CoreLogic, Inc. (CoreLogic) is a corporation that provides financial, property, and consumer information, analytics, and intelligence. In June 2020, CoreLogic received an unsolicited joint proposal from two funds to acquire CoreLogic, which CoreLogic’s board of directors (the Board) rejected. This failed bid led to significant interest in CoreLogic, and the Board initiated a process to seek strategic alternatives. Ultimately, CoreLogic narrowed the field of bidders to two: (1) CoStar Group Inc. (CoStar) submitted a strategic bid that included cash and stock; and (2) Stone Point Capital LLC (Stone Point) and Insight Partners LLC (Insight) submitted a financial bid. After months of negotiations with both bidders, CoreLogic accepted the financial bid from Stone Point and Insight.

Following the rejection of CoStar’s bid, an article reported that Andrew Florance, CoStar’s CEO, stated that he thought CoreLogic’s executives did not want to merge with CoStar because they feared losing their jobs. The plaintiff, a common stockholder of CoreLogic, then filed a books and records action against CoreLogic pursuant to Section 220 of the Delaware General Corporation Law to investigate “potential wrongdoing.” Following the receipt of documents, plaintiff filed a complaint alleging that the sale process was infected by the desire of Frank Martell, CoreLogic’s CEO, to protect his job. The complaint included (1) claims alleging disclosure violations related to antitrust concerns and Martell’s interests in post-merger employment; and (2) a breach of fiduciary duty claim against Martell.

As a preliminary matter, the court ruled that the entire fairness standard did not apply and that “the Complaint must be dismissed under Corwin, unless the Complaint supports a reasonable inference that the vote was not fully informed.” The court went on to explain that the plaintiff had the initial burden to identify a deficiency in disclosure document. Here, the plaintiff alleged four deficiencies related to the antitrust disclosures in the Proxy Statement, and, alternatively, alleged that the Proxy Statement omitted material information regarding Martell’s interest in securing post-merger employment.

With regard to the antitrust disclosures, plaintiff alleged that the disclosures were false because (1) CoreLogic did not raise antitrust concerns until December 2020, (2) there was no explanation for the Board’s antitrust concerns, (3) CoreLogic failed to retain antitrust counsel, and (4) CoStar was not a CoreLogic’s competitor. The court rejected each of these allegations, finding that the Proxy Statement disclosed that the Board’s antitrust concerns arose in July 2020 and included explanations for the Board’s antitrust concerns. The plaintiff abandoned the third allegation regarding failure to hire antitrust counsel. Finally, the court found plaintiff’s argument that CoStar was not a competitor to be misplaced as antitrust laws protect competition, not competitors, and determined that the Proxy Statement disclosed the Board’s concern with the impact the merger would have on customers and the regulatory scrutiny the merger would receive.

The court also rejected plaintiff’s claim that there was a disclosure violation because the Proxy Statement omitted information about Martell’s interest in post-Merger employment. The plaintiff alleged that Martell must have discussed post-merger employment because he was retained after the merger closed, but could not point to any documents or communications to support this allegation, despite receiving documents in response to the Section 220 demand. Accordingly, the court found the complaint failed under Corwin.

The court further held that even if Corwin were inapplicable, the complaint failed to state a breach of fiduciary duty claim against Martell. Plaintiff alleged that Martell drove the sale process, directed the Board to approve with the merger with Insight and Stone Point, and was motivated by his own self-interest regarding his employment and pay. The court rejected these claims, finding the complaint devoid of facts from which to infer that Martell had led the Company away from CoStar. The court observed that none of the 11 outside directors of the Board were beholden to Martell nor were alleged to have been conflicted. Rather, three of the directors had been nominated by entities during a proxy contest, and the court stated that an allegation that these three directors were “supine” was “not only conclusory, but, frankly, strains belief.” In addition, the Board’s advisors were not alleged to be conflicted, nor beholden to Martell, or alleged to have provided inaccurate information to the Board. The court also noted that Martell did not appear to play a role in the Board’s consideration or determination of their preference for deal terms. Therefore, the court found that there was no reasonable inference that Martell exerted improper influence over the sale.