## Facts

- Books-A-Million, Inc. (BAM) was a public company controlled by the Anderson family, which held roughly 57–58% of the voting power.
- In 2015, the controller group proposed a going-private squeeze-out merger to acquire the minority shares for cash, initially at $2.75 per share and later at $3.25 per share.
- From the outset, the controller conditioned the deal on (1) approval by an independent special committee and (2) approval by a majority of the disinterested minority shares.
- BAM formed a special committee of purportedly independent directors that hired its own legal and financial advisors, met frequently over several months, rejected initial offers, negotiated price increases, and conducted a market check.
- During the process, a third party expressed interest in acquiring all of BAM at a price materially higher than the controller’s minority-only offer, but the controller made clear it would not sell.
- The special committee approved the $3.25 per share transaction; the merger was approved by a majority of the minority stockholders and closed in December 2015.
- Former minority stockholders sued the controller, directors, officers, and acquisition entities, alleging fiduciary breaches and aiding and abetting.

## Issues

1. Whether the controller squeeze-out satisfied the MFW prerequisites such that business judgment, rather than entire fairness, governed review.
2. Whether plaintiffs pleaded facts supporting a reasonable inference that any MFW condition failed (including independence, empowerment, due care, informed and uncoerced minority vote, or controller coercion).
3. Whether, even under business judgment review, plaintiffs stated a viable claim for corporate waste.

## Decision

- The Court of Chancery granted defendants’ Rule 12(b)(6) motion and dismissed the action with prejudice.
- The court held that the transaction complied with MFW’s six conditions, so the business judgment rule supplied the operative standard of review.
- Plaintiffs failed to plead facts supporting a reasonable inference that the special committee lacked independence, acted in bad faith, or failed to meet its duty of care.
- The court found no well-pled basis to infer the minority vote was uninformed or coerced.
- Because business judgment applied, plaintiffs’ remaining theory required pleading waste, which was not plausibly alleged.

## Legal Principles

- A controller freeze-out merger receives business judgment review when, from the outset, it is conditioned on approval by both an independent special committee and an informed, uncoerced majority-of-the-minority vote, and the committee is independent, empowered to say no and to retain advisors, and satisfies its duty of care.
- At the pleading stage, to avoid business judgment review under MFW, plaintiffs must plead specific facts making it reasonably inferable that at least one MFW element was not satisfied.
- A special committee does not act disloyally or lose independence merely by accepting a controller’s minority-only price that is below an indicated third-party control price when the controller refuses to sell and the realistic alternatives include maintaining the status quo.
- Once business judgment governs, a plaintiff must plead waste—an exchange so one-sided that no rational person could view it as adequate—to survive dismissal.

## Conclusion

The court dismissed fiduciary-duty challenges to BAM’s controller squeeze-out merger because the controller conditioned the transaction on MFW protections from the beginning, the special committee ran a sustained negotiation and market check within the constraints of a non-selling controller, the minority vote was uncoerced and informed, and the pleaded facts did not support a waste claim under business judgment review.


In re Books-a-Million, Inc. Stockholders Litigation, 2016 WL 5874974 (Del. Ch. 2016)