The plaintiffs invoke the familiar principle of Delaware law that a duty of good faith dealing is superimposed on the terms of every contract arising in the corporate framework. See Guth v. Loft, 23 Del. Ch. 255, 5 A.2d 503 (1939); Condec Corp. v. Lunkenheimer Co., 43 Del. Ch. 353, 230 A.2d 769 (1967); Penn Mart Realty Co. v. Becker, 298 A.2d 349 (Del.Ch. 1972). They reason that even valid corporate machinery cannot be used for any improper motive to injure minority shareholders.
Ch.1929)).Penn Mart Realty Co. v. Becker, 298 A.2d 349, 352 (Del. Ch.1972).b. Aiding and Abetting Breaches of Fiduciary Duty
Gilbert v. El Paso Co., Del. Ch., 490 A.2d 1050, 1057 (1984) ("It is well settled that a third party who knowingly participates in the breach of a fiduciary's duty becomes liable to the beneficiaries of the trust relationship.") (citations omitted); Laventhol, Krekstein, Horwath and Horwath v. Tuckman, Del. Supr., 372 A.2d 168, 170-71 (1976) ("[P]ersons who knowingly join a fiduciary in an enterprise which constitutes a breach of his fiduciary duty of trust are jointly and severally liable for any injury which results.") (citing Jackson v. Smith, 254 U.S. 586 (1921)). Penn Mart Realty Co. v. Becker, Del. Ch., 298 A.2d 349, 351 (1972); see also Weinberger v. Rio Grande Industries, Inc., Del. Ch., 519 A.2d 116, 131 (1986) (same); Gilbert, 490 A.2d at 1057 (same). In this case, we have concluded that the amended complaint does not adequately allege a duty of loyalty claim.
The actions of those who join in such misconduct are equally tainted. See e.g. Penn Mart Realty v. Becker, Del. Ch. , 298 A.2d 349, 351 (1972). Defendants maintain that the Evans-Reilly tip was immaterial, because it did not prevent Maxwell from submitting a higher bid in the second and final round of the auction on September 26th.
The Court now addresses MA's claims within the framework of these well-established principles. In re Tri-Star Pictures. Inc. Litig., Del.Supr., 634 A.2d 319, 326 (1993); Delaware State Troopers Lodge No. 6 v. O'Rourke, Del.Ch., 403 A.2d 1109, 1110 (1979); Penn Mart Realty Co. v. Becker, Del.Ch., 298 A.2d 349. 351 (1972).Tri-Star, 634 A.2d at 326; O'Rourke, 403 A.2d at 1110, Penn Mart, 298 A.2d at 351.
In order to state a claim under this theory, plaintiffs would have to allege, "(1) the existence of a fiduciary relationship, (2) a breach of the fiduciary's duty, and (3) knowing participation in that breach by [Olin Acquisition]." Penn Mart Realty Company v. Becker, Del. Ch. , 298 A.2d 349, 351 (1972). The Complaint, however, contains no allegation of Olin Acquisition's "knowing participation" in Olin's breach of fiduciary duty. Indeed, there is no allegation that Olin Acquisition even existed at the time the merger proposal was presented to Hunt.
In the context of a motion to dismiss, or for summary judgment, Burlington must demonstrate that the plaintiffs could not prevail under any state of facts which could be proved in support of their claim. Penn Mart Realty Company v. Becker, Del. Ch. , 298 A.2d 349 (1972), or that no material question of fact exists and that Burlington is entitled to relief as a matter of law. In addition, all factual inferences must be resolved in favor of the plaintiffs as the nonmovants.
"Knowing participation" can be proven by a showing that a third party "purposely induced" a breach of the duty of care. SeeIn re Rural Metro Corp. Stockholders Litig. , 88 A. 3d 54, 97 (Del. Ch. 2014) ; see alsoPenn Mart Realty Co. v. Becker , 298 A. 2d 349, 351-52 (Del. Ch. 1972) (refusing to limit aiding and abetting to claims involving fraud, self-dealing or other conflict of interest). Again, the parties dispute whether the facts support all the elements of this claim, in particular whether Allcat and the other defendants knowingly participated in the alleged breach.
Moreover, the authority relied upon by Rabkin concerned a claim, not against the holder of the fiduciary duty, but rather against other parties for allegedly joined with the fiduciary in committing the breach.See id. at 968 (citing Penn Mart Realty Co. v. Becker, 298 A.2d 349, 351(1972)). The Directors contend that the breach of fiduciary duty claim has been inadequately pleaded as to them because the alleged misdeeds were actually committed by Cogan, and it is not alleged that the Directors knew of and approved those acts, i.e., that they knowingly participated.
Moreover, the authority relied upon by Rabkin concerned a claim, not against the holder of the fiduciary duty, but rather against other parties for allegedly joined with the fiduciary in committing the breach. See id. at 968 (citing Penn Mart Realty Co. v. Becker, 298 A.2d 349, 351 (1972)). The Directors contend that the breach of fiduciary duty claim has been inadequately pleaded as to them because the alleged misdeeds were actually committed by Cogan, and it is not alleged that the Directors knew of and approved those acts, i.e., that they knowingly participated.