                                 COURT OF CHANCERY
                                       OF THE
                                 STATE OF DELAWARE

J. TRAVIS LASTER                                           New Castle County Courthouse
VICE CHANCELLOR                                            500 N. King Street, Suite 11400
                                                          Wilmington, Delaware 19801-3734

                           Date Submitted: August 15, 2014
                            Date Decided: August 25, 2014


 Seth D. Rigrodsky                         Edward B. Micheletti
 Brian D. Long                             Jenness E. Parker
 Gina M. Serra                             Skadden, Arps, Slate, Meagher & Flom, LLP
 Rigrodsky & Long, P.A.                    One Rodney Square
 2 Righter Parkway, Suite 120              Wilmington, DE 19801
 Wilmington, DE 19803
                                           Ryan M. Ernst
 James R. Banko                            O‟Kelly, Ernst & Bielli, LLC
 Farqui & Farqui, LLP                      901 N. Market Street, Suite 1000
 20 Montchanin Road, Suite 145             Wilmington, DE 19801
 Wilmington, DE 19807

 Collin J. Seitz, Jr.
 Bradley R. Aronstam
 Eric D. Selder
 Seitz, Ross, Aronstam & Moritz, LLP
 100 S. West Street, Suite 400
 Wilmington, DE 19801

 RE:   In re Astex Pharmaceuticals, Inc. Stockholders Litigation, Consolidated C.A. No.
       8917-VCL

 Dear Counsel:

       The parties have asked the court to enter a Stipulated Order Withdrawing

 Plaintiffs‟ Counsel‟s Request for the Court to Retain Jurisdiction to Determine the

 Application for an Award of Attorneys‟ Fees and Closing the Case (the “Proposed

 Closure Order”). Because the parties have failed to provide notice to the remaining
August 25, 2014
Page 2 of 5


members as required under Advanced Mammography, the request is denied. See In re

Advanced Mammography Sys., Inc. S’holders Litig., 1996 WL 633409 (Del. Ch. Oct.

30, 1996) (Allen, C.).

                            FACTUAL BACKGROUND

       On September 5, 2013, Astex Pharmaceuticals, Inc. (“Astex”) and Otsuka

Pharmaceutical Co., Ltd. (“Otsuka”) entered into an Agreement and Plan of Merger (the

“Transaction”). Immediately thereafter, various stockholder plaintiffs filed lawsuits in

Delaware and California challenging the Transaction and asserting claims against Astex,

the members of its board of directors, and Otsuka. The claims included a contention that

Astex‟s stockholders lacked sufficient information to make an informed decision about

tendering their shares or seeking appraisal. Astex filed a supplemental Schedule 14D-9

containing additional disclosures on October 1, 2013. The court certified the class on

November 2, 2013.

       After the defendants moved for judgment on the pleadings, the named plaintiffs in

both California and Delaware concluded that their remaining claims lacked merit, and the

parties submitted a Stipulated Order Dismissing Action and Setting Schedule for

Plaintiffs‟ Counsel‟s Application for an Award of Attorney‟s Fees and Expenses on

November 27, 2013 (the “Dismissal Order”). The Dismissal Order did not purport to

compromise any claims on behalf of the remaining class members. The parties submitted

the Proposed Closure Order on August 12, 2014.
August 25, 2014
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       The Proposed Closure Order, along with an attached Stipulation Regarding

Attorneys‟ Fees and Expenses, evinced the parties‟ agreement to pay the plaintiffs a

mootness fee relating to the disclosure claims. On August 13, 2014, the court denied the

Proposed Closure Order pending a further submission by the parties explaining how they

had complied or proposed to comply with Advanced Mammography.

                                   LEGAL ANALYSIS

       In Advanced Mammography, Chancellor Allen set out principles that govern the

payment of a fee for mooted claims. “First, the defendants individually or a corporate

defendant may agree to pay a reasonable fee to plaintiff‟s counsel, in . . . exercising the

business judgment of the board, as in any expenditure of corporate funds.” Advanced

Mammography, 1996 WL 633409, at *1. In such a circumstance, “the court does not

„award‟ fees . . . and does not order that they be paid.” Id. The board is not, however,

“altogether free to exercise that judgment, as the pendency of a class action (and the risk

of buy off that it inevitably presents) constrain the board.” Id. If a board elects to pay a

reasonable fee in the context of a stockholders‟ mooted claim, “it is necessary that the

court be informed and that notice to the class of such payment be made and an

opportunity to be heard made.”        Id.   Finally, “in the context of a claim that is

acknowledged to be moot and in which no consideration has been paid to the class, it is

not appropriate for the court to purport to release any claims of the class.” Id.

       The second requirement—notice to the remaining members of the class—has not

been met. The notice requirement serves at least two purposes. First, it affords members
August 25, 2014
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of the class “an opportunity to show that the case really is not moot but that the proposed

payment to counsel is the only motivation for the dismissal on that ground.” Id. Second,

it enables members of the class to object to the use of corporate funds for the purpose of

paying a fee. See id.

       The parties try to distinguish Advanced Mammography on the grounds that no fee

agreement accompanied the dismissal, which they say eliminates any risk of a buy off.

While a dismissal combined with a contemporaneous agreement on fees might have

created a greater risk of a buy off, staggering the events did not eliminate the risk that

Chancellor Allen identified. Everyone involved knew that plaintiffs‟ counsel would be

seeking and likely receiving some level of fee. Intelligent people, like those in this case,

have the ability to think ahead and adapt their behavior to take into account foreseeable

future events. The lack of a contemporaneous agreement also does not address the role of

notice in permitting other class members to object to the use of corporate funds.

       The plaintiffs also emphasize that the Dismissal Order only dismissed with

prejudice the claims of the named plaintiffs, so no one else in the class was harmed. That

satisfies the third requirement of Advanced Mammography—that a dismissal not purport

to release claims of the class without consideration—but it does not address the notice

requirement.

       The parties have pointed to stipulated orders that this court has approved without

requiring compliance with Advanced Mammography. As Chancellor Allen remarked in

that decision,
August 25, 2014
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      [t]he court has attempted in the past to make the foregoing clear, but being
      busy and trusting in Delaware counsel, there are no doubt examples of
      cases in which our orders have done more than is appropriate in the context
      of a moot case. These unadjudicated precedents do reflect our reliance
      upon counsel, rather than a conscious resolution of principle.

Id. at *2. The stipulated orders do not signal a departure from Advanced Mammography.

      I am not requiring that the parties comply with Advanced Mammography because I

have any reason to suspect that a buy off occurred here. Just as fences make good

neighbors, and locks help keep honest people honest, the procedural requirements of

Advanced Mammography provide salutary protection in mootness dismissals.

                                    CONCLUSION

      The request that the Court enter the Closure Order is DENIED. The parties shall

submit a revised order contemplating notice to the class. In preparing the revised order,

the parties shall consider whether adequate notice can be accomplished by means other

than an individualized mailing, such as through a public filing in a Form 8K or similar

document.



                                         Very truly yours,

                                         /s/ J. Travis Laster

                                         J. Travis Laster
                                         Vice Chancellor
