaintiff-Appellant, :
vs. : O P I N I O N.
ANDREA J. AYERS, :
CHERYL K. BEEBE, :
RICHARD R. DEVENUTI, :
JEFFREY H. FOX, :
JOSEPH E. GIBBS, :
: JOAN E. HERMAN, : ROBERT E. KNOWLING, JR., : THOMAS L. MONAHAN, III, : ROBERT L. NELSON,
and
CONVERGYS CORP., :
Defendants-Appellees. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: August 10, 2020
The Brualdi Law Firm, P.C., Richard B. Brualdi and John F. Keating, Jr., and Altick & Corwin Co. L.P.A. and Steven E. Bacon, for Plaintiff-Appellant,
Dinsmore & Shohl LLP and Mark A. Vander Laan, and Pillsbury Winthrop Shaw Pittman LLP and Bruce A. Ericson, for Defendants-Appellees. OHIO FIRST DISTRICT COURT OF APPEALS
Z A Y A S , Judge.
{¶1} Plaintiff-appellant Joel Zalvin appeals from the judgment of the
Hamilton County Court of Common Pleas, which dismissed his second amended
complaint. Defendants-appellees in this case are Convergys Corporation
(“Convergys”) and nine of its directors (“defendant directors”): Andrea J. Ayers,
Cheryl K. Beebe, Richard R. Devenuti, Jeffrey H. Fox, Joseph E. Gibbs, Joan E.
Herman, Robert E. Knowling, Jr., Thomas L. Monahan, III, and Robert L. Nelson.
Zalvin, on behalf of a class of nominal shareholders, filed a shareholder derivative
class action against Convergys and the defendant directors alleging improprieties in
the sale of Convergys to Synnex Corporation. For the following reasons, we affirm
the trial court’s judgment.
I. Facts and Procedural History
{¶2} In June 2018, the Cincinnati-based Convergys publicly announced its
decision to merge with Synnex. In August 2018, Convergys and Synnex filed with the
Securities and Exchange Commission (“SEC”) a proxy statement, which was over
300-pages, explaining the merger, and asked their respective shareholders to vote on
it. In September 2018, Zalvin, who owned shares of Convergys’ common stock
continuously since May 2016, sued for breach of fiduciary duty and failure to
disclose. Zalvin alleged that the defendant directors had conflicts of interest in favor
of the transaction and that Convergys’s proxy statement was materially deficient.
Zalvin moved to enjoin the shareholder vote.
{¶3} Following a hearing on Zalvin’s motion for a preliminary injunction,
the motion was denied. The sale of Convergys to Synnex closed in early October
2018. For each share they owned, Convergys shareholders received $13.25 cash and
0.1263 shares of Synnex common stock, for a total value of $24.51 at closing.
2 OHIO FIRST DISTRICT COURT OF APPEALS
{¶4} In November 2018, Zalvin filed his second amended complaint, adding
additional claims regarding the defendant directors’ alleged self-dealing and
omissions from the proxy statement. Zalvin also complained that the shareholders
were deprived of over $2 per share (as they received $24.51 per share rather than
$26.66, the high closing price of Convergys stock in 2017), or $600 million
collectively, because the defendant directors failed to include a floating exchange
ratio in the sale agreement. Zalvin asked the court to, among other things, rescind
the sale, award compensatory damages, and order the defendant directors to
disgorge the sums paid to them as a result of the sale.
{¶5} Convergys and the defendant directors (collectively, “appellees”) filed
a motion to dismiss Zalvin’s second amended complaint pursuant to Civ.R. 12(B)(1)
and 12(B)(6). Appellees argued that the court did not have jurisdiction because
Zalvin had failed to bring a claim under R.C. 1701.85, Ohio’s appraisal statute, which
appellees contended provided the sole relief available to Zalvin for his complaint over
an “inadequate price.” Appellees argued that Zalvin did not state a claim upon which
relief can be granted because the conclusions in Zalvin’s second amended complaint
were unsupported. And, appellees argued that Zalvin had not properly pleaded all of
the requirements of Civ.R. 23.1 (governing shareholder derivative actions) because
he did not adequately establish demand futility—a requirement that a shareholder
exhaust his intra-corporate remedies before filing a derivative suit. See In re
Lubrizol Shareholders Litigation, 2017-Ohio-622, 79 N.E.3d 579, ¶ 33 (11th Dist.).
