   IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE


IN RE XURA, INC.                         :     CONSOLIDATED
STOCKHOLDER LITIGATION                   :     C.A. No. 12698-VCS
                                         :

                         MEMORANDUM OPINION


                      Date Submitted: September 11, 2018
                       Date Decided: December 10, 2018



A. Thompson Bayliss, Esquire and David A. Seal, Esquire of Abrams & Bayliss
LLP, Wilmington, Delaware, Attorneys for Plaintiff Obsidian Management LLC.

Robert S. Saunders, Esquire, Arthur R. Bookout, Esquire, Matthew P. Majarian,
Esquire and Haley S. Stern, Esquire of Skadden, Arps, Slate, Meagher & Flom LLP,
Wilmington, Delaware, Attorneys for Defendants Frank Baker, Michael Hulslander
and Siris Capital Group, LLC.

John L. Reed, Esquire, Ethan H. Townsend, Esquire, Peter H. Kyle, Esquire and
Harrison S. Carpenter, Esquire of DLA Piper LLP (US), Wilmington, Delaware and
Rudolf Koch, Esquire, Susan M. Hannigan, Esquire and Anthony M. Calvano,
Esquire of Richards, Layton & Finger, Wilmington, Delaware, Attorneys for
Defendant Philippe Tartavull.




SLIGHTS, Vice Chancellor
      What began as an appraisal case has become, with the benefit of appraisal

discovery, a breach of fiduciary duty case. The plaintiff here, Obsidian Management

LLC, is a former stockholder of Xura, Inc. When an affiliate of Siris Capital Group,

LLC acquired Xura via merger, Obsidian dissented and sought appraisal. According

to Obsidian, in the discovery that followed the filing of its petition for appraisal in

this Court, Obsidian uncovered evidence that Xura’s former CEO, Philippe

Tartavull, breached his fiduciary duties to Xura stockholders in the sale process

leading up to the merger. It initiated this breach of fiduciary duty and aiding and

abetting action individually, on its own behalf, against Tartavull and Siris,

respectively, soon after.

      The appraisal and fiduciary duty actions have been consolidated and the

appraisal action stayed pending final adjudication of the breach of fiduciary duty and

aiding and abetting claims. Defendants, Tartavull and Siris, have moved to dismiss

those claims with prejudice under Court of Chancery Rule 12(b)(6).               While

Defendants base their principal merits defense on the so-called Corwin doctrine,1

they also challenge Plaintiff’s standing to bring this fiduciary duty action given that

Plaintiff purportedly seeks identical relief in its pending appraisal action. If the




1
  See Corwin v. KKR Fin. Hldgs. LLC, 125 A.3d 304 (Del. 2015) (holding that “when a
transaction not subject to the entire fairness standard is approved by a fully informed,
uncoerced vote of the disinterested stockholders, the business judgment rule applies.”).

                                           1
Court determines that Plaintiff has standing, and that Corwin does not apply at the

pleading stage, then Defendants challenge whether Plaintiff has stated viable

claims—Tartavull challenges the sufficiency of Plaintiff’s Revlon, care and loyalty

claims and Siris challenges the sufficiency of the pled aiding and abetting claim.

       In this Memorandum Opinion, I conclude (1) Plaintiff has standing to pursue

these claims notwithstanding its pending appraisal action; (2) Plaintiff has pled facts

that support a reasonable inference that the stockholder vote approving the merger

was uninformed; (3) Plaintiff has pled a viable breach of fiduciary duty claim against

Tartavull as Xura’s CEO; and (4) Plaintiff has failed to plead a viable aiding and

abetting claim against Siris. My reasons follow.

                           I. FACTUAL BACKGROUND

       I draw the facts from the allegations in the Complaint,2 documents

incorporated by reference or integral to the Complaint and judicially noticeable facts

available in public Securities and Exchange Commission filings. 3 For the purposes


2
  I cite to the Plaintiff’s Verified Complaint for Breach of Fiduciary Duty as “Compl. ¶ __”;
Philippe Tartavull’s Opening Brief in Support of his Motion to Dismiss Plaintiff’s Verified
Complaint for Breach of Fiduciary Duty as “TOB”; Philippe Tartavull’s Reply Brief in
Further Support of his Motion to Dismiss Plaintiff’s Verified Complaint for Breach of
Fiduciary Duty as “TRB”; the Siris Defendants’ Opening Brief in Support of Their Motion
to Dismiss Plaintiff’s Verified Complaint for Breach of Fiduciary Duty as “SOB”; the Siris
Defendants’ Reply Brief in Further Support of Their Motion to Dismiss Plaintiff’s Verified
Complaint for Breach of Fiduciary Duty as “SRB”; and Plaintiff’s Combined Opposition
to Defendants’ Motions to Dismiss as “PAB.”
3
 Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) (holding that,
on a motion to dismiss, the Court may consider documents that are “incorporated by
                                             2
of this Motion to Dismiss, I accept as true the Complaint’s well-pled factual

allegations and draw all reasonable inferences in Plaintiff’s favor.4

          A. Parties and Relevant Non-Parties

          Plaintiff, Obsidian Management LLC, is a Delaware Limited Liability

Company and former Xura, Inc. stockholder at all times relevant to this litigation.5

Obsidian owned 933,555 shares of Xura common stock prior to the Merger.6 As

noted, Obsidian is also currently pursuing an appraisal of its Xura shares in this Court

(the “Appraisal Action”).7

          Defendant, Philippe Tartavull, was Xura’s CEO from 2012 until

December 19, 2016.8 He served as a director of Xura from 2012 until August 19,

2016—when an affiliate of Defendant, Siris Capital Group, LLC, acquired all




reference” or “integral” to the complaint); In re Gen. Motors (Hughes) S’holder Litig., 897
A.2d 162, 170 (Del. 2006) (holding that trial courts may take judicial notice of facts in SEC
filings that are “not subject to reasonable dispute”) (emphasis in original).
4
    Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 168.
5
    Compl. ¶ 20.
6
    Id.
7
    Id. ¶ 2. See Obsidian Mgmt. LLC v. Xura, Inc., C.A. No. 12698-VCS (Del. Ch.).
8
    Compl. ¶ 21.

                                             3
outstanding shares of Xura by merger (the “Transaction”).9                 Xura terminated

Tartavull as CEO on December 19, 2016, four months after the Transaction closed.10

          Defendant, Siris, is a Delaware Limited Liability Company. Defendant, Frank

Baker, is Siris’s co-founder and one of its Managing Partners.11 Defendant, Michael

Hulslander, is a principal of Siris, having been promoted after the Transaction’s

closing.12        For the sake of clarity, I refer to claims against these defendants

collectively as claims against the “Siris Defendants.”

          Non-party, Xura, Inc. (or “the Company”),13 was a publicly traded Delaware

Corporation. Non-party, Jacky Wu (“Wu”), was Xura’s CFO from April 2015 until

August 26, 2016.14 Non-party, Hank Nothhaft, was Xura’s Chairman of the Board

from October 2012 until August 19, 2016.15 Non-party, Matthew Drapkin, was a

director of Xura from March 2014 until August 19, 2016.16 Drapkin was a partner



9
    Id.
10
     Id. ¶ 107.
11
     Id. ¶ 22.
12
     Id. ¶ 23.
13
  For the sake of clarity, I use “Xura” to refer to Xura, Inc. regardless of the date. In doing
so, I acknowledge that, prior to August 2015, Xura, Inc. was known as Comverse, Inc.
14
     Id. ¶ 25.
15
     Id. ¶ 26.
16
     Id. ¶ 27.

                                              4
of Northern Right Capital Management, L.P., an activist investor that held a

significant amount of Xura stock and routinely sought board seats on small-cap,

public companies.17 Non-party, Goldman Sachs & Co. (“Goldman”), was Xura’s

longtime financial advisor and served in that capacity in connection with the

Transaction.18

           B. Tartavull’s First Contacts with Siris

           Tartavull first met Baker in Barcelona in 2012. Tartavull sought out Siris as

a potential financial sponsor for an acquisition involving the Company the following

year. In the discussions that ensued, the parties contemplated that Tartavull would

remain as the CEO of the post-acquisition Xura and would serve as chair of an

operating committee that would also include Siris executive partners and members

of Xura’s senior management. While nothing came of these discussions in 2013, the

two kept in touch.

