                               COURT OF CHANCERY
                                     OF THE
                               STATE OF DELAWARE
ANDRE G. BOUCHARD                                              LEONARD L. WILLIAMS JUSTICE CENTER
      CHANCELLOR                                                   500 N. KING STREET, SUITE 11400
                                                                  WILMINGTON, DELAWARE 19801-3734


                           Date Submitted: September 15, 2017
                            Date Decided: December 22, 2017


 Kurt M. Heyman, Esquire                         Kenneth J. Nachbar, Esquire
 Jamie L. Brown, Esquire                         Kevin M. Coen, Esquire
 Heyman Enerio Gattuso & Hirzel LLP              Zi-Xiang Shen, Esquire
 300 Delaware Avenue, Suite 200                  Morris, Nichols, Arsht & Tunnell LLP
 Wilmington, DE 19801                            1201 N. Market Street
                                                 Wilmington, DE 19801

          RE:      Chatham Asset Management, LLC v. Papanier
                   Civil Action No. 2017-0088-AGB

 Dear Counsel:

          This letter constitutes the Court’s decision on defendants’ motion to dismiss

 the Verified Amended Complaint filed on April 10, 2017.                 For the reasons

 explained below, the motion is granted in part and denied in part.

 I.       Background

          Unless otherwise noted, the facts recited in this letter decision come from the

 allegations in the Amended Complaint and documents incorporated therein.1 Any

 additional facts are either undisputed or subject to judicial notice.


 1
   See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013) (internal quotation
 marks and citations omitted) (“[P]laintiff may not reference certain documents outside
 the complaint and at the same time prevent the court from considering those documents’
 actual terms” in connection with a motion to dismiss.).
Chatham Asset Management, LLC v. Papanier
C.A. No. 2017-0088-AGB
December 22, 2017

        A.     The Parties

        Plaintiffs Chatham Asset Management, LLC, Chatham Fund, LP, and

Chatham Asset High Yield Master Fund, Ltd. (“Chatham”) hold common stock of

Twin River Worldwide Holdings, Inc. (“Twin River”).                Pursuant to a waiver

granted by the Rhode Island Department of Business Regulation, Chatham is

permitted to own up to, but not more than, 15% of Twin River’s common stock.2

        Defendants consist of six individuals who served at relevant times as

directors or officers of Twin River. George Papanier, John E. Taylor, Jr., Soo

Kim, and Stephen H. Capp served as directors. Papanier is Twin River’s President

and Chief Executive Officer; the other three individuals are outside directors. The

remaining two individual defendants—Craig L. Eaton and Glenn Carlin—served

as officers of Twin River.

        Non-party Twin River conducts casino and other operations in Rhode Island,

Mississippi, and Colorado through its subsidiaries. Twin River’s stock does not

trade on a national securities exchange but does trade on institutional trading desks,

where only qualified institutional buyers are permitted to purchase shares.3 Quotes

2
    Am. Compl. ¶ 26.
3
  Am. Compl. ¶ 25. The term “qualified institutional buyer” means any of certain entities
“acting for its own account or the accounts of other qualified institutional buyers, that in
the aggregate owns and invests on a discretionary basis at least $100 million in securities
of issuers that are not affiliated with the entity.” 17 C.F.R. § 230.144A(a)(1)(i).

                                             2
Chatham Asset Management, LLC v. Papanier
C.A. No. 2017-0088-AGB
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on the stock and trading activity are disseminated via Bloomberg. According to

Chatham, “[a]s a result of this generally small trading community, the trading price

of the stock reacts swiftly and significantly to any newly disclosed information that

changes the balance of supply and demand.”4

        B.     The Tender Offer

        On November 15, 2016, when its stock was trading for approximately $70

per share, Twin River announced a tender offer to purchase up to 250,000 shares of

its common stock for $80 per share in cash (the “Tender Offer”).5 Immediately

after the Tender Offer was announced, Twin River’s stock was quoted at $80 per

share and “remained[ed] available at that price” until early April 2017 “for very

small volume transactions.”6

        On December 16, 2016, Twin River announced that 1,738,293 shares were

validly tendered and that it would purchase 14.38% of the shares tendered by each

participating investor.7 Chatham alleges that “despite having specifically increased