{¶6} In April 2019, the trial court granted appellees’ motion to dismiss on
all three bases put forth in the motion. Zalvin now appeals, asserting two
assignments of error.
3 OHIO FIRST DISTRICT COURT OF APPEALS
II. Analysis
{¶7} In his first assignment of error, Zalvin argues that the trial court erred
in dismissing the complaint with prejudice. Zalvin contends that the trial court’s
ruling was a decision otherwise than on the merits and thus the trial court should
have indicated that it was a dismissal without prejudice. In his second assignment of
error, Zalvin argues that the trial court erred in granting appellees’ motion to dismiss
pursuant to Civ.R. 12(B)(1) and 12(B)(6). We address Zalvin’s assignments of error
out of order.
Ohio’s Appraisal Statute – R.C. 1701.85
{¶8} We first consider the trial court’s dismissal of Zalvin’s complaint for
lack of subject-matter jurisdiction pursuant to Civ.R. 12(B)(1). The trial court
concluded that Zalvin did not act in accordance with Ohio’s appraisal statute, R.C.
1701.85, and thus the court was without jurisdiction over the subject matter.
Appellees maintain, and the trial court agreed, that Zalvin’s complaint was in essence
a challenge to the value paid for his shares in the cash-out merger and was merely
disguised as a complaint for breach of fiduciary duty and failure to disclose. Such an
action must be brought under the appraisal statute. See Stepak v. Schey, 51 Ohio
St.3d 8, 553 N.E.2d 1072, 1075 (1990).
{¶9} “R.C. 1701.85, is designed to provide compensation for those
shareholders who dissented from the merger.” Stepak at 11, citing Armstrong v.
Marathon Oil Co., 32 Ohio St.3d 397, 513 N.E.2d 776 (1987). “It provides for the
payment of fair cash value to a shareholder for his or her shares as of the day prior to
the vote of the shareholders.” Id. “[A]n action for breach of fiduciary duty may be
maintained notwithstanding R.C. 1701.85; however, such action may not seek to
overturn or modify the fair cash value determined in a cash-out merger.” Stepak at
10. “A cause of action outside of the appraisal statute will not be recognized ‘where
4 OHIO FIRST DISTRICT COURT OF APPEALS
the shareholder’s objection is essentially a complaint regarding the price which he
received for his shares.’ ” Smith v. Robbins & Myers, Inc., 969 F.Supp.2d 850, 861-
862 (S.D.Ohio 2013), quoting Stepak at 11. The plaintiff in Stepak “did not allege
that his shares were undervalued—rather he alleged that he should have received
more money for his shares—thus ‘[s]uch action, merely asking for more money, per
Armstrong must be brought under the appraisal statute.’ ” Smith at 862, quoting
Stepak at 11.
{¶10} Here, Zalvin alleges that the shares were in fact undervalued. The
direct and derivative breach-of-fiduciary-duty claims challenge the defendant
directors’ fair dealing and the substantive fairness of the merger process. The second
amended complaint alleges that defendant directors breached their fiduciary duties
by approving the merger in order to secure personal benefits unrelated to the merits
of the transaction. Additionally, the second amended complaint alleges that the
defendant directors secured the unfair merger by soliciting shareholder votes with a
misleading and materially deficient proxy statement. See Smith at 862, citing Terry
v. Carney, 6th Dist. Ottawa No. OT-94-054, 1995 WL 763971, *6.
{¶11} Accordingly, considering the second amended complaint in the light
most favorable to Zalvin, we find that his allegations are not simply disguised
attempts to modify the cash value received, and therefore the appraisal statute does
not bar this action.1
Dismissal for Failure to State a Claim
{¶12} We next consider the trial court’s decision to dismiss Zalvin’s second
1 While we acknowledge that the second amended complaint repeatedly refers to complaints of a lower than implied share price and that Convergys shareholders received $2 less per share from the merger, Zalvin also alleges claims that are not based on the cash value of the merger.
5 OHIO FIRST DISTRICT COURT OF APPEALS
amended complaint for the failure to state a claim upon which relief can be granted
pursuant to Civ.R. 12(B)(6).