           In late 2014, Siris and Tartavull met again to discuss a potential acquisition of

Xura. Tartavull had lunch with Hubert de Pesquidoux, a Siris Executive Partner,

and Baker on November 17, 2014.                Three days later, Tartavull joined Siris

representatives for dinner where discussions about a possible acquisition continued.




17
     Id.
18
     Id. ¶ 4.

                                               5
Later that month, Siris representatives attended a meeting at Xura’s Wakefield,

Massachusetts headquarters.

         On January 7, 2015, Siris submitted a letter of interest in which it proposed to

acquire Xura for $24 per share.19 The letter underscored that Siris “continue[d] to

be impressed by the senior leadership team and is excited about the prospect of

partnering with them.”20 Xura’s board of directors (the “Board”) discussed Siris’s

expression of interest at its January 13, 2015 meeting. Before the Board could

formally respond, however, Siris decreased its offer to $20–$22 per share citing

significant execution risks and deteriorating financials. The Board rejected the offer

and, again, the negotiations ended.

         C. Xura Focuses Inward

         Following this second failed negotiation, Xura looked inward and endeavored

to enhance shareholder value. On April 14, 2015, Xura entered into a Master Service

Agreement with Tech Mahindra and began to outsource a significant portion of its

workforce in exchange for payments totaling $211 million over six years. Two

weeks later, on April 29, 2015, Xura sold its billing systems and support business

(at the time this made up approximately half of Xura’s revenues) to Amdocs for




19
     Id. ¶ 35; Definitive Proxy Statement on Schedule 14A (the “Proxy”) at 27.
20
     Compl. ¶ 35.

                                              6
$272 million. Then, on August 6, 2015, Xura acquired Acision Global Limited for

$136 million in cash and 3.14 million shares of common stock. The transformation

ultimately led the Company to its new name—Xura.

         D. Siris Circles Back

         On October 19, 2015, Siris contacted Tartavull directly with an offer to

acquire the new and improved Xura for $30–$32.50 per share. Once again, Siris

made clear that it was “excited about the prospect of working with the management

team to help Xura reach its full potential.”21 Tartavull and Baker immediately began

discussing Siris’s offer amongst themselves.22 On October 21, 2015, Baker texted

Tartavull looking for the Board’s feedback on Siris’s offer. According to the Proxy,

Tartavull advised the Board of Baker’s outreach at the time or soon after it

occurred.23

         The Board considered Siris’s offer at its October 22, 2015 meeting and

directed management to communicate to Siris that the offer was inadequate and the

Company was not for sale. Tartavull provided this feedback to Baker in a telephone

conversation on October 29, 2015.


21
     Compl. ¶ 39.
22
 As discussed below, Plaintiff contends that many of these discussions took place via text
messages that Tartavull and Baker both failed to preserve notwithstanding a duty to do so.
PAB 10.
23
     Proxy 28.

                                            7
         Siris was undeterred. On the day it received news of the Board’s rejection

from Tartavull, Siris representatives, Tartavull and Wu continued to discuss a

possible acquisition, including a discussion of Xura’s forecasts and other non-public

information. Siris raised its offer to $35 per share the next day. In its offer letter,

Siris stated that it was “excited about the opportunity of working with the Company

and its leadership team to accelerate Xura’s transformation without the scrutiny and

pressures of the public markets.”24 Siris followed its letter with a request directed to

Tartavull for an exclusivity period of four to six weeks. Tartavull promptly relayed

the request to the Board.

         E. Siris Negotiates Directly with Tartavull and Management

         The Board discussed Siris’s revised proposal at its November 5, 2015

meeting. This time the Board “authorized management to continue discussing a

potential transaction with Siris” and “authoriz[ed] the engagement of Goldman to

assist the Company in the process.”25              The Board also authorized Xura’s

management to agree to a three-week period of exclusivity with Siris if Siris could

confirm a deal price and provide assurances regarding financing.26




24
     Compl. ¶ 43.
25
     Compl. ¶ 44; Joskowicz Aff. Ex. I (Pl.’s Pre-Trial Br. 10; JX163); Proxy 29.
26
     Bookout Aff. Ex. 22 at XURA0000226.

                                              8
         On November 12, 2015, Goldman emailed Siris a contract extending the terms

of the non-disclosure agreement Siris and Xura previously executed back in 2013.27

That agreement stated:

                 You agree that all (i) communications regarding the Transaction,
         (ii) requests for additional information, (iii) requests for facility tours
         or management meetings, and (iv) discussions or questions regarding
         procedures, will be submitted or directed only to the Chief Executive
         Officer of the Company or any designee thereof (the “Designated
         Officer”). You further agree that, subject to paragraph 11, under no
         circumstances will you or your Representatives discuss or otherwise
         communicate any aspect of the Transaction to any member of the
         management of the Company without the express written permission of
         the Designated Officer.28

Goldman and Xura management participated in discussions and due diligence

sessions with Siris throughout November 2015.

         In response to various data requests from Siris directed to Wu, on

November 19, 2015, Goldman asked Hulslander to ensure that Siris copied Goldman

on all transaction-related communications with Xura moving forward.                    On

November 29, 2015, Hulslander forwarded Baker an email from Goldman offering

to coordinate a call with Wu. Although Hulslander indicated he would participate

in the call orchestrated by Goldman, internally he was working with his Siris team




27
     Bookout Aff. Ex. 8 at GS-XURA-000180426.
28
     Bookout Aff. Ex. 8 at GS-XURA-000180433–34. (Emphasis supplied).

                                             9
to come up with a plan to exclude Goldman and work directly with Xura

management to “get the remaining high priority data.”29

         Siris reiterated its $35 per share offer in a December 2, 2015 letter. Consistent

with its previous communication, Siris again emphasized that it was “excited about

the opportunity of working with the Company and its leadership team to accelerate

Xura’s transformation without the scrutiny and pressures of the public markets.”30

         The Board held a meeting on December 3, 2015, with Goldman and its legal

advisor, DLA Piper LLP (US), to discuss Siris’s December 2 letter. At the meeting,

the Board created a committee consisting of Tartavull, Nothhaft and Drapkin (the

“Strategic Committee”). According to the Proxy, the mandate of the Strategic

Committee was to “review, evaluate and negotiate the terms of a potential

transaction with Siris and to make certain decisions between meetings of the board

of directors.”31 Despite its mandate, the Strategic Committee never met with Siris,

never took any formal action and never kept minutes nor any written record of its

activities. Instead, the Strategic Committee functioned essentially as a weekly

check-in with Tartavull. Indeed, one of the three Special Committee members,

Nothhaft, did not even realize that the Special Committee existed or that he was a


29
     Compl. ¶ 45.
30
     Compl. ¶ 46.
31
     Compl. ¶ 101.

                                             10
member of the committee until he learned about it at his deposition in the appraisal

litigation.

       Later in December, Xura missed the filing deadline for its 10-Q when it

encountered technical difficulties incorporating Acision’s UK-based accounting

system with Xura’s system. Xura eventually filed its 10-Q on December 28, 2015.

       Throughout January 2016, Xura’s senior management and Goldman engaged

in various meetings and due diligence sessions with Siris. Siris received access to

the Company’s data room on January 15, 2016.                Management presentations

highlighting Xura’s revenue, bookings, expenses and product pipeline occurred

during due diligence meetings on January 12 and 20–22, 2016.

       All the while, Tartavull communicated directly with Siris on a regular basis

without keeping Goldman informed—despite Goldman’s stated preference that

“communications go through [Goldman].”32 Tartavull’s regular communications

with Siris troubled Wu, the Company’s CFO. Accordingly, Wu asked Goldman to

speak with Tartavull about channeling communications through Goldman.

Goldman agreed, but Tartavull ignored the admonition. Siris likewise ignored

Goldman’s request that it be included in all communications with Xura. Indeed, at




32
  Compl. ¶ 53. Here again, Plaintiff alleges that these communications frequently occurred
through text messages that have since been lost or destroyed. PAB 12.

