Delaware's Chancery Court recently ruled once again that directors/managers have an affirmative duty to disclose material information when asking their investors to take action. In Marie Raymond Revocable Trust v. MAT Five LLC, et al, 2008 Del. Ch. LEXIS 77 (June 26, 2008) the court also suggested that when a company is asking its members to release it, and its officers, employees and agents from all claims the investors may have against them for essentially taking the company down the tubes, the company has a duty to describe the underlying reasons the release is being sought.
To sustain a a claim for breach of the duty to disclose a plaintiff must identify material information that was reasonably available but omitted from the disclosure document (in this case a tender offer, but it could also be proxy materials). The standard for materiality is whether a reasonable investor would consider it important in making a decision or would find that the information would alter the "total mix" of information available.
There will be more on this case soon since the hearing on the plaintiff's motion for a preliminary injunction is scheduled for tomorrow.
-Marc Ward
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