{¶13} The standard of review applied to dismissals for failure to state a claim
is de novo. Corrado v. Lowe, 11th Dist. Geauga No. 2014-G-3239, 2015-Ohio-1993, ¶
22. When considering a Civ.R. 12(B)(6) dismissal, the court must presume that all
factual allegations of the complaint are true, and it must make all reasonable
inferences in favor of the nonmoving party. It must then appear beyond doubt that
the nonmoving party can prove no set of facts entitling it to the requested relief in
the complaint. Avery v. Rossford, Ohio Transp. Improvement Dist., 145 Ohio
App.3d 155, 164, 762 N.E.2d 388 (6th Dist.2001), citing Mitchell v. Lawson Milk Co.,
40 Ohio St.3d 190, 192, 532 N.E.2d 753 (1988). However, the court is not required to
presume the truth of conclusions in the complaint unsupported by factual
allegations. Guess v. Wilkinson, 123 Ohio App.3d 430, 434, 704 N.E.2d 328 (10th
Dist.1997); Swint v. Auld, 1st Dist. Hamilton No. C-080067, 2009-Ohio-6799, ¶ 3;
Maternal Grandmother v. Hamilton Cty. Dept. of Job & Family Services, 1st Dist.
Hamilton No. C-180662, 2020-Ohio-1580, ¶ 21. Additionally, the court may not rely
upon evidence outside of the complaint when considering a Civ.R. 12(B)(6) motion,
but “[m]aterial incorporated in a complaint may be considered part of the complaint
for purposes of determining a Civ.R. 12(B)(6) motion to dismiss.” State ex rel.
Crabtree v. Franklin Cty. Bd. of Health, 77 Ohio St.3d 247, 249, 673 N.E.2d 1281
(1997), fn. 1, citing State ex rel. Edwards v. Toledo City School Dist. Bd. of Edn., 72
Ohio St.3d 106, 109, 647 N.E.2d 799 (1995); see Henkel v. Aschinger, 167 Ohio
Misc.2d 4, 2012-Ohio-423, 962 N.E.2d 395, ¶ 8 (C.P.) (considering proxy statement
6 OHIO FIRST DISTRICT COURT OF APPEALS
referred to in plaintiff’s complaint and publicly filed with the SEC in ruling on a
motion to dismiss).2
{¶14} Zalvin’s second amended complaint alleges four causes of action: two
direct claims against the defendant directors individually for breach of fiduciary duty
(Count I) and failure to disclose (Count II), and two derivative claims on behalf of
Convergys against the defendant directors for breach of fiduciary duty (Count III)
and failure to disclose (Count IV). We will address Counts I and III together and
Counts II and IV together, as the same operative facts apply to these respective
causes of action.
Counts I and III – Breach of Fiduciary Duty
{¶15} Directors of a corporation owe a fiduciary duty to the corporation and
to the corporation’s shareholders. R.C. 1701.59(E). R.C. 1701.59(B) defines a
director’s fiduciary duties as follows:
A director shall perform his duties as a director, including his duties as
a member of any committee of the directors upon which he may serve,
in good faith, in a manner he reasonably believes to be in or not
opposed to the best interests of the corporation, and with the care that
an ordinarily prudent person in a like position would use under similar
circumstances.
2 The allegations in Zalvin’s second amended complaint regarding the defendant directors’ actions explicitly refer to Convergys’s proxy statement and characterizes the contents of that document. Elsewhere in the complaint, Zalvin directly quotes from the proxy statement. Accordingly, the court takes judicial notice of that public disclosure, which the defendants filed with their motion to dismiss. See In re Alloy, Inc., No. 5626-VCP, 2011 WL 4863716, *3 (Del.Ch. Oct. 13, 2011) (taking judicial notice of a publicly-disclosed preliminary proxy statement when ruling on motions to dismiss plaintiffs’ complaint); In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 169 (Del.2006) (“When a complaint partially quotes or characterizes what a disclosure document says, a defendant is entitled to show the trial court the actual language or the complete context in which it was used [on a motion to dismiss].”); Solomon v. Armstrong, 747 A.2d 1098, 1122 (Del.Ch.1999), fn. 72 (taking judicial notice of facts publicly available in SEC disclosures and documents incorporated by reference into the complaint when considering a motion to dismiss).