                                           11
his deposition, Hulslander acknowledged that, even though Goldman “smacked us

on the hand,” the direct communications with Tartavull continued.33

           F. Goldman Shops Xura Unsuccessfully

           During the last week of January 2016, Goldman worked with the Board and

senior management to identify nine potential parties that might have an interest in

acquiring the Xura.34 The interested parties included five financial sponsors and four

strategic buyers.35 After initial contacts, three financial sponsors (Bain Capital,

Carlyle, and Thoma Bravo) and one strategic buyer (Nokia) executed confidentiality

agreements and moved to the next stage of the sale process.36

           The second stage of the process proved to be an effective filter.37 Bain Capital

never attended any presentations and never responded to Goldman’s efforts to

schedule a call.38 Xura made management and financial presentations to Nokia,




33
     Compl. ¶ 53.
34
     Compl. ¶ 54; Proxy 30.
35
     Proxy 30.
36
     Compl. ¶ 54; Proxy 30.
37
     Compl. ¶ 57; Proxy 30.
38
     Id.

                                              12
Thoma Bravo and Carlyle.39          Soon after, Nokia and Thoma Bravo informed

Goldman they were no longer interested.40

           The last potential bidder standing—Carlyle—soon followed the other suitors

out of the process. On March 8, 2016, Goldman had a call with Carlyle to discuss

the Company’s long-term model and to answer diligence questions.41 In doing so,

Goldman did not hide the fact that Xura was a “complicated story.”42 Prior to

obtaining full diligence, on March 13, 2016, Carlyle provided Goldman with a verbal

indication of interest in the range of $26–$27 per share.43 Nevertheless, Carlyle

stated that it “[had] a lot of work to do to confirm.”44 Goldman informed Carlyle

that the offering price would at least have to match Siris’s offer of $28 per share.45

Carlyle maintained it could not bid at that price and exited the bidding process

thereafter.46




39
     Id.
40
     Id.
41
     Compl. ¶ 67.
42
     Id.
43
     Compl. ¶ 68; Proxy 31.
44
     Id.
45
     Proxy 31.
46
     Compl. ¶ 70; Proxy 32.

                                           13
           While Goldman was courting other bidders, Siris held firm and showed no

sign of concern. From Hulslander’s vantage point, “the Company [was] not ‘for

sale’ and [Siris] ha[d] a proprietary angle on the deal . . . .”47

           G. Tartavull Lends Siris A Helping Hand

           Despite Xura’s business transformation, its fortunes did not noticeably

improve. On December 15, 2015, Xura announced disappointing preliminary third

quarter results and disclosed the delay in filing of its Form 10-Q for the quarter

ending October 31, 2015.48 The Company’s stock closed at $22.53 per share that

day.49 The trend of declining share value continued into 2016. On February 17,

2016, Xura’s stock closed at $19.12 per share, marking a nearly 15% drop in the

span of two months.50 By February 24, 2016, the Company’s common stock was

trading at $18.64 per share.51 At the time of the Transaction, Xura’s stock was

trading at $18.94 per share.52




47
     Compl. ¶ 55; Pl.’s Ex. 3.
48
     Compl. ¶ 49; Proxy 30.
49
     Proxy 30.
50
     Id.
51
     Id. 31.
52
     Id. 33.

                                            14
           During the course of due diligence, Siris grew uneasy about Xura’s outlook,

particularly its cash flow projections and the historic and pending liabilities.53 Siris

informed Goldman on February 18, 2016, that it intended to submit a revised

indication of interest that incorporated these concerns.54

           Meanwhile, an industry trade show, Mobile World Congress, convened from

February 22 through 25, 2016 in Barcelona, the site of the original Tartavull-Siris

encounter.55 Baker planned to attend and to meet with “Xura personnel” while

there.56 Hulslander was on board, saying it made “sense to get together with

[Tartavull] and part of his team in some capacity.”57 By the first day of the trade

show, Baker and Tartavull had scheduled a lunch meeting.58

           During that February 24 lunch, Baker and Tartavull discussed Siris’s latest

offer, the timing of the Transaction and possible additional M&A transactions.59




53
     Proxy 30–31.
54
     Compl. ¶ 59; Proxy 30.
55
     Compl. ¶ 60.
56
     Compl. ¶ 60.
57
     Id.
58
     Id.
59
     Compl. ¶ 61; Pl.’s Ex. 4.

                                            15
Baker indicated Siris would offer $27 per share.60 With a gentle nudge, Tartavull

told Baker that the offer price should be $28 per share.61 Baker later acknowledged

that the parties “agreed” upon $28 in advance of Siris sending a letter to Tartavull

memorializing that price.62

           Tartavull did not inform anyone at Xura or Goldman about his meeting with

Baker, either before or after it occurred.63 Neither Baker nor Tartavull recalled this

meeting at their depositions.64 Moreover, none of this appeared in the Proxy or any

other public filing.65 The only evidence of the meeting is an internal communication

between two lower-level Siris employees.66

           The next day, Siris submitted a revised offer of $28 per share.67 The letter

echoed Siris’s statement that it was “excited about the opportunity of working with

the Company and its leadership team to accelerate Xura’s transformation without




60
     Compl. ¶ 61.
61
     Id.
62
     Id. ¶ 62.
63
     Id. ¶ 63.
64
     Id. ¶ 61. (“At their depositions, Baker and Tartavull denied ever negotiating over price.”).
65
     Id. ¶ 60.
66
     Compl. ¶ 61.
67
     Id. ¶ 64.

                                                16
the scrutiny and pressures of the public markets.”68 Siris also renewed its request

for exclusivity.69

           H. Exclusivity and Tartavull’s Continued Negotiations with Siris

           On February 29, 2016, the Board, along with its legal and financial advisors,

met to discuss Siris’s revised proposal—oblivious to Tartavull’s side conversations

with Siris.70 The Board discussed the terms of Siris’s proposal, the downward

adjustment of Xura’s financial projections and forecasts, the underperformance of

the Acision business and the Company’s ability to execute its strategic plan.71 The

Board then “authorized management to continue discussing a potential transaction

with Siris.”72 The Board also authorized management to negotiate the length of a

“go-shop” period and the amount of the termination fee in exchange for a grant of

exclusivity.73 Tartavull participated in a due diligence call on March 5, 2016, and




68
     Id.
69
     Proxy 31.
70
     Compl. ¶ 64; Proxy 31.
71
     Proxy 31.
72
     JX 258.
73
     Proxy 31.

                                             17
Xura representatives attended meetings with Siris and their respective advisors from

March 7 through March 11, 2016.74

           Siris reiterated its revised indication of interest at $28 per share and again

requested exclusivity on March 14, 2016.75 On the following day, the Board

authorized management to enter into an exclusivity agreement until April 8, 2016.76

           In the meantime, Wu continued to express concern to Goldman regarding

Tartavull’s contacts with Siris. Indeed, he stated internally that Tartavull “appears

to be working directly with Siris on his own.”77 On March 17, 2016, one day after

he executed Siris’s exclusivity agreement, Tartavull told Siris privately that Wu told

“white lies.”78 He even suggested that Siris assign someone to take over Wu’s

modeling functions during the transaction process.79           This prompted Baker to

instruct his team to “triple check” Xura’s numbers and to plan a “mind meld”

between Wu and a possible replacement.80



74
     Compl. ¶¶ 65–66; Proxy 31.
75
     Proxy 32.
76
     Id.
77
     Compl. ¶ 72.
78
     Compl. ¶ 73; Pl.’s Ex. 5.
79
     Compl. ¶ 73.
80
     Id.

                                             18
         I. Siris Retrades Again

         On March 23, 2016, Michael Ronen from Goldman predicted Siris’s next

move: “[h]ere comes the price renegotiation . . . [w]e are in exclusivity and now

[S]iris will create a crisis to take price down[.]”81 Wu saw the price reduction

coming too, noting that Siris was going to “try to retrade.”82

         The day after Goldman predicted Siris’s retrade, Siris retraded. Siris advised

Goldman it might not be able to offer more than $24 per share. Siris confirmed its

position with Tartavull on April 6, 2016, stating it could no longer support its prior

offer of $28 per share.

         That same day, the Board met to discuss the status of the sale process. At the

meeting, management advised the Board that it might not be able to file Xura’s

Form 10-K for fiscal year ended January 31, 2016 on time. The Board instructed

Goldman to disclose the potential delay to Siris. Goldman did so and then, to make

matters worse, Goldman had to provide Siris with downward revisions to the

Company’s financial projections.

