## Facts

- Caremark Rx, Inc., a pharmacy benefit manager, negotiated a stock-for-stock merger with CVS Corporation in 2006.
- Caremark had explored strategic combinations and received interest from other industry participants before entering the CVS deal.
- After the CVS–Caremark merger was announced, Express Scripts, Inc. made an unsolicited competing bid for Caremark at a premium and pursued a proxy contest urging stockholders to vote down the CVS deal.
- Caremark’s board repeatedly rejected Express Scripts’ proposals, citing perceived antitrust and execution risks and preferring the CVS transaction.
- The CVS merger agreement included deal-protection provisions such as a termination fee, matching rights, and limits on negotiations with third parties.
- Caremark stockholders were scheduled to vote on the CVS merger while the competing Express Scripts bid remained public and active.

## Issues

1. Whether plaintiffs showed a sufficient likelihood that Caremark’s directors breached fiduciary duties in approving the CVS merger and responding to the competing Express Scripts bid.
2. Whether the CVS deal-protection measures were unreasonable, coercive, or preclusive under Delaware enhanced scrutiny applicable to board conduct in a change-of-control setting.
3. Whether alleged disclosure deficiencies created a material information deficit requiring the court to enjoin or delay the stockholder vote.

## Decision

- The Court of Chancery denied the motions for a preliminary injunction and permitted the Caremark stockholder vote on the CVS merger to proceed.
- The court held plaintiffs did not carry the heavy burden required to stop a stockholder vote on a negotiated merger.
- Although aspects of the board’s process raised concerns, the court found no showing at the preliminary stage that the process failures rendered stockholders unable to protect themselves through the franchise.
- The court concluded the deal protections, while strong, were not shown to be coercive or preclusive in light of an active topping bidder, a proxy contest, and an impending vote.
- The court found plaintiffs did not show a “critical lack of information” in the disclosures that would prevent an informed vote.
- Plaintiffs failed to satisfy preliminary-injunction requirements, including likelihood of success and irreparable harm; the balance of equities favored allowing stockholders to decide.

## Legal Principles

- A preliminary injunction to block a merger vote is an extraordinary remedy; plaintiffs bear a heavy burden when seeking to prevent stockholders from making a fundamental decision.
- In merger disputes involving competing bids and defensive responses, Delaware courts apply enhanced scrutiny to assess whether board actions and deal protections are reasonable and proportionate and do not coerce or preclude stockholder choice.
- Disclosure claims turn on materiality: whether there is a substantial likelihood a reasonable stockholder would view the omitted or misstated fact as important in deciding how to vote.
- Courts generally will not substitute judicial judgment for stockholder choice when stockholders can make an informed decision and the market for control remains meaningfully open.
- Preliminary injunction relief requires a showing of (1) likelihood of success on the merits, (2) irreparable harm absent relief, and (3) that the equities favor injunctive relief.

## Conclusion

The court refused to enjoin the CVS–Caremark stockholder vote because plaintiffs did not show likely fiduciary or disclosure violations warranting judicial intervention, and the challenged deal protections and disclosures did not prevent stockholders from choosing between the negotiated merger and the competing bid.


La. Mun. Police Emps.' Ret. Sys. v. Crawford, 918 A.2d 1172 (Del. Ch. 2007)