Duane Morris Class Action Review - 2023 - Report - Page 339
case where the court looked closely at both the underlying securities claim and whether
the plaintiffs satisfied the state procedural class action requirements.
Plaintiffs sought to certify the claims of a class of company stockholders in Buttonwood
Tree Value Partners, L.P., et al. v. R. L. Polk & Co., 2022 Del. Ch. LEXIS 146 (Del. Ch.
June 23, 2022), including claims for breach of fiduciary duty by Defendants. R.L. Polk
and Co., Inc., (the Company) had been majority owned and controlled by the Polk family
since 1870. In March 2011, the Company made a tender offer to all stockholders to
purchase up to 37,037 shares of the Company’s stock at a price of $810 per share (the
Self Tender). Id. at *2. The plaintiffs participated in the Self-Tender. The defendant
Stephen Polk was the Company’s President, CEO, and the chairman of the board of the
directors during the relevant period; he controlled the voting power of the Polk shares
owned by the Polk Family, with the exception of the co-defendants, Katherine Polk
Osborne and Nancy Polk – also members of the Polk board of directors. Id. at *3.
Stephen Polk also served as the fiduciary for two Polk-related trusts that had also
participated in the Self-Tender. Id. The plaintiffs maintained that the Self-Tender
significantly undervalued the Polk stock, when it sold for $2,675 per share two years
later. Id. at *4. The plaintiffs also asserted that they missed out on several
“extraordinary” dividends issued by Polk after the 2011 Self-Tender, and before the
2013 sale. Id. The plaintiffs alleged that the defendants materially mislead the plaintiffs
in connection with the Self-Tender by failing to disclose certain details in their Offer to
Purchase for Cash (Offer to Purchase) regarding the Company’s valuation. Id. at *5.
The plaintiffs filed suit seeking approximately $62 million in damages for breach of duty
of care (or loyalty) in connection with the misleading disclosures. The plaintiffs sought to
certify a class of shareholders that tendered shares in the Self-Tender, or, who had sold
their shares into the market from the dissemination of the Offer to Purchase. Id.at *7.
The crux of the defendants’ opposition lay in their contention that each member of the
plaintiff class would have to prove reliance, causation and damages on an individualized
basis, and that such issues were fatal to the class certification requirements. Id. at *8.
The court determined that, while such individualized questions may be relevant to the
plaintiffs’ request for ultra-nominal damages, they were not relevant to the question of
whether the defendants had breached their duty of disclosure, or whether they owed
corresponding nominal damages. Id. at *10. On this basis, the court certified the
proposed class, finding that the plaintiffs had satisfied the requirements of numerosity,
commonality, typicality and adequacy of representation, in connection with the plaintiffs’
claim for breach of fiduciary duty in connection with the disclosures. Id. at *31. The
plaintiffs also sought to certify a defendant class to include all Polk family members to
the extent they had owned “directly or beneficially” shares controlled by a Polk Director,
or benefitted from the actions of the Polk Directors challenged in the complaint. The
plaintiffs also sought to appoint Stephen Polk as the class representative. Id. at *31. The
court noted that generally, “[c]ourts are reluctant to certify a defendant class absent a
‘sufficient showing of necessity,” and ultimately determined that the plaintiffs had failed
to demonstrate that the defendant class met the requirements of the Delaware Rule 23,
for certification. Id. at *32. In so holding, the court determined that the defendant class
members each had individualized defenses fatal to class certification, and Stephen Polk
could not represent the interests of the defendant class members while also serving as
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Duane Morris Class Action Review – 2023