         On April 7, 2016, Goldman and the Board decided that the right response to

Siris’s retrade strategy was to go “radio silent.”83 Tartavull, however, apparently


81
     Compl. ¶ 76; Pl.’s Ex. 6.
82
     Compl. ¶ 74.
83
     Compl. ¶ 79; Pl.’s Ex. 8.

                                           19
thought otherwise. He contacted Baker directly to discuss next steps. When Siris

contacted Wu to follow up, Wu lamented to Goldman, “[w]e are bidding against

ourselves.”84

           On April 9, 2016, Siris offered $24.75 per share after speaking with Tartavull.

Siris justified this price move by emphasizing the material decline in projected cash

flow and the overall underperformance of the Company’s businesses. The Board

discussed the revised offer at its April 12, 2016 meeting and instructed Goldman that

Siris must raise its price to $25 per share to extend exclusivity. Siris agreed to the

$25 price, and Xura extended the exclusivity period for two weeks.

           J. An Interested Seller Is Diverted to Buy Side

           On April 15, 2016, Xura publicly announced that it would not meet its 10-K

filing deadline again and that it was in negotiations with a potential buyer for a sale

at $25 per share. In that announcement, Xura stated that it missed the 10-K filing

deadline due to “complex strategic negotiations for the potential sale of the

company.”85 Immediately following the announcement, Keith Geeslin of Francisco

Partners contacted Tartavull to let him know that “if Xura is going to be sold,

[Francisco Partners] would appreciate the opportunity to bid.”86 For reasons not


84
     Id.
85
     Compl. ¶ 88.
86
     Id. ¶ 89; Pl.’s Ex. 9.

                                              20
coincidental by Plaintiff’s lights, Francisco Partners never made a bid because,

somehow, it learned Siris was the potential buyer.87 Instead, Francisco Partners

contacted Siris about a potential co-investment on the buy-side of the transaction.

         K. The Merger Agreement, the Unfruitful Go-Shop and Stockholder
            Litigation

         On May 19, 2016, Xura’s Board held a special meeting to discuss the terms

of the proposed transaction with Siris. During the meeting, the Board deliberated

Siris’s request that Xura do without a go-shop or at least limit it to 30 days. The

Board declined and insisted on a 45-day go-shop. Goldman also presented its

preliminary financial analysis of the proposed transaction. The Board met again on

May 22, 2016. DLA Piper LLP (US) discussed the material terms of the proposed

Transaction and Goldman presented an oral fairness opinion.

         On May 23, 2016, Xura and Siris executed a definitive merger agreement at

$25 per share (the “Merger Agreement”). The Merger Agreement provided for a 45-

day go-shop (the “Go-Shop”), a 2% termination fee (or $0.50 per share) if a superior

proposal was submitted during the Go-Shop and a 3.5% termination fee (or $0.875

per share) if a superior proposal was submitted after the Go-Shop.

         On May 25, 2016, Siris executed an NDA with Neuberger Berman

(“Neuberger”), which at the time held over 5% of Xura’s stock. By the end of June


87
     Compl. ¶ 90.

                                         21
2016, Neuberger had sold nearly all of its Xura stock. Instead of exiting its

investment in Xura, however, Neuberger was co-investing its equity with Siris.

Neuberger-controlled entities ultimately co-invested $16,985,345 on the buy-side of

the Transaction. Thus, by the time of closing, both Neuberger and Francisco

Partners had joined Siris on the buy-side.

           During the Go-Shop, Goldman contacted 26 prospective buyers, including

Francisco Partners and all of the other parties contacted during the pre-signing

market check. While three parties entered into confidentiality agreements during the

Go-Shop, none submitted acquisition proposals.          By June 15, 2016, Goldman

reported that there were no parties participating in the Go-Shop.           Regarding

Francisco Partners, Tartavull said at his deposition: “since Siris was engaged, I don’t

think [Francisco Partners] want[ed] to go to battle seriously in a go-shop.”88 Indeed,

Plaintiff alleges that Tartavull approved Francisco Partners as a financing source for

Siris before the Go-Shop period expired.89

           On July 11, 2016 and July 22, 2016, Xura stockholders filed lawsuits in the

United States District Court for the District of Massachusetts seeking to enjoin the

Merger (the “Massachusetts Actions”). On July 26, 2016, Xura, Siris and the




88
     Compl. ¶ 96.
89
     Id.

                                            22
Massachusetts plaintiffs reached an agreement whereby Xura would issue a

supplemental proxy statement in exchange for a release of all claims related to the

Merger against Xura, its directors and Siris.

       On August 16, 2016, a majority of Xura’s stockholders voted to approve the

Merger. The Transaction closed on August 19, 2016. After closing, Tartavull

negotiated a long-term incentive plan that could have paid him over $25 million.90

That plan yielded no benefits for Tartavull, however, because Xura terminated

Tartavull after closing on December 19, 2016, before the plan could be executed.

       L. Tartavull Faces Job Uncertainty

       As Tartavull negotiated the Xura/Siris combination, Xura stockholders and

the Board contemplated Tartavull’s future with the Company in the event a

transaction was not consummated. Major stockholders, including Wellington Asset

Management and Steinberg Asset Management, openly questioned Tartavull’s

performance. In early March, before Xura and Siris agreed to exclusivity, Obsidian

indicated that it intended to launch a proxy contest and made clear to both Tartavull

and the Board its view that Xura should find a new CEO. In April, Nothhaft




90
   Compl. ¶ 95 (“After the execution of the Merger Agreement, Tartavull and Siris began
finalizing the terms of a long-term incentive plan for employees Siris intended to retain
(the “LTIP”). Siris asked Tartavull to provide the list of participants for the LTIP prior to
the close of the Merger. Tartavull and Siris ultimately agreed on LTIP allocations that
promised a potential payout to Tartavull of over $25 million.”).

                                             23
privately advised Tartavull that the Board was considering major changes if there

was no deal, including changes at the Board level and the highest ranks of

management.91 Thus, as Tartavull engaged in private negotiations with Siris, he was

facing a genuine risk that he would lose his job at Xura if the Company was not

acquired. And he knew it.

       M. Lost Cell Phones, Lost Data and Claims of Spoliation

       Throughout the process that led to the Merger, Tartavull, Baker and

Hulslander exchanged text messages on various personal and business devices.

Many if not most of those messages have been either lost or destroyed.92 As alleged,


91
  Id. ¶ 84. (“Xura’s board had begun to consider making changes to the management team
absent a sale, and certain directors had concluded that Tartavull should go. Nothhaft told
this to Tartavull. . .”). Unlike the major stockholders’ dissatisfaction and the proxy contest
rumblings, however, Nothahft’s confidential message to Tartavull regarding his dim future
with the Company was not disclosed to shareholders or potential buyers, including Siris.
92
   Id. ¶ 109. Plaintiff asks the Court to draw an adverse inference at the pleading stage
given its well-pled allegations of spoliation. Delaware courts have yet to decide whether
an adverse inference is available to the plaintiff at the pleading stage when responding to a
motion to dismiss. Some federal courts have held that an adverse inference may be drawn
at the motion to dismiss stage; others have held that adverse inferences must be preceded
by thorough factual inquiries and findings. Compare Callahan v. Schultz, 783 F.2d 1543,
1545 (11th Cir. 1986) (holding that “[u]nder the adverse inference rule, we hold the district
court was justified in denying the government’s motion to dismiss[]” where government
failed to produce exhibits it claimed would justify dismissal); Richtek Tech. Corp. v. uPI
Semiconductor Corp., 2011 WL 1627986, at *1 (N.D. Cal. Apr. 28, 2011) (describing order
requiring defendant to produce documents where “failure to comply fully may result in an
adverse inference being drawn against Powerchip in its motion to dismiss (and possibly
future motions).”) with ABC Bus. Forms, Inc. v. Pridamor, Inc., 2009 WL 4679477, at *3
(N.D. Ill. Dec. 1, 2009) (citation omitted) (striking spoliation allegations from pleadings
because “‘[s]poliation of evidence’ . . . may be the basis for sanctions, but it does not ‘give
rise in civil cases to substantive claims or defenses.’”); Jarvis v. FedEx Office & Print
Servs., Inc., 2009 WL 3579035, at *3 (D. Md. Oct. 27, 2009) (holding that “[p]laintiff’s
                                              24
Tartavull was under a duty to preserve documents no later than May 30, 2016, when

