Dell/EMC Merger Prompted 15 Class Action Lawsuits

This information is an abstract of a SEC filing published by EMC Corp.

As of August 8, 2016, fifteen putative shareholder class action lawsuits challenging the merger have been filed, of which thirteen were filed purportedly on behalf of company shareholders and two purportedly on behalf of VMware shareholders.

The lawsuits name various combinations of the company, its current and former directors, VMware, certain of VMware’s directors, Denali, Dell and Merger Sub, among others, as defendants. The fifteen lawsuits seek, among other things, injunctive relief enjoining the merger, rescission of the merger if consummated, an award of fees and costs and/or an award of monetary damages.

The suits are captioned as follows:
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Of the thirteen lawsuits filed purportedly on behalf of company shareholders, nine were filed in Massachusetts state court, and four in the United States District Court for the District of Massachusetts. Eleven of the lawsuits initially advanced substantially the same allegations that the merger agreement was adopted in violation of the fiduciary duties of the company’s directors.  Certain of those lawsuits also alleged that the company, Denali, Dell, Merger Sub, Silver Lake Partners, LLC, and/or MSD Partners, LLC aided and abetted the alleged breaches of fiduciary duty by the directors.
 
On November 5, 2015, pursuant to a motion made by the company and its directors, the nine lawsuits then pending in state court in Massachusetts were consolidated with and into the first-filed of those actions, IBEW Local No. 129 Benefit Fund v. Joseph M. Tucci, et al. That action, brought in the Business Litigation Session of the Suffolk County Superior Court, named as defendants the company and each member of its board of directors (as constituted as of October 12, 2015), Denali, Dell and Merger Sub.
 
The company and its directors moved to dismiss the amended complaint in the IBEW matter pursuant to provisions of the Massachusetts Business Corporation Act, M.G.L. c. 156D, § 7.40 et seq., and Rules 12(b)(6) and 23.1 of the Massachusetts Rules of Civil Procedure, on the basis that the complaint asserts a derivative action on behalf of the company and should be dismissed for failure to make the requisite pre-suit demand on the company. On December 7, 2015 the court granted this motion and on December 24, 2015 the court entered judgment dismissing each of the consolidated actions. On January 21, 2016, three of the plaintiffs served notice that they will appeal this judgment. On April 29, 2016, the appeal was docketed in the Massachusetts Appeals Court as case number 2016-P-0595. On May 2, 2016, the appellants filed an application for direct appellate review in the Massachusetts Supreme Judicial Court as Direct Appellate Review No. DAR-24347. That application was granted on June 23, 2016, and the appeal is now pending in the Massachusetts Supreme Judicial Court as case number SJC-12137.
 
On January 11, 2016, following the state court judgment and a motion by the company and its directors to stay or dismiss the two lawsuits then pending in the United States District Court for the District of Massachusetts, the plaintiffs in those cases amended their complaints to eliminate the initial claims based on Massachusetts state law and substitute allegations that the preliminary proxy statement/prospectus dated December 14, 2015 omits and/or misrepresents material information and that such omissions and misrepresentations constitute violations of Section 14(a) of, and Rule 14a-9 under, the Securities Exchange Act of 1934. Two additional lawsuits were later filed in the same court advancing substantially the same proxy-disclosure-based allegations. On June 17, 2016, the parties filed a stipulation and proposed order requesting that the court dismiss all four actions with prejudice as to the named plaintiffs and retain jurisdiction to determine plaintiffs’ counsel’s application for an award of attorneys’ fees and reimbursement of expenses.
 
Of the two lawsuits filed purportedly on behalf of VMware shareholders, one was filed in Middlesex County Superior Court in Massachusetts, and the other in Delaware Chancery Court. Both generally allege that the company, in its capacity as the majority shareholder of VMware, and individual defendants who are directors of the company, VMware, or both, breached their fiduciary duties to minority shareholders of VMware in connection with the merger. Both further allege that various combinations of defendants aided and abetted these alleged breaches of fiduciary duties. The company, VMware, Denali, Dell, Merger Sub, and other defendants have served or filed motions to dismiss the operative complaints in both actions.
 
The outcome of these lawsuits is uncertain, and additional lawsuits may be brought or additional claims advanced concerning the merger. An adverse judgment for monetary damages could have an adverse effect on the company’s operations.  A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the merger.