By: Amanda Torres
In Re Allergan, Inc., Stockholder Litigation, the Delaware Chancery Court denied a Motion for Summary Judgment filed by stockholders of a pharmaceutical company, Allergan, Inc. (“Allergan”). This action arose after Valeant Pharmaceuticals (“Valeant”) and hedge fund, Pershing, sought to acquire Allergan. The remaining shareholders sued Allergan’s nine board members, seeking judicial declarations relating to issues they found with Allergan’s response to Valeant’s proposed merger.
The first issue involved a “Written Consent Amendment” to Allergan’s Certificate of Incorporation, permitting special meetings of stockholders via written requests. Plaintiffs sought a judicial declaration that the “Written Consent Amendment” permitted the removal of a majority of Allergan’s Board by written consent. The second issue involved Allergan’s amendment to its bylaws known as the “Similar Item” provision, stating that special meeting requests would not be permitted if similar issues were presented at a stockholder meeting within the previous year. Plaintiffs’ sought a declaration that this “Similar Item” provision would not prohibit an election of a new board through written consent, so long as the nominees had not been nominees within the proceeding year. Lastly, Plaintiffs’ asserted that the Board breached its fiduciary duty of candor for making false and misleading statements about the election of directors in its proxy statement.
The Court denied Plaintiffs’ first and second claim for lack of ripeness. A matter is ripe for declaratory judgment “if litigation sooner or later appears to be unavoidable and where the material facts are static.”  “Delaware courts ‘typically decline to decide issues that may not have to be decided or that create hypothetical harm.’” The Court found the new provisions to have no present negative effect on stockholders. The present proxy contest for control of the board demonstrated that the amendments did not deter Valeant from seeking Allergan. Furthermore, the Court held that the Plaintiffs’ claims for declaratory relief were based solely upon a hypothetical scenario. The Court found it imprudent to break precedent and ignore the policy considerations against issuing advisory opinions.
Finally, the Court denied Plaintiffs’ breach claim for failure to present a supporting factual record. The Court explained that the duty of candor/disclosure is a subset of a duty of care and/or loyalty. Although the Plaintiffs’ captioned their complaint as if duty of candor is an independent duty, the Court held that they were obligated to put forth evidence demonstrating a breach of duty of care/loyalty.
The Delaware Chancery Court is closely monitored in the business community. Here, the Court followed Delaware’s precedent for ripeness and enforced the high burden in a fiduciary duty breach claim. This decision has strong weight for stockholders suing boards based on language in a proxy statement, to avoid possible outcomes. Courts take breach of fiduciary duties claims very seriously, and stockholders may not solely rely on hypothetical future results as a basis for their claims. Because of the Court’s consideration of avoiding issuing advisory opinions, it may be interesting to see what it takes for Delaware to stray from this strong public policy.
 No. CIV.A. 9609-CB, 2014 WL 5791350 (Del. Ch. Nov. 7, 2014).
 XI Specialty Ins. Co. v. WMI Liquidating Trust, 93 A.3d 1208, 1217 n.43 (Del. 2014).
 Allergan, 2014 WL 5791350, at *9.
 Allergan, 2014 WL 5791350, at *10.