Xura received a litigation demand letter relating to the Merger.93                 The Siris

Defendants were obliged to preserve documents, as alleged, no later than July 11,

2016, when the first of the Massachusetts complaints named them as parties.94 It is

alleged that those preservation obligations continued after Plaintiff filed the

Appraisal Action and after Plaintiff served discovery seeking text messages.95

           Tartavull used multiple phones during the Merger negotiations. He turned

over one of his phones to Xura when he departed in December 2016. 96 Xura then

restored the factory settings on the phone and thereby wiped its data. To date, the




request for sanctions based on spoliation of evidence is improper at this [pleading] stage of
the proceedings.”); Forest Labs., Inc. v. Caraco Pharm. Labs., Ltd., 2009 WL 998402,
at *1 (E.D. Mich. Apr. 14, 2009) (“[S]poliation is not a substantive claim or defense but a
‘rule of evidence[.]’”) (citation omitted); Rodriguez v. Ocean Motion Watersports, Ltd.,
2014 WL 11880984, at *2 (S.D. Fla. Nov. 5, 2014) (addressing motion to dismiss and
holding that spoliation inference plaintiff sought “would be more appropriately prayed for
in a later motion.”). The issue is interesting, to be sure, but I need not address it here as I
have determined, applying the generous inferences that flow to Plaintiff under Chancery
Rule 12(b)(6), that the Complaint as to Tartavull survives dismissal without the need for
adverse inferences and cannot survive dismissal as to Siris even with reasonable adverse
inferences.
93
     Compl. ¶ 110.
94
     Id. ¶ 111.
95
     See Pl.’s Exs. 10–12.
96
     Id.

                                              25
parties have had no success mining data from that phone.97 In the Appraisal Action,

Tartavull produced some text messages from a different unwiped phone, but that

production did not include pre-Closing texts, some of which were mentioned in

emails that were produced.98

            Baker initially indicated that he damaged his Blackberry in March 2017, at

least eight months after he incurred a duty to preserve.99 He stated that he disposed

of the Blackberry after it stopped working, though Siris stated in a verified

interrogatory response that the device was lost.100 In January 2018, after the Court

heard argument on Obsidian’s Motion for an Adverse Inference in the Appraisal

Action, Baker found his Blackberry in a ski bag.101 Because Baker cannot remember

the password, however, no one has been able to recover any data from that device

either.102




97
     Id.
98
     Id. ¶ 113.
99
     Id. ¶ 111.
100
      Id.
101
    Compl. ¶ 111. I note that the Court has not issued a final ruling on Obsidian’s spoliation
motion in the Appraisal Action but expects that the motion will be renewed and resolved
in this litigation.
102
      Id.

                                             26
            Hulslander inadvertently “cleared” his phone in June 2017, at least eleven

months after he incurred a duty to preserve.103 More specifically, he incorrectly

entered the password on his phone too many times thereby triggering a feature that

automatically wiped the data from memory.104

            N. Procedural Posture

            Plaintiff filed its Appraisal petition on August 29, 2016. On January 29, 2018,

the Massachusetts plaintiffs abandoned the proposed settlement of the

Massachusetts Actions and dismissed their complaints. Plaintiff filed this fiduciary

duty action soon after, on March 30, 2018. On April 18, 2018, the Court continued

the appraisal trial and informed the parties that it would consolidate the Appraisal

Action and this action. Siris moved to dismiss this action on April 30, 2018.

Tartavull filed his motion to dismiss on May 14, 2018.

                                 II. LEGAL ANALYSIS

            Under Court of Chancery Rule 12(b)(6), a complaint must be dismissed if the

plaintiff would be unable to recover under “any reasonably conceivable set of

circumstances susceptible of proof” based on the facts pled in the complaint. 105 In



103
      Id. ¶ 112.
104
      Id.

  In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 168 (citing Savor, Inc. v. FMR
105

Corp., 812 A.2d 894, 896–97 (Del. 2002)).

                                               27
considering a motion to dismiss, the Court must accept as true all well-pled

allegations in the complaint and draw all reasonable inferences from those facts in

Plaintiff’s favor.106 The Court need not accept conclusory allegations that lack

factual support, however, or “accept every strained interpretation of the allegations

proposed by the plaintiff.”107            Because the Complaint incorporates several

documents by reference, and makes clear that others are integral to the Complaint,

the Court may consider those documents in their entirety for purposes of deciding

the Motion.108

            I address Plaintiff’s claim against Tartavull first. In doing so, I consider the

following issues: (1) does Plaintiff have standing to assert his breach of fiduciary

duty claims; (2) if so, does Corwin cleansing apply; (3) if not, has Plaintiff stated a

claim of breach of fiduciary duty against Tartavull as Xura CEO; and (4) if so, does

Board approval of Tartavull’s conduct cleanse any breach of fiduciary duty that


106
      In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 168.
107
      Id.
108
    See Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691
A.2d 609, 613 (Del. 1996) (stating that the court may consider on motion to dismiss
documents beyond the complaint if the documents are “integral to . . . and incorporated
[within] the complaint.”) (citation omitted); Winshall v. Viacom Int’l, Inc., 76 A.3d 808,
818 (Del. 2013) (stating that a “plaintiff may not reference certain documents outside the
complaint and at the same time prevent the court from considering those documents’ actual
terms.”) (citations omitted); In re Sirius XM S’holder Litig., 2013 WL 5411268, at *4 n.17
(Del. Ch. Sept. 27, 2013) (“A document is integral if it is the ‘source’ of the facts pled.”)
(citation omitted).

                                               28
might be pled. With respect to Plaintiff’s claim against Siris, I consider whether

Plaintiff has well-pled all of the prima facie elements of aiding and abetting a breach

of fiduciary duty, with a particular concentration on whether it has adequately pled

that Siris knowingly participated in the alleged breach.

       A. Plaintiff Has Adequately Pled a Breach of Fiduciary Duty Against
          Tartavull as Xura CEO

       “A public policy, existing through the years . . . demands of a corporate officer

or director, peremptorily and inexorably, the most scrupulous observance of his duty,

not only affirmatively to protect the interests of the corporation committed to his

charge, but also to refrain from doing anything that would work injury to the

corporation . . . .”109     In essence, Plaintiff alleges Xura was steered into the

Transaction by a fiduciary who had an interest different from shareholders, namely

self-preservation.110 While Plaintiff does not concede that Tartavull stands alone in

his breach of fiduciary and, indeed, maintains that Xura’s Board (or at least its



109
   Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939). See also id. (“Corporate officers and
directors are not permitted to use their position of trust and confidence to further their
private interests.”).
110
    See In re Zenith Nat’l Ins. Corp. S’holders Litig., C.A. No. 5296-VCL, at 5 (Del. Ch.
Apr. 22, 2010) (TRANSCRIPT) (describing the risk that a “CEO might steer the deal or
the process to a particular buyer or particular result with whom he either has a long-time
relationship or some expectation [] of benefits”); In re Netsmart Techs., Inc. S’holders
Litig., 924 A.2d 171, 194 (Del. Ch. 2007) (“If management had an incentive to favor a
particular bidder (or type of bidder), it could use the . . . process to its advantage, by using
different body language and verbal emphasis with different bidders.”).