7 OHIO FIRST DISTRICT COURT OF APPEALS
“The fiduciary relationship between a corporation’s directors and the corporation
and its shareholders has also been described to include ‘a duty of good faith, a duty of
loyalty, a duty to refrain from self-dealing and a duty to disclosure.’ ” Thompson v.
Cent. Ohio Cellular, Inc., 93 Ohio App.3d 530, 540-541, 639 N.E.2d 462 (8th
Dist.1994), quoting Wing Leasing, Inc. v. M & B Aviation, Inc., 44 Ohio App.3d 178,
181, 542 N.E.2d 671 (1988).
{¶16} “In shareholder actions alleging the breach of fiduciary duties, ‘the
general rule * * * [is] that directors carry the burden of showing that a transaction is
fair and in the best interests of shareholders only after the plaintiff [or aggrieved
shareholder] has made a prima facie case showing that the directors have acted in
bad faith or without the requisite objectivity.’ ” Stepak, 51 Ohio St.3d at 14, 553
N.E.2d 1072, quoting Radol v. Thomas, 772 F.2d 244, 257 (6th Cir.1985); citing
American Law Institute, Principles of Corporate Governance, Section 4.01, at 6
(protections of the business judgment rule removed only if a challenging party can
sustain his burden of showing the director was not acting in good faith or with
disinterest, or was not informed as to the subject of his business judgment).
{¶17} Accordingly, directors may not, in breach of their fiduciary duties, act
unfairly to the disadvantage of their corporation or its shareholders. For example,
“within the bidding process of a corporate takeover or merger, the directors may not
rig, control or stifle such bidding to their own advantage.” Stepak at 14. However,
“the directors are not held to a duty to the shareholders to obtain, like an auctioneer,
the highest price possible for their shares of the corporation.” Id.
{¶18} Zalvin’s second amended complaint contains three principle
arguments for breaches of fiduciary duty. First, he alleges that director and chief
executive officer, Andrea J. Ayers, secretly and unilaterally—without board of
directors’ authorization—pursued a merger to prevent the forfeiture of
8 OHIO FIRST DISTRICT COURT OF APPEALS
approximately $10.1 million of unvested stock upon her planned departure from
Convergys. Second, he alleges that the defendant directors “promoted an
undervalued transaction to secure personal benefits” as they were “motivated to
complete a sale, any sale, no matter how unfavorable to Convergys shareholders and
even after Synnex reduced its offer price, to prevent the forfeiture of over $1 million
in unvested equity compensation, collectively.” And, third, Zalvin alleges that “[t]he
decision to enter into the Sale Agreement was also driven by Convergys’ directors
desire to appease an activist investor and New York based hedge fund, Elliott
Management.”
{¶19} In regard to his first two arguments, Zalvin’s second amended
complaint contains conflicting allegations. Zalvin alleges that Ayers’s pursuit of a
merger was done in secret but concedes in later paragraphs that the proxy statement
discloses her initial meetings regarding a possible merger. Zalvin alleges that Ayers’s
pursuit was unilateral, but the proxy statement reveals that Ayers was accompanied
by Convergys’s chief financial officer, Andre Valentine, at her first meeting with a
potential bidder. The proxy statement also contains a chronological timeline of
Ayers’s and Convergys’s contacts with potential bidders, beginning in early 2017.
Zalvin alleges that the vesting of unvested stock upon the sale of Convergys
demonstrates a conflict of interest, but concedes in later paragraphs that Ayers’s and
the other defendant directors’ compensation was stock-based compensation, in
which their interests were generally aligned with the shareholders. See In re
Micromet, Inc. S’holders Litig., C.A. No. 7197-VCP2, 2012 WL 681785, * 13 fn. 64
(Del.Ch. Feb. 29, 2012) (rejecting argument that directors were interested due to
vesting of stock options because “the directors’ interests would be aligned with the
shareholders in seeking the highest price for their shares reasonably available”).
Furthermore, the defendant directors’ compensation was revealed in detail to the
9 OHIO FIRST DISTRICT COURT OF APPEALS
shareholders in the proxy statement and was subject to a separate shareholder vote—
i.e., a vote separate and apart from the vote on the merger such that the shareholders
could have approved the merger and rejected the defendant directors’ compensation.
