Opinion
7341 7342 7343 7344 Index 650675/18 650766/18
10-16-2018
Darwin DEASON, Plaintiff–Respondent, v. FUJIFILM HOLDINGS CORP., Defendant–Appellant, Xerox Corp., et al., Defendants. In re Xerox Corporation Consolidated Shareholder Litigation Asbestos Workers Philadelphia Pension Fund, etc., et al., Plaintiffs–Respondents, v. Fujifilm Holdings Corp., Defendant–Appellant, Xerox Corp., et al., Defendants.
Sidley Austin LLP, New York (Eamon P. Joyce of counsel), for appellant. King & Spalding LLP, New York (Richard T. Marooney of counel), for Darwin Deason, respondent. Grant & Eisenhofer P.A., New York (Jay W. Eisenhofer and James J. Sabella of counsel), for class respondents.
Sidley Austin LLP, New York (Eamon P. Joyce of counsel), for appellant.
King & Spalding LLP, New York (Richard T. Marooney of counel), for Darwin Deason, respondent.
Grant & Eisenhofer P.A., New York (Jay W. Eisenhofer and James J. Sabella of counsel), for class respondents.
Renwick, J.P., Tom, Gesmer, Singh, JJ.
Orders, Supreme Court, New York County (Barry Ostrager, J.), entered on or about April 30, 2018, and on or about May 1, 2018, which, to the extent appealed from as limited by the briefs, denied the motions of defendant Fujifilm Holdings Corp. (Fuji) to dismiss the respective complaints as against it, and granted plaintiffs' motions for preliminary injunctions, unanimously reversed, on the law and the facts, with costs, the complaints dismissed as against Fuji, and the injunctions dissolved. The Clerk is directed to enter judgments accordingly in favor of Fuji. Appeals from orders, same court and Justice, entered on or about June 22, 2018 and on or about June 21, 2018, which denied Fuji's motions seeking to dissolve the injunctions, unanimously dismissed, without costs, as academic.
Plaintiffs failed to show bad faith or a disabling interest on the part of the majority of the directors of Xerox such that plaintiffs' actions stood a likelihood of success on the merits (see Security Police & Fire Professionals of Am. Retirement Fund v. Mack, 93 A.D.3d 562, 564, 940 N.Y.S.2d 609 [1st Dept. 2012] ). While there was an agreement that five members of the then current board of directors would serve on the board of the new company created after the proposed transaction with Fuji, the possibility that any one of the directors would be named to that board alone was not a material benefit such that it was a disabling interest (see Giuliano v. Gawrylewski, 122 A.D.3d 477, 478, 997 N.Y.S.2d 20 [1st Dept. 2014] ; Orman v. Cullman, 794 A.2d 5, 24–25 [Del. Ch. Ct. 2002] ).
To the extent former CEO of Xerox, Jacobson, was conflicted, inasmuch as the transaction provided that he would serve as the future CEO of the new company, the conflict was acknowledged; he neither misled nor misinformed the board (see Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261, 1264 [Del. Super. 1989], compare Deblinger v. Sani–Pine Prods. Co., Inc., 107 A.D.3d 659, 967 N.Y.S.2d 394 [2d Dept. 2013] ). The board, which engaged outside advisors and discussed the proposed transaction on numerous occasions prior to voting on agreeing to present it to the shareholders, did not engage in a mere post hoc review, nor was the transaction unreasonable on its face (see In re MeadWestvaco Stockholders Litig., 168 A.3d 675, 683 [Del. Ch. 2017], compare Sinclair Oil Corp. v. Levien, 280 A.2d 717 [Del. Super. 1971] ).
In light of the foregoing, the business judgment rule does apply ( Auerbach v. Bennett, 47 N.Y.2d 619, 419 N.Y.S.2d 920, 393 N.E.2d 994 [1979] ). And upon application of the business judgment rule, plaintiffs did not make a showing of the likelihood of success on the merits in the actions, which allege breaches of fiduciary duty and fraud. The court should have also dismissed the claims alleging aiding and abetting a breach of fiduciary duty as against Fuji. Plaintiffs failed to plead these causes of action with the requisite particularity, their claims being unsupported by specific factual allegations (see CPLR 3016[b] ; Schroeder v. Pinterest Inc., 133 A.D.3d 12, 25, 17 N.Y.S.3d 678 [1st Dept. 2015] ; compare Front, Inc. v. Khalil, 103 A.D.3d 481, 483, 960 N.Y.S.2d 79 [1st Dept. 2013], affd 24 N.Y.3d 713, 4 N.Y.S.3d 581, 28 N.E.3d 15 [2015] ).
We have considered plaintiffs' remaining contentions and find them unavailing.