## Facts

- A stockholder of Society for Savings Bancorp, Inc. challenged disclosures made to obtain shareholder approval for a multi-step merger involving Bank of Boston Corporation and their subsidiaries.
- The transaction merged a Bank of Boston subsidiary into Society for Savings (a Bancorp subsidiary) and ultimately merged Bancorp with Bank of Boston.
- The merger proxy statement included discussion touching on a third-party $275 million bid for Fidelity Acceptance Corporation, a profitable Bancorp/Society subsidiary, but did not fully describe the bid or its implications.
- The stockholder alleged the proxy contained material misstatements and omissions, including about the FAC bid and certain valuation work performed by Goldman Sachs.
- Bancorp’s charter contained a DGCL § 102(b)(7) provision limiting directors’ personal monetary liability for certain fiduciary duty breaches.
- The Court of Chancery granted summary judgment for defendants, finding the alleged disclosure problems immaterial and concluding Revlon enhanced scrutiny was not triggered.
- The stockholder appealed.

## Issues

1. Whether alleged proxy statement omissions and misstatements, particularly concerning the FAC bid, were material such that the proxy was materially misleading.
2. Whether Bancorp’s DGCL § 102(b)(7) charter provision exculpated the individual directors from personal monetary liability for any disclosure violation found.
3. Whether the merger triggered Revlon duties due to a change of control requiring directors to seek the best value reasonably available.

## Decision

- The Delaware Supreme Court affirmed in part, reversed in part, and remanded.
- The Court held that the proxy statement’s partial disclosures regarding the FAC bid were materially misleading, and summary judgment on that disclosure claim was improper.
- The Court agreed that other challenged disclosure items (including aspects of Goldman Sachs’ valuation work) were not material.
- The Court held the § 102(b)(7) charter provision shielded the individual directors from personal monetary liability for the disclosure violation found.
- The Court held Revlon was not implicated because the transaction did not effect a change of control; post-merger ownership remained in a public, widely held company with control residing in a fluid market.
- The case was remanded for further proceedings consistent with the opinion, including consideration of any appropriate non-monetary relief.

## Legal Principles

- A fact is material for proxy disclosure purposes if there is a substantial likelihood a reasonable stockholder would consider it important in deciding how to vote, or if it would significantly alter the total mix of information.
- When directors choose to speak in a proxy on a subject, they must not provide half-truths; partial disclosure can be materially misleading if it creates an incomplete or distorted picture.
- DGCL § 102(b)(7) permits a charter provision eliminating directors’ personal monetary liability for duty-of-care breaches, but not for loyalty breaches, bad faith, intentional misconduct, knowing law violations, or improper personal benefit.
- Absent record support for a statutory exception (e.g., bad faith or disloyalty), § 102(b)(7) exculpation bars personal monetary damages against directors even where a disclosure-based duty-of-care violation is established.
- Revlon enhanced duties apply in transactions that result in a change of control; a stock-for-stock merger between widely held public companies that leaves control in a fluid market does not, by itself, trigger Revlon.

## Conclusion

The court held that the proxy statement’s partial discussion of the FAC bid rendered it materially misleading, reversed summary judgment on that limited disclosure claim, but ruled that the directors were exculpated from personal monetary liability under DGCL § 102(b)(7) and that Revlon enhanced scrutiny did not apply because the merger did not produce a change of control.


Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270 (Del. 1994)