The proxy statement describes in a section entitled, “Interests of Convergys’
Directors and Executive Officers in the Mergers,” the directors’ compensation and
their interests in the merger that might differ from the shareholders, and describes
their equity compensation over several pages.
{¶20} In regard to Zalvin’s third argument, that the decision to proceed with
the sale was based on threats from “activist investor” Elliott Management, there are
no set of facts to indicate that Elliott Management’s role in the merger, regardless of
his purported motivations or modus operandi, led to a breach of the defendant
directors’ fiduciary duties. Allegations that Elliott Management actually threatened a
proxy fight, leading the defendant directors to take action adverse to the
shareholders, are not within the second amended complaint.
{¶21} In sum, Zalvin’s claims against the defendant directors for breaches of
fiduciary duty fail to state a claim upon which relief could be granted. Even drawing
all reasonable inferences on behalf of Zalvin, he has failed to plead facts under which
it is reasonably conceivable that he could recover.
Counts II and IV – Failure to Disclose
{¶22} The duty of disclosure applies when a corporation seeks shareholder
approval of fundamental corporate changes, such as a merger, “but the adequacy of
disclosure is captured under the well-defined concept of materiality.” Henkel, 167
Ohio Misc.2d 4, 2012-Ohio-423, 962 N.E.2d 395, at ¶ 33.
{¶23} “Securities law regards a fact as material when there is a substantial
likelihood that it would have been viewed by a reasonable investor as having
significantly altered the total mix of information available.” Id. at ¶ 34; see Basic Inc.
10 OHIO FIRST DISTRICT COURT OF APPEALS
v. Levinson, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). “In setting this
standard, the [United States] Supreme Court acknowledged a concern that a lesser
standard might bury shareholders in an avalanche of trivial information.” Henkel at
¶ 34, citing Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 38, 131 S.Ct. 1309,
179 L.Ed.2d 398 (2011), and TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438,
448-449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). In addition, federal securities law
“do[es] not create an affirmative duty to disclose any and all material information.
Disclosure is required * * * only when necessary to make statements made, in the
light of the circumstances under which they were made, not misleading.” Matrixx at
44 (“Silence, absent a duty to disclose, is not misleading [under federal securities
law]”).
{¶24} Ohio uses the same approach to materiality in a fraud or breach-of-
fiduciary-duty claim. See Henkel at ¶ 35, citing Saxe v. Dlusky, 10th Dist. Franklin
No. 09AP-673, 2010-Ohio-5323, ¶ 51 (“materiality in a fraud claim is essentially the
same as the definition used for materiality in a federal securities claim”).
{¶25} Accordingly, Convergys and its defendant directors were obligated to
convey only material information in connection with the proposed transaction.
There was no requirement that it “overload shareholders with meaningless detail or
offer all available information that might be deemed helpful by some hypothetical
reader.” Henkel at ¶ 33. For instance, a board of directors is ordinarily not obligated
to disclose “the panoply of possible alternatives to a course of action it is proposing,
because too much information can be as misleading as too little.” Id., citing In re
3Com Shareholders Litigation, No. 5067-CC, 2009 WL 5173804, *6 (Del.Ch. Dec.
18, 2009). “Omitted facts are not material simply because they might be helpful.”
Skeen v. Jo-Ann Stores, Inc., 750 A.2d 1170, 1174 (Del.2000). “So long as the proxy
statement, viewed in its entirety, sufficiently discloses and explains the matter to be
11 OHIO FIRST DISTRICT COURT OF APPEALS
voted on, the omission or inclusion of a particular fact is generally left to
management’s business judgment.” In re 3Com at *1. Furthermore, the law “does
not require that a fiduciary disclose its underlying reasons for acting.” In re Sauer-
Danfoss, Inc. Shareholders Litigation, No. 5162-VCL, 2011 WL 2519210, *12
(Del.Ch. May 3, 2011).
