## Facts

- EMC Corporation, a Massachusetts corporation, agreed to be acquired by Dell in October 2015 in a transaction valued at roughly $67 billion, including cash and a tracking-stock component.
- Shortly after the announcement, EMC shareholders filed multiple Massachusetts actions challenging the merger; the cases were consolidated in the Superior Court.
- Shareholders alleged the CEO and board breached fiduciary duties by conducting an unfair sale process and accepting an inadequate price, thereby failing to maximize the value received in the merger.
- The complaints asserted economic harm from an allegedly underpriced sale affecting shareholders through the consideration paid for their shares.
- The actions were pleaded as direct, putative class claims rather than derivative claims brought on behalf of EMC.

## Issues

1. Whether shareholder claims challenging a proposed merger as underpriced due to directors’ alleged fiduciary breaches may be brought directly as a class action, or must be brought derivatively on behalf of the corporation.

## Decision

- The Supreme Judicial Court affirmed dismissal for failure to state a claim in the posture pleaded.
- The court held the alleged merger-underpricing injury was to the corporation and therefore the claims were derivative, not direct.
- Because plaintiffs did not sue derivatively (and thus did not satisfy derivative-procedure requirements), dismissal was proper.

## Legal Principles

- Under Massachusetts corporate law, directors’ fiduciary duties generally run to the corporation, not directly to shareholders as individuals.
- A claim is derivative when the alleged wrong injures the corporation and any recovery would flow to the corporation, even if shareholders experience a corresponding decline in share value.
- A claim is direct only if shareholders suffer a distinct injury separate from other shareholders or if the wrong violates a right held individually rather than through the corporate enterprise.
- A generalized allegation that a merger price is too low, where all shareholders receive the same consideration and no disparate treatment is alleged, states a derivative claim under Massachusetts law.
- Massachusetts does not treat sale-of-control merger-price challenges as direct claims merely because shareholders will receive allegedly inadequate consideration.

## Conclusion

The court classified merger-price and sale-process challenges alleging an across-the-board inadequate price as derivative claims because the asserted harm is a reduction in corporate value; shareholders therefore could not proceed via a direct class action and their complaints were properly dismissed.


Int'l Bhd. of Elec. Workers Loc. No. 129 Benefit Fund v. Tucci, 70 N.E.3d 918 (Mass. 2017)