Corporation Owes No Fiduciary Duties to Owners; Delaware Chancery Court Dismisses Action

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By Yin Wilczek

Aug. 8 - The Delaware Court of Chancery Aug. 7 dismissed a class action against automotive information supplier R.L. Polk & Co. alleging that it breached its fiduciary duties to shareholders by failing to disclose material facts during a self-tender.

In a letter decision, Vice Chancellor Sam Glasscock III wrote that a corporation "owes no fiduciary duties" to shareholders, "nor can it aid and abet the fiduciary breaches of those who direct its operations."


In March 2011, R.L. Polk offered to buy up to 37,037 of its outstanding shares through a self-tender. The company subsequently bought 34,825 outstanding shares for about $810 each. The self-tender valued the company at about $435 million.

In June 2013, after an auction process, the company announced that it had entered into a merger agreement in which it would be bought by IHS Inc. for more than $1.34 billion. Through the merger, minority shareholders received $2,675 per share, while majority shareholders received a mixture of cash and equity worth about $2,675.

In June 2014, shareholders that had sold shares during the self-tender-including California limited partnership Buttonwood Tree Value Partners LP-filed a class action against R.L. Polk's controlling shareholders and board members. The plaintiffs alleged that they were induced to sell their shares for an inadequate price due to misrepresentations by the board acting on behalf of the controlling shareholders. The lawsuit also named R.L. Polk as a defendant.

No Fiduciary Duty of Disclosure

The court found that under Delaware law, corporations do not owe a fiduciary duty of disclosure to their shareholders in connection with a tender offer.

The court also found that although corporations may owe disclosure obligations during self-tenders that are not fiduciary duties, that disclosure duty must be predicated upon a theory of legal or equitable fraud.

In this case, the court observed that the plaintiffs did not plead or claim that R.L. Polk engaged in legal or equitable fraud. "In any event, proof of fraud requires a showing of reasonable reliance, which must be demonstrated for each individual plaintiff; accordingly, our Supreme Court has found that fraud actions by stockholders against corporations cannot be maintained as class actions," it said. "Therefore, there is no basis upon which this portion of [the complaint] could survive."

Buttonwood was represented by R. Bruce McNew of Wilks, Lukoff & Bracegirdle LLC, Wilmington, Del.

R.L. Polk was represented by Steven L. Caponi and David A. Dorey of Blank Rome LLP, Wilmington, Del.

To contact the reporter on this story: Yin Wilczek in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

The decision is available at .