## Facts

- The Fresh Market, Inc. (TFM) agreed to be acquired in a going-private transaction through a cash tender offer by an Apollo-controlled entity at $28.50 per share.
- TFM’s board recommended stockholders tender their shares through a Schedule 14D-9, which described the sale process and the board’s reasons for recommending the offer.
- While the tender offer was pending, stockholder Elizabeth Morrison demanded books and records under 8 Del. C. § 220; after litigation she obtained board materials and an email from Ray Berry’s counsel indicating Berry had reached an understanding with Apollo in October 2015.
- Morrison filed a plenary action alleging that TFM’s founder and chairman, Ray Berry, and his son Brett Berry worked with Apollo to suppress competition and acquire TFM at a discount; she asserted fiduciary-duty claims against directors and aiding-and-abetting claims against Brett Berry.
- Morrison alleged the disclosure record was materially misleading because it did not adequately reveal: (a) an October 2015 agreement or understanding between Ray Berry and Apollo; (b) the depth and timing of Berry’s commitment to Apollo and resulting incentives; (c) a threat by Berry to sell his large stake if the company did not pursue a sale; and (d) the reasons the board formed a Strategic Transaction Committee in October 2015.
- The tender offer closed with 68.2% of outstanding shares tendered.
- The Court of Chancery dismissed under Rule 12(b)(6), applying Corwin to treat the tender as fully informed, uncoerced stockholder approval triggering business-judgment review.

## Issues

1. Whether Corwin’s business-judgment cleansing applied at the pleading stage when stockholders tendered a majority of shares in a transaction allegedly approved on a materially misleading disclosure record.
2. Whether alleged omissions and misleading partial statements in the 14D-9 about a key insider’s relationship with the acquirer, incentives, and the sale-process safeguards rendered the tender decision not fully informed.

## Decision

- The Delaware Supreme Court reversed the dismissal and remanded.
- The court held Morrison adequately pled that stockholders’ tender decision was not fully informed due to material omissions and misleading disclosures in the 14D-9.
- Because the tender was not shown to be fully informed at the pleading stage, Corwin cleansing and business-judgment review were unavailable on a motion to dismiss.

## Legal Principles

- Corwin applies only when disinterested stockholders approve a transaction through a fully informed, uncoerced vote (or tender); absent a fully informed decision, Corwin does not shift review to the business-judgment rule at the pleading stage.
- A disclosure is material if there is a substantial likelihood a reasonable stockholder would view the omitted or misstated fact as significantly altering the total mix of information.
- When a company describes the sale process and the role of potentially conflicted insiders, disclosures must not be materially misleading by omission; partial, selective descriptions can defeat Corwin cleansing.
- Omitted facts bearing on an influential insider’s commitments to the buyer, divergent economic incentives (including equity rollover expectations), pressure exerted on the board, and the purpose of special committee formation can be material to stockholders evaluating the transaction and the board’s recommendation.

## Conclusion

The Delaware Supreme Court held that pled material disclosure deficiencies concerning an insider’s relationship with the acquirer, incentives, and sale-process protections prevented treating the tender offer as fully informed stockholder approval under Corwin, requiring reversal of dismissal and remand for further proceedings.


Morrison v. Berry, 191 A.3d 268 (Del. 2018)