Twin River’s credit facility to allow the Company to purchase $50 million worth of




4
    Am. Compl. ¶ 25.
5
    Am. Compl. ¶ 27.
6
    Am. Compl. ¶ 27.
7
    Am. Compl. ¶ 31.

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Chatham Asset Management, LLC v. Papanier
C.A. No. 2017-0088-AGB
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shares, only $20 million was used—a paltry sum compared to Twin River’s

approximately $780 million market capitalization.”8

          C.         The Offer to Purchase

          Twin River made the Tender Offer through an offer to purchase circular

dated November 15, 2016 (“Offer to Purchase”). The Offer to Purchase stated that

“[t]he purpose of the Offer is to return cash to our Shareholders by providing them

the opportunity to tender all or a portion of their Shares and, thereby, receive a

return of some or all of their investment if they so elect.”9 The Offer to Purchase

also stated that Twin River’s directors and executive officers did not “currently

intend” to participate in the Tender Offer but that they may sell their shares in the

post-Tender Offer market “from time to time”:

          Our directors, executive officers and affiliates may, subject to
          applicable law and applicable policies of the Company, sell their
          Shares from time to time pursuant to the terms of equity compensation
          awards or in open-market and/or other transactions at prices that may
          be more or less favorable than the Purchase Price to be paid to our
          Shareholders pursuant to the Offer.10

The Tender Offer expired on December 15, 2016.11



8
    Am. Compl. ¶ 8.
9
    Defs.’ Opening Br. Ex. B at 2.
10
     Id. at 2, 16.
11
     Defs.’ Opening Br. Ex. B.

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Chatham Asset Management, LLC v. Papanier
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         D.     Defendants’ Alleged Plan to Sell Their Shares

         Chatham alleges that when defendants made the Tender Offer, they planned

to sell their shares, not “from time to time,” but shortly after the Tender Offer

closed.12 According to Chatham, “a representative of Defendants informed certain

stockholders of Twin River (other than Chatham) that the Defendants had wanted

to participate in the Tender Offer,” but when they learned that it would be

problematic for them to do so, they “quickly determined to sell their shares

promptly after the Tender Offer closed.”13

         “Within weeks of the Tender Offer closing,” defendants allegedly shopped

“at least 125,000 shares, half of the total Twin River purchased through the Tender

Offer, through at least one broker.”14 According to Chatham, the broker provided

“big-boy” letters to prospective purchasers to facilitate the sale of defendants’

shares.15 The Amended Complaint, which was filed on April 10, 2017, does not

allege that defendants actually sold any shares since the Tender Offer expired on


12
     Am. Compl. ¶ 3.
13
     Am. Compl. ¶ 4.
14
     Am. Compl. ¶ 5.
15
   Id. “Big boy letters are agreements between parties to a securities transaction where
one party, typically the seller, has material, nonpublic information that it does not want to
disclose, but both parties want to complete the transaction and preclude any claims based
on the nondisclosure.” Edwin D. Eshmoili, Note, Big Boy Letters: Trading on Inside
Information, 94 CORNELL L. REV. 133, 135 (2008).

                                             5
Chatham Asset Management, LLC v. Papanier
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December 22, 2017

December 15, 2016. Defendants represented that they still had not done so as of

June 9, 2017, when their reply brief was filed.16

         Before the Tender Offer closed, Chatham owned 14.98% of Twin River’s

stock.17 Chatham alleges it had “no choice” but to tender some of its shares into

the Tender Offer because of the 15% cap on its holdings, which it did.18 As a

result, Chatham held a 14.91% position in Twin River after the Tender Offer

closed.19 In the months after the Tender Offer closed, Twin River stock traded

between approximately $80 and $82 per share.20

         E.     Twin River Sends a Letter to Rhode Island Regulators
                Concerning Chatham

         Twin River is party to a Regulatory Agreement, dated July 1, 2016, with the

Rhode Island Department of Business Regulation and the Division of Lotteries of

the Rhode Island Department of Revenue (the “Regulators”). The Regulatory

Agreement contains a provision obligating Twin River to comply with, and to

cause owners of 5% or more of its stock to comply with, certain legal

requirements:

16
     Defs.’ Reply Br. 1-2.
17
     Am. Compl. ¶ 26.
18
     Am. Compl. ¶¶ 30, 57.
19
     Am. Compl. ¶ 26.
20
     Am. Compl. ¶ 32.

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Chatham Asset Management, LLC v. Papanier
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           [Twin River] shall at all times comply and remain in compliance with
           and shall cause its Senior Executives, directors and owners of a direct
           or indirect Financial Interest of 5% or greater in any class of Financial
           Interests in each Rhode Island Company to comply and remain in
           compliance with: (i) all applicable requirements under all laws,
           statutes and rules and regulations; (ii) this Agreement; (iii) the VLT
           Contract; (iv) the Newport VLT Contract; and (v) all applicable
           decrees and orders of any Governmental Authority.21

According to defendants, Twin River could face various penalties if it fails to

comply with its obligations under the Regulatory Agreement.22

            On April 7, 2017, Twin River sent a letter to the Regulators (the “April 7

Letter”) bringing to their attention certain “recent events involving Chatham.”23

The April 7 Letter stated that these events called into question whether Chatham

was in compliance with its institutional shareholder license, which “requires that

institutional investors have (1) no involvement in the Company’s business

activities and (2) no intention of influencing, affecting or participating in the

Company’s affairs.”24 The April 7 Letter identified four such events: the frequency


21
  Defs.’ Opening Br. Ex. E § 7.1. The Court takes judicial notice of the Regulatory
Agreement because there can be no reasonable dispute concerning its existence and
contents. In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 169 (Del. 2006).
22
   According to defendants, those penalties could include “injunctive relief, withholding
of income, monetary penalties of up to $50,000 per violation[,] and any other remedies
that the regulators have at law or equity” and “the revocation or suspension of its gaming
license.” Def. Opening Br. 19 n.12.
23
     Defs.’ Opening Br. Ex. A at 1.
24
     Id.

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Chatham Asset Management, LLC v. Papanier
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December 22, 2017

of Chatham’s contacts with Twin River, the fact that Chatham representatives

expressed a desire for “immediate liquidity” for their investment in Twin River in

June 2016, the filing of this lawsuit in February 2017, and an investor call that

occurred on April 4, 2017.25

           The April 7 Letter, a copy of which was sent to Chatham’s counsel, also

stated that Twin River “necessarily cannot be sure of all potentially relevant

information because some of it is not available to us and in some respects

Chatham’s subjective intent may be relevant.”26 Chatham contends that defendants

submitted the April 7 Letter to “retaliate[] against Chatham for seeking to protect

[its] rights via this lawsuit.”27

II.        Procedural Posture

           On February 6, 2017, Chatham filed its original complaint, which it

amended on April 10, 2017. The Amended Complaint asserts three claims, each of

which Chatham has brought individually.          None of the claims is asserted

derivatively or on behalf of a putative class.

           On April 25, 2017, defendants moved to dismiss the Amended Complaint

under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief.


25
     Id. at 1-2.
26
     Id.

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Chatham Asset Management, LLC v. Papanier
C.A. No. 2017-0088-AGB
December 22, 2017

Argument on the motion was held on August 8, 2017, and the parties filed

supplemental briefs on September 15, 2017.