                                              29
Strategic Committee) bears some responsibility for the harm done here,111 it has

trained its sights on Tartavull as the most culpable and most accessible (i.e., non-

exculpated) actor.112

      For his part, Tartavull (joined by Siris) argues that, to justify dismissal, the

Court need look no further than the fully informed, uncoerced and disinterested

stockholder approval of the Transaction and the cleansing effect of that approval on

any breach of fiduciary duty claim Plaintiff might otherwise be able to plead against

him.113 He also maintains that Plaintiff has not well-pled a breach of fiduciary duty


111
    See In re Del Monte Foods Co. S’holders Litig., 25 A.3d 813, 835 (Del. Ch. 2011)
(holding that board acted unreasonably by allowing conflicted investment bank to negotiate
price with bidder); In re Lear Corp. S’holder Litig., 926 A.2d 94, 117 (Del. Ch. 2007)
(criticizing special committee because it failed to chaperone conflicted CEO’s negotiations
with the buyer and failed to provide “more assurance that [the CEO] would take a tough
line and avoid inappropriate discussions that would taint the process.”); In re Netsmart
Techs., Inc. S’holders Litig., 924 A.2d at 194 (criticizing special committee because they
“let this process be driven by management[]” despite the concern that “some bidders might
desire to retain existing management or to provide them with future incentives while others
might not.”).
112
   See Gantler v. Stephens, 965 A.2d 695, 709 n.37 (Del. 2009) (holding that 8 Del. C.
§ 102(b)(7) does not authorize the exculpation of corporate officers).
113
    Corwin, 125 A.3d at 309 (holding that the business judgment rule is the standard of
review when a transaction is approved by a majority of disinterested, uncoerced fully
informed stockholders). In deciding this motion, I have presumed, as the parties do, that
the business judgment rule applies to Tartavull as CEO. I acknowledge, however, that this
point is not settled in our law and that there is a lively debate among members of the
academy regarding whether corporate officers may avail themselves of business judgment
rule protection. See, e.g., Michael Follett, Gantler v. Stephens: Big Epiphany or Big
Failure? A Look at the Current State of Officers’ Fiduciary Duties and Advice for Potential
Protection, 35 Del. J. Corp. L. 563, 576 (2010) (suggesting that officers are protected by
the business judgment rule); Lyman P.Q. Johnson, Corporate Officers and the Business
Judgment Rule, 60 Bus. Law. 439 (2005) (applying principles of agency and making the
                                            30
claim even if Corwin cleansing is unavailable. As a threshold matter, however,

Tartavull argues that the Court lacks jurisdiction to consider the bona fides of

Plaintiff’s claims because Plaintiff lacks standing to bring them. I take up that issue

first.

             1. Plaintiff Has Standing

         Tartavull cites then-Chancellor Strine’s decision in In re Appraisal of

Aristotle Corp. in support of his argument that Plaintiff lacks standing to pursue

breach of fiduciary duty claims given that he has already filed, and has pending, a

petition for appraisal relating to the Transaction.114 In Aristotle, the court rejected

the plaintiffs’ attempt to “complicate” a pending appraisal case by asserting a “late-

breaking” breach of fiduciary duty claim that would “only yield [them] a right to a

‘quasi’ version of something they already possess in its actual form.”115 That is not

what is happening here.

         First, unlike Aristotle, where the plaintiff’s breach of fiduciary duty claim

focused on alleged disclosure violations, Plaintiff has raised disclosure failures as


case that officer conduct should be evaluated under a negligence paradigm); Lawrence A.
Hamermesh & A. Gilchrest Sparks III, Corporate Officers and the Business Judgment
Rule: A Reply to Professor Johnson, 60 Bus. Law. 865 (2005) (arguing that Delaware
courts should approach officer liability in much the same manner they approach director
liability).
114
      In re Appraisal of Aristotle Corp., 2012 WL 70654 (Del. Ch. Jan. 10, 2012).
115
      In re Appraisal of Aristotle Corp., 2012 WL 70654, at *3.

                                              31
much to plead around Tartavull’s Corwin defense as to state affirmative claims for

relief.116 The gravamen of Plaintiff’s breach of fiduciary duty claim is that a

conflicted fiduciary directed Xura to consummate an undervalued transaction for

reasons other than the best interests of stockholders. The disclosure allegations

accent that claim but they are not proffered as the essence of the breach. Second,

unlike Aristotle, where the plaintiff sought only quasi-appraisal as a remedy for the

alleged fiduciary breach, Plaintiff has sought more traditional post-closing remedies

as redress for Tartavull’s alleged breach, including rescissory damages and

disgorgement.117 Under our law, Plaintiff has standing to maintain both this claim

and its appraisal claim.118




116
    See In re Solera Hldgs., Inc. S’holder Litig., 2017 WL 57830, at *7-8 (Del. Ch. Jan. 5,
2017) (holding that “a plaintiff challenging the decision to approve a transaction must first
identify a deficiency in the operative disclosure document, at which point the burden would
fall to defendants to establish that the alleged deficiency fails as a matter of law in order to
secure the cleansing effect of the vote.”).
117
    See In re Trados Inc. S’holder Litig., 73 A.3d 17, 35 (Del. Ch. 2013) (describing
difference between appraisal and fiduciary duty cases as “[t]he breach of fiduciary duty
claim seeks an equitable remedy that requires a finding of wrongdoing. The appraisal
proceeding seeks a statutory determination of fair value that does not require a finding of
wrongdoing.”).
118
   Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1187–88 (Del. Ch. 1988) (holding that
shareholder had standing to pursue a breach of fiduciary duty claim seeking rescissory
damages while also pursuing appraisal remedy).

                                              32
             2. Corwin Does Not Apply at the Pleading Stage

         As noted, Tartavull (and Siris) argue that Corwin requires application of the

business judgment standard and dismissal of the claim because an informed,

uncoerced majority of Company’s stockholders approved the Transaction.119

I disagree. As pled, Xura’s stockholders could not have cleansed conduct about

which they did not know.

         “[O]ne [disclosure] violation is sufficient to prevent application of

Corwin.”120 Here, Plaintiff has adequately pled seven. From the public disclosures

provided to Xura stockholders, it is reasonably conceivable that stockholders lacked

the following material information when they voted to approve the Transaction:

(1) Tartavull and Siris regularly communicated regarding the Transaction in private

without the knowledge or approval of the Board or Goldman; (2) Tartavull and Baker

negotiated price terms directly without Board approval, and Tartavull advised Siris

what offer the Board would accept121; (3) Siris made clear its intention to work with

management (including Tartavull) after consummation of the Transaction in all of


119
   TOB at 29. See Singh v. Attenborough, 137 A.3d 151 (Del. 2016) (ORDER) (“When
the business judgment rule standard of review is invoked because of a vote, dismissal is
typically the result”).
120
      van der Fluit v. Yates, 2017 WL 5953514, at *8 n.115 (Del. Ch. Nov. 30, 2017).
121
   Alessi v. Beracha, 849 A.2d 939, 946 (Del. Ch. 2004) (holding that negotiations between
buyers and target’s CEO were material when the parties discussed “significant terms”
including “valuation”).

                                             33
its offer letters to the Company; (4) the Strategic Committee did not do the work

attributed to it in the Proxy; (5) Francisco Partners initially expressed interest in

offering a superior bid but somehow learned that Siris was Xura’s counterparty and

then moved its financial support to the buy-side of the Transaction122; (6) Siris

offered Neuberger a “side deal” by inviting it to co-invest its equity with Siris on the

buy-side; and (7) Tartavull received word from Nothhaft during negotiations with

Siris that his position at Xura was in jeopardy if the Company was not sold.123

       In deciding that Plaintiff has pled facts supporting a reasonable inference that

stockholder approval of the Transaction was uninformed, I am mindful that our law




122
    In this regard, I acknowledge Defendants’ argument that Plaintiff merely speculates
regarding whether Francisco Partners ultimately would have made a bid for Xura and
whether that bid would have been superior to the Siris bid. Plaintiff’s response—that we
will never know where the Francisco Partners’ overture might have gone—is, likewise,
well taken. Indeed, as a wise “do-dah man” once observed, “Sometimes your cards ain’t
worth a dime if you don’t lay ‘em down.” Garcia, Lesh, Weir, Hunter, Truckin (1970). In
any event, what is conceivably material about Francisco Partners is not its initial expression
of interest but the fact that it expressed interest, later declined to participate in the Go-Shop
and then mysteriously joined forces with Siris on the buy-side of the Transaction.
123
   See van der Fluit, 2017 WL 5953514, at *8 (finding that dismissal under Corwin was
inappropriate because the proxy failed to disclose that “Opower negotiators were Yates and
Laskey, who each received post-transaction employment and the conversion of unvested
Opower options into unvested Oracle options . . . .”); cf. City of Miami Gen. Empls.’ &
Sanitation Empls.’ Ret. Tr. v. Comstock, 2016 WL 4464156, at *15 (Del. Ch. Aug. 24,
2016), aff’d, 158 A.3d 885 (Del. 2017) (holding that a board need not “disclos[e] details
about offers [for acquisition] that directors conclude are not worth pursuing”—a fact
directly opposite of the facts pled here where Plaintiff alleges that Xura did, in fact, pursue
Francisco Partners in during the go-shop).

