## Facts

- Rural/Metro Corp., a public ambulance and fire protection services company, formed a special committee in December 2010 to explore strategic alternatives.
- The committee retained RBC Capital Markets, LLC as primary financial advisor and later hired Moelis & Company LLC as a secondary advisor.
- RBC urged Rural/Metro to pursue a sale process in parallel with the sale of a competitor (EMS) but did not disclose that parallel timing advanced RBC’s interest in securing financing roles for bidders and substantial additional fees.
- RBC faced multi-sided incentives: a sell-side advisory fee from Rural/Metro and potential buy-side financing fees in the EMS process and/or Rural/Metro transaction.
- Rural/Metro agreed in March 2011 to be acquired by a Warburg Pincus affiliate for $17.25 per share; the merger closed June 30, 2011.
- Stockholders sued, alleging the board breached fiduciary duties under Revlon and disclosure law, and that RBC and Moelis aided and abetted those breaches; plaintiffs settled with the directors and Moelis, leaving RBC for trial.
- After trial, the Court of Chancery found board duty-of-care and disclosure breaches and held RBC liable for aiding and abetting based on unauthorized sale-process activity, misleading information, and undisclosed conflicts.
- The Court of Chancery awarded damages based on the gap between merger price and going-concern value, allocated 83% of damages to RBC, and denied fee shifting for litigation misconduct.

## Issues

1. Whether the transaction triggered Revlon enhanced scrutiny and whether the board breached its Revlon duty of care in conducting and approving the sale process.
2. Whether materially misleading proxy disclosures supported a finding of a fiduciary duty of disclosure breach.
3. Whether RBC, a non-fiduciary advisor, knowingly participated in the board’s fiduciary breaches so as to be liable for aiding and abetting.
4. Whether RBC’s conduct proximately caused stockholder damages and whether the damages methodology and allocation were proper.
5. Whether Delaware’s Uniform Contribution Among Tortfeasors Act permitted RBC to obtain contribution from directors who were exculpated from monetary liability and had settled.

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery’s principal legal holdings and final judgment against RBC.
- The Court upheld findings that the board breached Revlon duties of care and disclosure in the sale process and in issuing a materially misleading proxy statement.
- The Court affirmed that RBC aided and abetted those breaches by knowingly participating, including through undisclosed conflicts and misleading analyses that impaired board and stockholder decision-making.
- The Court upheld proximate-causation findings and the damages approach measuring the difference between the merger consideration and Rural/Metro’s going-concern value, as well as the 83% allocation of damages to RBC.
- The Court held that § 102(b)(7) exculpation protected directors from monetary liability for duty-of-care breaches but did not protect third-party advisors, and it rejected RBC’s contribution arguments because exculpated directors were not joint tortfeasors for contribution purposes.

## Legal Principles

- In a sale-of-control transaction, Revlon enhanced scrutiny requires directors to act reasonably to obtain the best value reasonably available and to supervise the sale process with adequate, reliable information.
- When soliciting stockholder action, fiduciaries must disclose all material information; materially misleading statements or omissions in a merger proxy can constitute a disclosure breach.
- A financial advisor may be liable for aiding and abetting fiduciary duty breaches if it knowingly participates in the breach, including by concealing conflicts, distorting analyses, or otherwise impairing the board’s information and decision-making.
- DGCL § 102(b)(7) can exculpate directors from monetary damages for duty-of-care violations, but it does not extend to non-fiduciary third parties; director exculpation does not prevent using the directors’ breach as the predicate for advisor aiding-and-abetting liability.
- Contribution under DUCATA is unavailable against directors who, due to § 102(b)(7) exculpation, are not monetarily liable as joint tortfeasors for the duty-of-care-based damages at issue.

## Conclusion

The Delaware Supreme Court sustained a large damages award against a sell-side financial advisor for aiding and abetting Revlon and disclosure breaches where the advisor concealed conflicts and provided misleading information that affected the sale process and stockholder vote, while confirming that director exculpation under § 102(b)(7) does not protect advisors and can foreclose contribution claims against exculpated, settling directors.


RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015)