III.     Analysis

         The standards governing a motion to dismiss for failure to state a claim for

relief are well settled:

         (i) all well-pleaded factual allegations are accepted as true; (ii) even
         vague allegations are well-pleaded if they give the opposing party
         notice of the claim; (iii) the Court must draw all reasonable inferences
         in favor of the non-moving party; and (iv) dismissal is inappropriate
         unless the Plaintiff would not be entitled to recover under any
         reasonably conceivable set of circumstances susceptible of proof.28

Although this standard is minimal, the Court “will not credit conclusory allegations

or draw unreasonable inferences in favor of the Plaintiffs,”29 nor will it “accept

every strained interpretation of the allegations proposed by the Plaintiff.”30

         A.     Count I States a Claim for Relief

         In Count I of the Amended Complaint, Chatham asserts that the four director

defendants (Papanier, Taylor, Kim, and Capp) breached their fiduciary duties by

making materially false and misleading statements in the Offer to Purchase.


27
     Am. Compl. ¶ 15.
28
  Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (internal quotation marks
and citation omitted).
29
  In re BJ’s Wholesale Club, Inc. S’holder Litig., 2013 WL 396202, at *5 (Del. Ch.
2013).

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Chatham Asset Management, LLC v. Papanier
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           “[D]irectors of Delaware corporations are under a fiduciary duty to disclose

fully and fairly all material information within the board’s control when it seeks

shareholder action.”31 A fact is material if “there is a substantial likelihood that a

reasonable shareholder would consider it important in deciding how to vote.”32

Stated differently, material facts are those that, if disclosed, would “significantly

alter[] the ‘total mix’ of information made available.”33

           The gravamen of Chatham’s disclosure claim is that the Offer to Purchase

was false or misleading because it stated that “the purpose of the Tender Offer was

‘to return cash to [Twin River’s] shareholders’” and that Twin River’s directors

and executive officers “may . . . sell their shares from time to time” after the

Tender Offer closed when, in reality, their true intent was to use the Tender Offer

“to increase the price of the stock” and to sell “at or near this increased price”

“shortly after the Tender Offer closed.”34 In support of this contention, Chatham

alleges as follows:




30
     Gen. Motors, 897 A.2d at 168 (internal quotation marks and citation omitted).
31
     Stroud v. Grace, 606 A.2d 75, 84 (Del. 1992).
32
 Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v.
Northway, Inc., 426 U.S. 438, 449 (1976)).
33
     Id.
34
     Am. Compl. ¶¶ 2-3, 6, 51.

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         . . . a representative of Defendants informed certain stockholders of
         Twin River (other than Chatham) that the Defendants had wanted to
         participate in the Tender Offer so that they could, among other
         reasons, raise funds to pay down loans on encumbered Twin River
         shares and/or to pay taxes owed on their exercise of Twin River
         holdings. When the Defendants were informed prior to the Tender
         Offer that it would be problematic for them to sell shares in the
         Tender Offer, the Defendants quickly determined to sell their shares
         promptly after the Tender Offer closed.

         . . . Within weeks of the Tender Offer closing, the Defendants,
         consistent with their scheme, started shopping at least 125,000 shares,
         half of the total Twin River purchased through the Tender Offer,
         through at least one broker. In fact, the broker provided “big boy”
         letters to prospective purchasers in order to facilitate the sale of
         Defendants’ shares.35

         Accepting these allegations as true and drawing all reasonable inferences in

Chatham’s favor, as I must at the pleadings stage, it is reasonably conceivable that

the director defendants breached their fiduciary duties in connection with the

disclosures discussed above. The specific factual allegations concerning the efforts

defendants made to sell a substantial number of their shares “shortly” after the

Tender Offer closed cast reasonable doubt on the veracity of the noncommittal

disclosure in the Offer to Purchase that they “may . . . sell their shares from time to




35
     Am. Compl. ¶¶ 4-5.

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Chatham Asset Management, LLC v. Papanier
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time.” As one federal court put it, “stating an outcome as a possibility, that in fact

is not a possibility, is misleading.”36

       The existence of a firm intention by defendants to sell their shares, if true,

also would appear to be material. Defendants concede as much: “If Twin River

stated in the [Offer to Purchase] that each defendant intended to sell as many

shares as possible after the Tender Offer, it necessarily would have made

stockholders more, not less, likely to tender shares.”37

       Although Chatham has stated a disclosure claim, its recourse appears to be

limited if it can prove the claim, which is a much more difficult endeavor.38 Our