                                               34
does not require boards to engage in self-flagellation in their public disclosures.124

Even so, to invoke Corwin cleansing at the pleading stage, a fiduciary defendant

must demonstrate that stockholders possessed all material information before casting

the votes that provide the basis for cleansing. Plaintiff alleges that stockholders were

entirely ignorant of the extent to which Tartavull influenced the negotiations and

ultimate terms of the Transaction, not to mention his possible self-interested

motivation for pushing an allegedly undervalued Transaction on the Company and

its stockholders. Having found that these allegations are well-pled, this is enough to

justify denying Tartavull business judgment deference at the pleading stage by virtue

of the stockholder vote.125

            3. Plaintiff Has Pled a Viable Claim Against Tartavull

         Tartavull was a CEO leading a sale process. Plaintiff has well-pled that his

interests—e.g., a $25 million payout and continued employment post-closing in the

face of his looming termination from stand-alone Xura126—were different than those



124
    Stroud v. Grace, 606 A.2d 75, 84 n.1 (Del. 1992) (“[A] board is not required to engage
in ‘self-flagellation’ . . . .”).
125
    See Sciabacucchi v. Liberty Broadband Corp., 2017 WL 2352152, at *20 (Del. Ch.
May 31, 2017) (observing that “Corwin ‘was never intended to serve as a massive eraser,
exonerating corporate fiduciaries for any and all of their action or inactions preceding their
decision to undertake a transaction for which stockholder approval is obtained.’”) (quoting
In re Massey Energy Co. Deriv. Litig., 2017 WL 1739201, at * 19 (Del. Ch. May 4, 2017)).
126
      Compl. ¶ 95.

                                             35
of Xura’s stockholders. Continued employment in itself is a material interest.127 In

In re Answers Corp. Shareholders Litigation, the court refused to dismiss a

complaint alleging that a CEO’s desire to keep his job caused him to seek a quick

sale of the company.128 Plaintiff has alleged that, as Tartavull was engaged in

unauthorized discussions with Siris, he knew that both the Board and stockholder

activists were displeased with his performance and likely would remove him from

office if a sale of the Company did not occur. According to the well-pled allegations

in the Complaint, this looming reality prompted Tartavull to favor Siris over other

potential bidders, to feed information to Siris that would fortify its bid and then to

negotiate quickly for his Transaction-related payout.129             These allegations are

adequate at this stage to state a claim for breach of fiduciary duty.




127
    Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 833 A.2d 961, 978
(Del. Ch. 2003), aff’d, 845 A.2d 1040 (Del. 2004) (finding that president, chief operating
officer and director of corporation had “a material interest in her own continued
employment.”).
128
   In re Answers Corp. S’holders Litig., 2012 WL 1253072, at *7 (Del. Ch. Apr. 11, 2012)
(refusing to dismiss complaint alleging CEO’s desire to keep his job caused him to seek a
quick, undervalued sale of the company).
129
   Compl. ¶¶ 61, 63, 73, 79, 83, 84, 95, 107. It is remarkable to see evidence that a CEO
undermined the authority and questioned the competency of his CFO in direct
communications with a potential acquirer at the peak of negotiations during a sale process.
Yet, that is what the pled evidence reveals here. It is not surprising, therefore, that the CFO
(Wu) testified at deposition that he believed Tartavull’s direct contacts with Siris
“undermined the [C]ompany’s negotiating position.” Compl. ¶ 79.

                                              36
            4. Board Approval Does Not Cleanse Tartavull’s Conduct

         Tartavull argues that, because “no director besides Tartavull is named in the

Complaint[,]” and because “Plaintiff does not dispute that a majority of the Board

was independent and disinterested[,]” to state a claim against him, Plaintiff must

adequately plead that “the Board did not act in good faith in approving the

Transaction.”130 Here again, I disagree. A plaintiff need not allege that a majority

of the board committed a non-exculpated breach by failing to supervise management

in order to state a claim against a disloyal CEO.131 While Plaintiff has not pled a

MacMillan fraud-on-the-board claim, it has pled facts that support a reasonable

inference that the Board was not fully informed of Tartavull’s conduct—as

contemplated in MacMillan.132 The Board, like shareholders, cannot approve (and



130
      TOB at 36.
131
    See Kahn v. Stern, 2018 WL 1341719, at *1 n.4 (Del. Mar. 15, 2018) (ORDER)
(highlighting that a plaintiff can state a Revlon claim “where impartial board members did
not oversee conflicted members sufficiently”); Parnes v. Bally Entm’t Corp., 722 A.2d
1243, 1246 (Del. 1999) (“The presumptive validity of a business judgment is rebutted in
those rare cases where 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.’”)
(citing In re J.P. Stevens & Co., Inc., 542 A.2d 770, 780–81 (Del. Ch. 1988)).
132
     See Mills Acq. Co., 559 A.2d at 1280 (“By placing the entire process in the hands of
[the CEO and Chairman], through his own chosen financial advisors, with little or no board
oversight, the board materially contributed to the unprincipled conduct of those upon whom
it looked with a blind eye.”). See also In re Toys “R” Us, Inc. S’holder Litig., 877 A.2d
975, 1002 (Del. Ch. 2005) (“[T]he paradigmatic context for a good Revlon claim . . . is
when a supine board under the sway of an overweening CEO bent on a certain direction,
tilts the sales process for reasons inimical to the stockholders’ desire for the best price.”).

                                              37
ratify) what it did not know. The Complaint alleges the Board was unaware of the

February 24, 2016 lunch meeting between Baker and Tartavull. 133 On March 23,

2016, Goldman acknowledged that Tartavull and Siris had dinner without Goldman,

and that it did not know (and could not report to the Board) what Tartavull discussed

with Siris during that dinner.134 Defendants have pointed to nothing in the Complaint

that would overcome these well-pled allegations that the Board was uninformed.

Accordingly, there is no basis to invoke Board ratification as a defense at the

pleading stage, even assuming that board ratification would be a defense to a CEO’s

alleged breach of fiduciary duty.

          B. Plaintiff Has Not Stated a Viable Aiding and Abetting Claim

          To state a claim for aiding and abetting a breach of fiduciary duty, a plaintiff

must allege facts that, if true, would demonstrate: “(1) the existence of a fiduciary

relationship; (2) the fiduciary breached its duty; (3) a defendant, who is not a

fiduciary, knowingly participated in a breach; and (4) damages to the plaintiff

resulted from the concerted action of the fiduciary and the nonfiduciary.”135



133
      Compl. ¶ 63.
134
      Id. ¶ 77.
135
    Globis P’rs, L.P. v. Plumtree Software, Inc., 2007 WL 4292024, at *15 (Del. Ch.
Nov. 30, 2007). See also Goodwin v. Live Entm’t, Inc., 1999 WL 64265, at *28 (Del. Ch.
Jan. 25, 1999), aff’d, 741 A.2d 16 (Del. 1999) (holding that a defendant will be held liable
for aiding and abetting when he “purposely induced the breach of the duty of care . . . .”).

                                             38
“A claim of knowing participation need not be pled with particularity.” 136 Yet, “it

is necessary that the plaintiffs make factual allegations from which knowing

participation may be inferred in order to survive a motion to dismiss.”137

         To sustain its burden to plead knowing participation in this case, Plaintiff must

well-plead that Siris knew of Tartavull’s conflict. In this regard, it is useful to

reiterate what the alleged conflict is and what it is not. Plaintiff’s proffered conflict

is not simply that Tartavull sought to favor and facilitate a transaction with Siris.

Instead, the conflict is that Tartavull sought to favor and facilitate a transaction with

Siris because he thought he would lose his job and the chance at post-closing benefits

if the Transaction did not close.138 With this in mind, I am satisfied that Plaintiff has

failed to plead facts from which I could reasonably infer that Siris knew of

Tartavull’s alleged conflict and resulting breach of fiduciary duty.

