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Friday, January 17, 2020

Judge dismisses stockholder's claims against Fresh Market directors over sale; Allegations against others survive

State Court

By Charmaine Little | Jan 10, 2020

Sec

WILMINGTON, Del. (Legal Newsline) – A Delaware judge has dismissed a former Fresh Market Inc. stockholder's suit against the grocery store chain's directors over the sale of the company.

The Court of Chancery of the State of Delaware ruled on Dec. 31 that plaintiff Elizabeth Morrison failed to state a claim against the director defendants and granted the motion to dismiss concerning them. But when it came to the remaining defendants, Vice Chancellor Sam Glasscock denied the motion to dismiss.

Morrison alleged the market fiduciaries breached their duties when they negotiated the sale and acquired the approval from stockholders. The case was previously dismissed, but it was revived concerning the breakdown of dismissal.

Glasscock determined that Morrison didn’t state a non-exculpated claim for breach of fiduciary duty relating to the director defendants. She also failed to plead facts that would show the director defendants acted in bad faith during the initiation stages of the acquisition process, the structure and oversight phase, and the disclosure stage.

But when it comes to defendant Ray Berry, who was the chairman of the Fresh Market Board as well as former CEO, and his son, Brett Berry, who was the former CEO and vice chairman of the board, Glasscock determined that Morrison properly stated her claims against them.

“The (second amended complaint) adequately alleges that Ray Berry acted in self-interest and in bad faith in a manner that conceivably harmed Fresh Market,” wrote Glasscock. 

Glasscock noted that the second amended complaint contains allegations that Berry was dishonest and mislead the board for a handful of months before the sale process began. 

“From this, I can reasonably infer he was not motivated by the best interests of the company, and that he intentionally ignored his duties as a director,” Glasscock wrote.

Morrison also properly stated a claim against Fresh Market’s general counsel Scott Duggan when she said his “interests in the transaction improperly motivated him to help complete a sham sale,” according to the opinion. 

Glasscock denied his motion to dismiss as well as the motion for Richard A. Anicetti, who was the officer and director. Morrison sufficiently pleaded allegations that Anicetti’s employment inappropriately pushed him to urge the merger for as low of a price as possible.

Considering this, his motion to dismiss was also denied.

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