Supreme Court has made clear that compensatory damages for a disclosure claim

are available only when a complaint pleads facts showing that “the damages [are]

logically and reasonably related to the harm or injury for which compensation is


36
   Dorchester Inv’rs v. Peak Int’l Ltd., 134 F. Supp. 2d 569, 579 (S.D.N.Y. 2001)
(applying “the Court’s logic” in Hunt, IRA v. Alliance N.A. Gov’t Income Trust, Inc., 159
F.3d 723 (2d Cir. 1998)).
37
   Defs.’ Reply Br. 12. See also Tr. 10 (“But there’s nothing that says directors can’t
tender. Obviously, they have to make disclosure of that fact.”), 17 (“As plaintiffs
indicate, if the directors actually had a firm intent to sell . . . and they disclosed that, it
would have made other stockholders more likely to tender. After all, if the insiders want
out, that’s a negative sign for the value of the company. Thus, more stockholders would
have tendered.”) (Aug. 8, 2017) (Dkt. 42).
38
   See, e.g. Dorchester Inv’rs, 134 F.Supp.2d at 579 (“[F]or Plaintiffs to prevail on this
claim [that a disclosure was misleading because it stated a result as a possibility that in
fact was a certainty], Plaintiffs must demonstrate that Defendants were certain that such a
result would occur” when the disclosure was made.).

                                              12
Chatham Asset Management, LLC v. Papanier
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being awarded.”39 Put differently, a failure to disclose material information will

not provide a basis for compensatory damages “from defendant directors absent

proof of (i) a culpable state of mind or non-exculpated gross negligence, (ii)

reliance by the stockholders on the information that was not disclosed, and (iii)

damages proximately caused by that failure.”40

         Chatham’s own allegations in the Amended Complaint suggest that it likely

will be unable to establish reliance and causation to recover compensatory

damages for its disclosure claim. Chatham admits that, “because of the strict

regulation of the percentage of total shares Chatham is permitted to hold, a limit

that it was close to, Chatham would have to participate in the Tender Offer or face

potential adverse regulatory consequences,” and that Chatham had “no choice but

to participate in the Tender Offer.”41 Indeed, the central premise of the Amended

Complaint is that Chatham did not want to sell any shares in the Tender Offer but

39
     In re J.P. Morgan Chase & Co. S’holder Litig., 906 A.2d 766, 773 (Del. 2006).
40
   In re Wayport, Inc. Litig., 76 A.3d 296, 314-15 (Del. Ch. 2013); see also O’Reilly v.
Transworld Healthcare, Inc., 745 A.2d 902, 919 (Del. Ch. 1999) (“[C]ausation and actual
quantifiable damages are elements of the compensatory damages portion of a claim for
breach of the fiduciary duty of disclosure.”) (emphasis in original); In re Orchard Enter.,
Inc. S’holder Litig., 88 A.3d 1, 53 (Del. Ch. 2014) (“[A]lthough the request for
stockholders to take action based on the disclosures may satisfy the requirement of
reliance, the plaintiff still must prove causation and damages.”).
41
   Am. Compl. ¶¶ 30, 57; see also Prayer for Relief ¶ 6 (“In the event that Chatham is
forced to sell its shares, awarding Chatham damages to compensate it for the difference
between the price of any such sale and the fair value of Chatham’s shares.”).

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Chatham Asset Management, LLC v. Papanier
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was forced to do so to comply with the 15% cap on its holdings imposed by the

Rhode Island Department of Business Regulation. As such, it appears conceded

that any harm Chatham suffered was caused not by its reliance on the disclosures

in the Offer to Purchase, but by its need to comply with the 15% cap.

