In Re Massey Energy Company Derivative And Class Action Litigation

2011 Del.Ch. Lexis 83 (Ch. Del. 2011)

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Nature of the Case

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Facts

D fostered an adversarial relationship with regulators and accepted as ordinary the idea that D would regularly be accused of violating important safety regulations. On April 5, 2010, a massive explosion occurred, and 29 miners died. This was not the first time that D miners had suffered death and serious injuries. Ps filed derivative suits, seeking to ensure that the corporate directors and officers who managed the firm were held responsible for what Ps argued was a failure to make a good faith effort to make sure that D complied with mine safety regulations. D's stock price fell dramatically. D was put up for sale. D entered into a 'Merger Agreement' with Alpha Natural Resources, Inc., a mining company with a good reputation and track record for miner safety and regulatory compliance. Under the terms of that Agreement, each D share will be converted into the right to receive 1.025 shares of Alpha common stock and $10.00 in cash if D stockholders approve the 'Merger' at a vote scheduled for June 1, 2011. The Merger consideration amounted a 27% premium over D's stock price the day of the explosion at the Upper Big Branch mine. Ps seek a preliminary injunction against the Merger because the Board did not negotiate to have the pending 'Derivative Claims' transferred into a litigation trust for the exclusive benefit of D stockholders. They argue that the Merger is unfair because it results in Alpha being able to acquire D without paying fair value for the economic value of the Derivative Claims. The D Board never attempted to value the Derivative Claims but proceeded on the assumption that the Derivative Claims would survive the Merger. There was also evidence that showed that many board members had no clue as to what would happen to the claims upon merger.