Louisiana Municipal Police Employees' Retirement System v. Crawford

Delaware Court of Chancery · 2007 · Corporations

918 A.2d 1172 (2007)

Updated August 22, 2026

CorporationsMergersDisclosureAppraisal RightsPreliminary Injunctionsduty of disclosurematerialitypreliminary injunction

Facts

Caremark and CVS agreed to a stock-for-stock merger, later modified so Caremark shareholders would receive a cash "special dividend" payable only if the merger were approved and effective. After Express Scripts made an unsolicited competing offer, Caremark's board rejected it and continued to recommend the CVS transaction. Plaintiffs alleged fiduciary breaches and disclosure defects, including inadequate disclosure of banker compensation and failure to inform shareholders that the conditional cash dividend triggered appraisal rights. KEW, Express Scripts' subsidiary, bought Caremark shares only after the merger agreement was announced.

Issue

Whether the court should preliminarily enjoin the Caremark shareholder vote because of alleged fiduciary and disclosure violations, and specifically whether the conditional special cash dividend constituted merger consideration giving shareholders appraisal rights. The case also presented whether certain disclosure omissions were material and whether Express Scripts had standing to challenge pre-purchase conduct.

Rule

A preliminary injunction requires a reasonable probability of success on the merits, immediate irreparable injury absent relief, and a balance of hardships favoring the movant. Directors seeking shareholder action must fully and fairly disclose all material information, meaning information for which there is a substantial likelihood a reasonable shareholder would consider it important and that would significantly alter the total mix of information. Under 8 Del. C. § 262, when merger consideration includes cash and stock, appraisal rights attach; a cash payment styled as a dividend is merger consideration if payment is conditioned on shareholder approval and effectiveness of the merger rather than having independent legal significance.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Pine Harbor Systems, a Delaware corporation based in Portland, Maine, announced a merger with Rivergate Health on April 1. On May 10, Alder Peak Capital bought Pine Harbor shares, and on May 20 Pine Harbor's board reaffirmed its recommendation of the merger and rejected a competing bidder's offer. Alder Peak then sued in Delaware, challenging both the April 1 approval of the merger agreement and the May 20 rejection of the rival bid.

Which claims is Alder Peak most likely to have standing to pursue?

Explanation. A stockholder who purchases after the challenged transaction lacks standing to attack board decisions made before ownership began. But ownership does support challenges to later directorial actions, such as post-purchase rejection of a competing offer or later disclosure violations. The majority opinion drew that line between pre-purchase conduct and post-purchase conduct.