      Given that Chatham’s own allegations suggest that it likely will be unable to

prove the elements necessary to sustain a disclosure claim for compensatory

damages, the most it appears Chatham stands to gain from Count I of the Amended

Complaint, if proven, is an award of nominal damages.42 Our Supreme Court

stated that “there must at least be an award of nominal damages” where “directors

have breached their disclosure duties in a corporate transaction that has in turn

caused impairment to the economic or voting rights of stockholders.”43



42
  “[N]ominal damages do not purport to put the offended party back in the place that it
was before it suffered harm, rather they are ‘in recognition of a technical injury and by
way of declaring the rights of the plaintiff. Nominal damages are . . . selected simply for
the purpose of declaring an infraction of the Plaintiff’s rights and the commission of a
wrong.’” SinoMab Bioscience Ltd. v. Immunomedics, Inc., 2009 WL 1707891, at *17
(Del. Ch. June 16, 2009) (quoting Ivize of Milwaukee, LLC v. Complex Litig. Support,
LLC, 2009 WL 1111179, at * 12 (Del. Ch. Apr. 27, 2009)); see also Oliver v. Boston
Univ., 2006 WL 1064169, at *35 (Del. Ch. Apr. 14, 2006) (awarding nominal damages
“for the purpose of declaring an infraction of the Plaintiff’s rights and the commission of
a wrong” in a fiduciary duty case) (internal quotations omitted).
43
   Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 142 (Del. 1997) (explaining
that In re Tri-Star Pictures, Inc. Litig., 634 A.2d 319 (Del. 1993) “stands only for the
narrow proposition that, where directors have breached their disclosure duties in a
corporate transaction that has in turn caused impairment to the economic or voting rights
of stockholders, there must be at least an award of nominal damages”); see also In re J.P.

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Chatham Asset Management, LLC v. Papanier
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         Here, Chatham has a reasonably conceivable claim for nominal damages

because it alleges that it was forced to tender 35,954 shares of Twin River stock for

$80 per share when the stock traded above $80 after the Tender Offer closed,

thereby impairing its economic rights.44          If Chatham were to prevail on its

disclosure claim, an award of nominal damages would serve the “purpose of

declaring an infraction of the Plaintiff’s rights and the commission of a wrong.”45

         B.     Count II Fails to State a Claim for Relief

         Count II of the Amended Complaint is an odd claim. Chatham asserts that

defendants breached their fiduciary duty of loyalty on the following theory:

         . . . the Defendants left Chatham no choice but to participate in the
         Tender Offer, while the Defendants, including the Director
         Defendants, abstained from participating themselves, and instead
         implemented a scheme to sell a significant portion of their shares into
         the market after the Tender Offer closed, at the higher price created by
         the Tender Offer. Accordingly, the Defendants are attempting to
         bestow upon themselves benefits that were not offered to Chatham or
         other stockholders, namely the ability to sell shares without
         proration.46

Morgan, 906 A.2d at 773-74 (“[T]he plaintiffs’ entitlement to seek nominal damages
depends upon whether their complaint alleges the type of deprivation of the . . .
stockholders’ economic interests or impairment of their voting rights, that would be
cognizable under Tri-Star, as limited by Loudon.”); In re Tyson Foods, Inc., 919 A.2d
563, 602 (Del. Ch. 2007) (noting that “nominal damages are appropriate only where the
shareholder’s economic or voting rights have been injured”).
44
     Am. Compl. ¶¶ 27, 32.
45
     Oliver, 2006 WL 1064169, at *35 (internal quotations omitted).
46
     Am. Compl. ¶ 57; Pl. Answering Br. 21-22.

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         Chatham does not allege that any of the defendants sold any of their Twin

River shares in the post-Tender Offer market or engaged in any other form of self-

dealing. Chatham also concedes that nothing prevented Chatham from selling

shares in the post-Tender Offer market.47 If Chatham wanted to sell its shares in

the post-Tender Offer market, it was free to do so. Thus, in addition to the lack of

any allegations that defendants enriched themselves, Count II fails to explain how

it is reasonably conceivable that Chatham was harmed in any way from an alleged

scheme that was never implemented. Accordingly, Count II fails to state a claim

for relief.48

         C.      Count III Fails to State a Claim for Relief

         In Count III of the Amended Complaint, Chatham asserts that defendants

sent the April 7 Letter to the Regulators in bad faith. According to Chatham, “the

false and deceptive content and timing of the April 7 letter support a reasonable