         Inferences “cannot take the place of” facts.139 Even if the Court were to

assume for purposes of this Motion that spoliation occurred, as alleged, and that an



136
      In re Shoe-Town, Inc. S’holders Litig., 1990 WL 13475, at *8 (Del. Ch. Feb. 12, 1990).
137
      Morgan v. Cash, 2010 WL 2803746, at *4 (Del. Ch. July 16, 2010).
138
      Compl. ¶ 84.
139
   Collins v. Throckmorton, 425 A.2d 146, 150 (Del. 1980); see also In re Asbestos Litig.,
155 A.3d 1284, 1284 n.2 (Del. 2017) (TABLE) (“Where there is no precedent fact, there
can be no inference; an inference cannot flow from the nonexistence of a fact, or from a
complete absence of evidence as to the particular fact. Nor can an inference be based on
surmise, speculation, conjecture, or guess, or on imagination or supposition.”); Smith v.
                                              39
adverse inference is, therefore, justified, the only fact that has been pled is that Siris

was communicating with Tartavull by text message during the timeframe in which

they were negotiating the Transaction. This would perhaps support an adverse

inference that the parties were discussing the Transaction in these text messages.

One could go so far as to draw an adverse inference that Tartavull engaged in text

communications with Siris without Board knowledge or authority, given the pled

facts that Tartavull engaged in such unauthorized communications with Siris in other

contexts. But Plaintiff conspicuously stops short of alleging any precedent facts,

even on information and belief, from which a pleading stage adverse inference could

be drawn that Tartavull told or otherwise indicated to Siris that he was in danger of

losing his job if the Transaction fell through or that he was motivated to steer Xura

into the Transaction for self-interested reasons. Nor does Plaintiff allege that

Goldman tipped Siris off regarding the conflict. And the Strategic Committee could

not somehow have leaked news of Tartavull’s pending fate because that committee

never even met with Siris.140 In short, there are no pled facts from which an adverse




Haldeman, 2012 WL 3611895, at *1 (Del. Super. Aug. 21, 2012) (“Inferences draw their
life from facts, and without such a factual foundation, they remain speculation.”).
140
      Compl. ¶ 48.

                                           40
inference that Siris knew of Tartavull’s conflict, and therefore knowingly

participated in Tartavull’s breach, could be drawn.141

         Plaintiff contends the fact that Siris spoke directly with Tartavull after

Goldman asked to be “‘ke[pt] . . . on any communications with the Company going

forward’” is evidence of Siris’s knowing participation in Tartavull’s breach.142

Not so. The Board authorized management to negotiate with Siris on November 5,

2015,143 and reaffirmed that authorization during Board meetings on December 3,




141
    See In re Zale Corp. S’holders Litig., 2015 WL 5853693, at *21 (Del. Ch. Oct. 1, 2015)
(dismissing aiding and abetting claim when plaintiff failed to plead that acquirer knew
about the alleged non-disclosure constituting the purported fiduciary breach); Hospitalists
of Delaware, LLC v. Lutz, 2012 WL 3679219, at *7 (“[T]he acquirer’s mere receipt of
preferential terms does not demonstrate participation in the target board's breach of
duty . . . .”); Houseman v. Sagerman, 2014 WL 1600724, at *9 (Del. Ch. Apr. 16, 2014)
(“‘[I]t is not the fiduciary that must act with scienter, but rather the aider and abettor.’”
(citation omitted)); Rouse Props., 2018 WL 1226015, at *25 (holding that buyers are
“entitled to negotiate the terms of the Merger with only [their] interests in mind; [they are]
under no duty or obligation to negotiate terms that benefit[] [sellers] or otherwise to
facilitate a superior transaction for [sellers].”); Morgan, 2010 WL 2803746, at *5
(“[R]etaining management is a routine occurrence” and “[t]o view the retention of
management on reasonable terms with suspicion would only undermine business practices
that often facilitate the difficult transitions required when two businesses merge.”); In re
Telecommc’ns, Inc. S’holders Litig., 2003 WL 21543427, at *3 (Del. Ch. July 7, 2003)
(dismissing aiding and abetting claim and finding that “the fact that AT&T [the acquirer]
negotiated with Malone [the target’s CEO] and the TCI management team” does not
“provide a sufficient basis for inferring that AT&T knowingly participated in any breach
of fiduciary duty that may have occurred.”).
142
      Compl. ¶ 44.
143
      TOB Ex. 22 at XURA0000226; see also Compl. ¶ 44.

                                             41
2015144 and February 29, 2016.145           Xura’s standard non-disclosure agreement

required Siris to communicate through Tartavull and to get his permission before

communicating directly with others.146 Goldman’s request to be kept in the loop

was not a condition imposed by the Board or the Strategic Committee, and it

certainly was not binding upon Siris. Siris’s alleged disregard of that request,

therefore, cannot form the basis of an aiding and abetting claim.

         Plaintiff’s allegations that Siris somehow aided and abetted in the Board’s

deficient disclosures also fall short.147 At the outset, I note that an aiding and

abetting claim based on a third-party’s alleged failure somehow to prevent a board

from providing misleading disclosures to stockholders rests on thin ice. 148 Yet that

is what Plaintiff alleges here. It has pled no facts to support an inference that Siris

knowingly facilitated alleged disclosure deficiencies or otherwise “knowingly


144
      Compl. ¶ 47.
145
      JX 258 at XURA0000289.
146
      TOB Ex. 16 at SIRIS0198355-56; see also TOB Ex. 8 at GS-XURA000180433-34.
147
    I note Plaintiff alleges Siris Defendants aided and abetted the purported disclosure
deficiencies for the first time in its Answering Brief. PAB 75–76. The Complaint simply
claims Siris Defendants aided and abetted a breach of fiduciary duty “by engaging in direct
and improper communications with Tartavull throughout the negotiations that led to the
Merger.” Compl. ¶ 127. This alone is enough to disregard the claim. In re Rouse Props.,
Inc., 2018 WL 1226015, at *23 n.197 (Del. Ch. Mar. 9, 2018) (citation omitted) (“‘Under
Rule 15(aaa), a party cannot use its brief as a mechanism to informally amend its
complaint.’”).
148
      Plaintiff unsurprisingly cites no case law in support of this argument. PAB 75–76.

                                              42
participated” in that aspect of the alleged breach of fiduciary. 149 Instead, at best,

Plaintiff alleges (albeit summarily) that Siris knew certain facts and knew that the

Board was not disclosing those facts to stockholders.

            In any event, with regard to the specific disclosure violations Siris allegedly

aided and abetted Xura in committing, Plaintiff has not alleged anything to support

its conclusory allegation that “[t]he Siris Defendants knew that Francisco Partners

had expressed interest and [were] diverted to the buy-side of the transaction.”150 Nor

has Plaintiff well-pled that Siris aided and abetted a breach of fiduciary duty because

it “knew about [its] side deal with Neuberger[,]” but sat by as the Board failed to

disclose the deal to stockholders.151

            The knowledge standard embedded in our aiding and abetting law is “a

stringent one, one that turns on proof of scienter of the alleged abettor.”152 Plaintiff’s

allegations fall short of this standard.




149
    Courts have found aiding and abetting liability in the narrow circumstance where the
third-party plays an active role in the “informational vacuum.” In re Rural Metro Corp.,
88 A.3d 54, 96 (Del. Ch. 2014), decision clarified on denial of reargument sub nom. In re
Rural Metro Corp. S’holders Litig., 2014 WL 1094173 (Del. Ch. 2014). Here, there is no
allegation that Siris provided knowingly false information to Xura with the knowledge that
the Board would disclose that information to shareholders.
150
      PAB 76.
151
      Id.
152
  Binks v. DSL.net, Inc., 2010 WL 1713629, at *10 (Del. Ch. Apr. 29, 2010). See also
Houseman v. Sagerman, 2014 WL 1600724, at *9 (Del. Ch. Apr. 16, 2014) (“‘[I]t is not
                                               43
                              III. CONCLUSION

      For the foregoing reasons, the motion to dismiss Count I must be DENIED

and the motion to dismiss Count II must be GRANTED.

      IT IS SO ORDERED.




the fiduciary that must act with scienter, but rather the aider and abettor.’” (citation
omitted)).

                                          44