{¶26} Zalvin’s second amended complaint contains five principle arguments
for the failures to disclose, basing his claims on material misrepresentations and
omissions. First, he alleges that Ayers “shopped Convergys to Synnex and others
without the knowledge or authorization of the Board,” which he alleges was not
disclosed to shareholders. It is clear from the proxy statement that Ayers did in fact
disclose her meetings with potential bidders, but it is omitted whether she first had
specific board approval. The proxy statement only describes that around the same
time as Ayers’s first meeting with potential bidders, “Convergys’ board of directors
discussed Convergys’ near- and long-term strategy and, as part of its ongoing
strategic planning, engaged a management consultant to conduct a strategic review
of Convergys’ business.” However, Zalvin does not allege facts to demonstrate the
materiality of this omission to the shareholder vote, and we do not see how this
omission “would have been viewed by the reasonable investor as having significantly
altered the ‘total mix’ of information made available.” See TSC Industries, Inc. v.
Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). Zalvin
merely speculates in a series of questions that allegedly unauthorized discussions
affected negotiations in the sale agreement in a way that was not mentioned in an
over 300-page, remarkably thorough proxy statement.
{¶27} Second, Zalvin alleges that the proxy statement is silent as to the steps
the defendant directors “took to obtain a floating exchange rate for the stock portion
of the Sale consideration.” But again, the proxy statement does disclose in over ten
12 OHIO FIRST DISTRICT COURT OF APPEALS
pages the negotiations between Convergys and Synnex regarding the steps the
defendant directors took to obtain the ratio for the stock. And, Zalvin admits in his
complaint that this information was disclosed, he just wants the reasoning for not
having a fixed ratio (instead of the floating exchange ratio). While a fiduciary is not
required to disclose its underlying reasons for acting, the proxy statement
nonetheless discloses the underlying reasoning—in a section entitled, “Convergys’
Reasons for the Mergers,” stating:
the collar structure of the consideration, which balances protection of
the value of the stock component of the merger consideration in the
event of a decline in SYNNEX’s stock price during the pendency of the
transaction while providing for a fixed exchange ratio in the event of
significant increases in SYNNEX’s stock price that will not be adjusted
for fluctuations in the market price of shares of SYNNEX common
stock or Convergys common shares, and will give Convergys
shareholders greater certainty as to the number of shares of SYNNEX
common stock to be issued to them in the transaction.
Thus, the floating exchange ratio was perceived to be the less risky option through
the pending merger.
{¶28} Third, Zalvin alleges that the substance of the defendant directors’
interactions with Elliott Management was omitted from the proxy statement, but the
proxy statement summarizes a continued dialogue with Elliott Management over the
course of three pages. And, as discussed in the preceding section, Zalvin’s complaint
does not allege that Elliott Management threatened a proxy fight. Zalvin does allege
that Convergys entered into a standstill agreement with Elliott Management, but
provided no other allegations to demonstrate that further disclosures regarding the
standstill agreement would be useful to shareholders for considering the merger. We
13 OHIO FIRST DISTRICT COURT OF APPEALS
agree with the court in In re Novell, Inc. Shareholder Litigation, 2013 WL 322560,
No. 6032-VCN, *13 (Del.Ch. Jan. 3, 2013), which dismissed similar disclosure claims
in a complaint regarding Elliott Management, holding:
As a minority shareholder, Elliott [Management’s] conduct does not
rise to the level of assuming “actual significance in the deliberations of
the reasonable shareholder.” The actions of a minority (less than ten
percent) holder with no representative on the board simply do not
require the disclosures that the Plaintiffs argue would have been
material. * * * [T]he Board had no effective control over what Elliott
did and, as set forth above, how a perceived fear of Elliott may have
influenced the sales process, once initiated, is not backed by any
specific factual allegations.
{¶29} Fourth, Zalvin alleges that the proxy statement failed to disclose a
conflict of interest regarding a financial advisor and investment bank called
Centerview Partners, which was advising Convergys with respect to the fairness of
the price to be paid by Synnex. Zalvin alleges that Centerview Partners’ employees
might own Synnex stock, and also that the proxy statement was misleading because
it said that Centerview Partners’ employees might own Synnex stock. In other
words, Zalvin’s allegations here are speculative. Moreover, it is unclear how the
disclosure of more information than already disclosed in the proxy statement
regarding the potential conflict of interest of Centerview Partners’ employees would
have had practical value for a shareholder vote.