47
     Tr. 69-70 (Aug. 8, 2017) (Dkt. 42); Pl. Answering. Br. 22.
48
   See Coates v. Netro-Corp., 2002 WL 31112340, at * 6 (Del. Ch. Sept. 11, 2002)
(dismissing fiduciary duty claim challenging the adoption of a poison pill for failure to
state a claim for relief because “the plaintiff fails to allege any specific threat or show any
harm by the adoption of the poison pill rights plan”).

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Chatham Asset Management, LLC v. Papanier
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inference that the Board mailed the letter with an actual intent to retaliate against

Chatham for filing this lawsuit.”49

         “[T]o state a bad-faith claim, a plaintiff must show either an extreme set of

facts to establish that disinterested directors were intentionally disregarding their

duties, or that the decision under attack is so far beyond the bounds of reasonable

judgment that it seems essentially inexplicable on any ground other

than bad faith.”50 “Bad faith is not a light pleading standard.”51

         Here, the Amended Complaint falls far short of pleading the “extreme set of

facts” necessary to state a claim for bad faith with respect to the sending of the

April 7 Letter. Chatham does not dispute that its institutional shareholder license

requires that it “have (1) no involvement in [Twin River’s] business activities and

(2) no intention of influencing, affecting or participating in [Twin River’s]

affairs.”52 Nor does Chatham dispute that the Regulatory Agreement requires Twin

River to take affirmative steps to monitor and ensure that a holder of 5% or more




49
     Pl.’s Answering Br. 25.
50
  In re Chelsea Therapeutics Int’l Ltd. S’holders Litig., 2016 WL 3044721, at *7 (Del.
Ch. May 20, 2016) (internal quotation marks and citations omitted).
51
  In re Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *23 (Del. Ch. Oct. 24,
2014).
52
     Defs.’ Opening Br. Ex. A at 1.

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Chatham Asset Management, LLC v. Papanier
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of its shares complies with “all laws, statutes and rules and regulations.”53

Chatham also failed to identify anything in the April 7 Letter that was false.54

Finally, the timing of the April 7 Letter’s submission is not inherently suspicious,

given that it refers to events that occurred in February 2017 (the filing of this

action) and in early April 2017 (an investor call) as two of the four points that

formed the basis for Twin River’s stated concerns about Chatham’s activities.55

         Under these circumstances, and given Twin River’s exposure to significant

penalties for not adhering to its obligations under the Regulatory Agreement, it is

not reasonably conceivable in my opinion that the decision to send the April 7

Letter reflects an intentional disregard of defendants’ fiduciary duties or is so far

beyond the bounds of reasonable judgment that it is essentially inexplicable on any

ground other than bad faith. Given my conclusion that Chatham has failed to state

a reasonably conceivable claim of bad faith, I do not address the parties’ arguments

concerning the Noerr-Pennington doctrine.


53
     Defs.’ Opening Br. Ex. E § 7.1.
54
   Chatham alleged that the April 7 Letter “falsely reported . . . that the instant suit was an
effort ‘to pressure for liquidity disguised as a lawsuit.’” Am. Compl. ¶ 38. This
allegation cropped an important qualification from the April 7 Letter, however, which
actually states that “it may be that the litigation is really the renewal of Chatham’s efforts
to pressure for liquidity disguised as a lawsuit.” Defs.’ Opening Br. Ex. A at 2 (emphasis
added).
55
     Defs.’ Opening Br. Ex. A.

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Chatham Asset Management, LLC v. Papanier
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                                      *****

      For the reasons explained above, defendants’ motion to dismiss is denied

with respect to Count I and granted with respect to Counts II and III.

      IT IS SO ORDERED.

                                       Sincerely,

                                       /s/ Andre G. Bouchard

                                       Chancellor

AGB/ms




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