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agreed to sell GenDerm's Euroderma subsidiary to Bioglan Pharma PLC for $2.2 million. By mid-1997, GenDerm's board had empowered Dr. Bernstein and another GenDerm director as a two-person special committee to "represent the Company in all current and future equity transaction negotiations." The creation of the special committee apparently resulted from an expression of interest from Bioglan in buying the rest of GenDerm.
The plaintiffs challenged the Euroderma transaction in this lawsuit, but that count was dismissed because Vice Chancellor Jacobs held that the claim was derivative and that the plaintiffs had lost standing in the merger. Turner v. Bernstein, Del. Ch., C.A. No. 16190, mem. op. at 27-33, Jacobs, V.C. (Feb. 9, 1999) (hereinafter ( "Turner v. Bernstein I").
PX 14 (July 16, 1997 GenDerm Board Minutes at 2).
On August 1, 1997, Bioglan sent GenDerm a proposal contemplating a purchase of GenDerm for $60 million plus possible contingent payments of up to $20 million. When Bioglan could not obtain financing, this strategic option went away.
But the same broker who had represented Bioglan in dealing with GenDerm soon told Dr. Bernstein that he had another client willing to buy the company on essentially the same terms as Bioglan had proposed. That client was Medicis.
GenDerm followed up with Medicis, and negotiations ensued. On October 3, 1997, Dr. Bernstein provided Medicis with a package of materials discussing GenDerm's financial conditions and prospects (the
informed decision, pre-merger, whether to accept the merger consideration or demand appraisal.
21
In Skeen v. Jo-Ann Stores, Inc.,22 the Supreme Court recently confirmed Vice Chancellor Jacobs's view of the applicable standard, stating:
In this appeal, we consider the adequacy of corporate disclosures to minority stockholders who were "cashed out" in a merger approved by the majority stockholder. The minority stockholders complain that they were not given enough financial information to decide whether to accept the merger consideration or seek appraisal. They say, in essence, that the settled law governing disclosure requirements for mergers does not apply, and that far more valuation data must be disclosed where, as here, the merger decision has been made and the only decision for the minority is whether to seek appraisal.
We hold that there is no different standard for appraisal decisions. Directors must disclose all material facts within their control that a reasonable stockholder would consider important in deciding how to respond to the pending transaction.
23
Without belaboring the obvious, the defendant directors did not discharge their obligation to provide the GenDerm stockholders with "the available material facts that would enable them to make an informed decision. . . whether to accept the merger consideration or demand appraisal."24 The record is clear that the defendant directors defaulted on