## Facts

- Swing-N-Slide Corp. (SNS) was the target of a two-step tender-offer transaction designed to transfer voting control.
- Mueller, SNS’s president, chief executive officer, and a director at the time, and other SNS officers formed Greengrass Management, LLC (Management), apparently to serve as the acquisition vehicle for the tender offer.
- Management then formed a general partnership, Greengrass Holdings (Holdings), together with Greengrass Capital, LLC (Capital), whose members were not affiliated with SNS.
- SNS and Holdings entered into a tender-offer agreement under which Holdings would acquire a majority of SNS shares through a tender offer and proceed with a second-step transaction to complete the acquisition structure.
- Robert Barbieri, an SNS stockholder, sued to challenge the tender-offer transaction.
- Barbieri filed an amended complaint adding Holdings and Management as defendants and asserting claims against them for breach of fiduciary duty and equitable fraud.
- Holdings and Management moved to dismiss the fiduciary-duty and equitable-fraud claims asserted against them.

## Issues

1. Whether the amended complaint stated a claim that Management and Holdings—entities created and used by SNS insiders to pursue the tender offer—could be subject to fiduciary-duty claims in connection with the challenged transaction.
2. Whether the amended complaint sufficiently pleaded equitable fraud against Management and Holdings based on alleged misleading disclosures or omissions tied to the tender offer.
3. Whether, applying Court of Chancery pleading standards, the fiduciary-duty and equitable-fraud claims against Management and Holdings should be dismissed at the motion-to-dismiss stage.

## Decision

- The Court of Chancery denied the motion to dismiss as to the challenged claims against Management and Holdings.
- The court held that, at the pleading stage, it was reasonably conceivable that the insider-created entities involved in the tender offer could face liability on fiduciary-duty theories connected to the alleged conflicted acquisition structure.
- The court also allowed the equitable-fraud theory to proceed past dismissal as pleaded against Management and Holdings based on the alleged disclosure problems tied to the tender offer.

## Legal Principles

- Delaware fiduciary-duty analysis is not limited to formal titles; a plaintiff may plead fiduciary-duty liability against persons or entities that allegedly exercise control or act jointly with corporate fiduciaries in a conflicted transaction.
- Entities formed by corporate insiders to carry out an acquisition can, depending on pleaded facts about control and participation, be treated as owing duties or as proper defendants for fiduciary-duty claims arising from the transaction.
- Equitable fraud may be pleaded in connection with transaction-related disclosures where stockholders are asked to act (such as tendering shares) based on information provided by transaction participants, and where the complaint alleges materially misleading statements or omissions.
- On a motion to dismiss, the court accepts well-pleaded allegations as true and draws reasonable inferences in the plaintiff’s favor; dismissal is improper if the complaint supports a reasonably conceivable basis for relief.

## Conclusion

In *Barbieri v. Swing-N-Slide Corp.*, the Delaware Court of Chancery refused to dismiss breach-of-fiduciary-duty and equitable-fraud claims asserted against Greengrass Management, LLC and Greengrass Holdings, entities created and used by SNS insiders as part of a two-step tender offer for control, concluding that the amended complaint plausibly alleged a basis to keep those entities in the case at the pleading stage.


Barbieri v. Swing-N-Slide Corp., 1997 Del. Ch. LEXIS 9 (1997)