{¶30} Finally, Zalvin alleges that the proxy statement does not disclose the
Synnex management financial projections and analyst estimates used by Centerview
Partners to generate its “fairness opinion”—i.e., the investment bank’s endorsement
of the fairness of the transaction. However, the proxy statement provided a
14 OHIO FIRST DISTRICT COURT OF APPEALS
summary of the financial projections of the merger over the course of three pages.
When the board of directors relies on the advice of a financial advisor in making a
decision that requires shareholder action, those shareholders “are entitled to receive
in the proxy statement 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.” (Emphasis added.) In re Trulia, Inc.
Stockholder Litigation, 129 A.3d 884, 900 (Del.Ch.2016). There was no requirement
that the defendant directors “overload shareholders with meaningless detail or offer
all available information that might be deemed helpful by some hypothetical reader.”
Henkel, 167 Ohio Misc.2d 4, 2012-Ohio-423, 962 N.E.2d 395, at ¶ 33.
{¶31} Zalvin therefore failed to plead the materiality of any of the purported
disclosure violations. Accordingly, Zalvin’s claims against the defendant directors
for failure to disclose fail to state a claim upon which relief could be granted.
{¶32} Convergys’s proxy statement set out a thorough but straightforward
narrative of how the corporation initiated negotiations with Synnex during 2017 and
planned to effectuate a merger. Zalvin essentially ignored that detailed background
in mounting his case. The merger went forward with a majority of shareholders
voting for both the merger and the defendant directors’ compensation. That, and
similarly important facts, cannot be trumped by unsupported allegations such as the
claim that the defendant directors acted in breach of their obligations.
Dismissal with Prejudice
{¶33} In his first assignment of error, Zalvin argues that the trial court’s
ruling was a decision otherwise than on the merits and therefore the dismissal
should have been without prejudice. We disagree.
{¶34} A determination as to whether a dismissal is with or without prejudice
rests within the discretion of the trial court. Quonset Hut, Inc. v. Ford Motor Co., 80
15 OHIO FIRST DISTRICT COURT OF APPEALS
Ohio St.3d 46, 47, 684 N.E.2d 319 (1997). However, “[b]ecause a dismissal with
prejudice forever bars a plaintiff review of the merits of his claim, appellate ‘abuse of
discretion’ review is heightened when reviewing decisions that forever deny a review
of a claim’s merits.” Grippi v. Cantagallo, 11th Dist. Ashtabula No. 2011-A-0054,
2012-Ohio-5589, ¶ 11.
{¶35} Civ.R. 41(B)(1), which governs involuntary dismissals, provides that
when a plaintiff fails to comply with the civil rules, the court may dismiss the action,
either on the motion of a defendant or on its own motion. Civ.R. 41(B)(3) provides
that “any dismissal not provided for in this rule * * * operates as an adjudication
upon the merits unless the court, in its order for dismissal, otherwise specifies.” A
dismissal under Civ.R. 12(B)(6) for failure to state a claim is a dismissal under Civ.R.
41(B)(1) for failure to comply with the civil rules. See Customized Solutions, Inc. v.
Yurchyk & Davis, CPA’s, Inc., 7th Dist. Mahoning No. 03MA38, 2003-Ohio-4881, ¶
23. Therefore, a dismissal under Civ.R. 12(B)(6) operates as an adjudication on the
merits and properly results in a dismissal with prejudice. See Reasoner v. City of
Columbus, 10th Dist. Franklin No. 04AP-800, 2005-Ohio-468, ¶ 8-10.
{¶36} The trial court’s order dismissing Zalvin’s second amended complaint
under Civ.R. 12(B)(1) and 12(B)(6) did not specify that it was not an adjudication on
the merits, but nonetheless pursuant to Civ.R. 41(B)(1) and 41(B)(3), it was an
adjudication on the merits. Accordingly, dismissal with prejudice was appropriate.
Conclusion
{¶37} Based on the foregoing, we conclude that Zalvin’s complaint was
properly dismissed with prejudice under Civ.R. 12(B)(6) and decline to consider the
remaining basis for dismissal. Therefore, we overrule Zalvin’s first and second
assignments of error and affirm the judgment of the trial court.
16 OHIO FIRST DISTRICT COURT OF APPEALS
Judgment affirmed.
MOCK, P.J., and CROUSE, J., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.