Richard Frank v. Michael Mullen

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

RICHARD FRANK, On Behalf of )
Himself and All Others Similarly )
Situated, )
)
Plaintiff, )
)
v. ) C.A. No. 2023-0381-MTZ
)
MICHAEL MULLEN and B. RILEY )
FINANCIAL, INC., )
)
Defendants. )
)

MEMORANDUM OPINION
Date Submitted: January 22, 2025
Date Decided: May 5, 2025

Blake A. Bennett, Dean Roland, COOCH & TAYLOR, P.A., Wilmington,
Delaware; Juan E. Monteverde, Miles D. Schreiner, MONTEVERDE &
ASSOCIATES PC, New York, New York; Michael J. Palestina, KAHN SWICK &
FOTI, LLC, New Orleans, Louisiana, Attorneys for Plaintiff Richard Frank.

Raymond J. DiCamillo, Sandy Xu, Nicholas F. Mastria, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Adam S. Paris, Michael S. Drell, Emily D.
Olsen, SULLIVAN & CROMWELL LLP, New York, New York, Attorneys for
Defendants B. Riley Financial, Inc. and Michael Mullen.

ZURN, Vice Chancellor.
A former stockholder of National Holdings Corporation (“National” or the

“Company”) brings this putative class action challenging the 2021 sale of National

to its largest stockholder, B. Riley Financial, Inc. (“BRF”). The plaintiff did not sue

National’s board: instead, he brought breach of fiduciary duty claims against BRF

and National’s former Chairman and CEO.

This opinion addresses BRF’s motion to dismiss the claim against it. The

plaintiff contends BRF controlled National for purposes of the 2021 sale, making it

a conflicted transaction subject to entire fairness review. At the time, BRF owned

46.4% of National’s stock and appointed one nonvoting observer to National’s

board. The plaintiff claims BRF controlled the merger process by controlling the

negotiations in the shadow of its significant stake. From there, the plaintiff asserts

the transaction was marred by an unfair process and unfair price.

The complaint fails to support a reasonable inference that BRF controlled

National for purposes of the merger such that it owed any fiduciary duties. The

claim against BRF is dismissed.

2
I. BACKGROUND 1

National is a Delaware corporation headquartered in New York City.2 It

operates as a full-service investment banking and asset management firm.3

National’s business includes investing in early-stage companies. 4 Before BRF took

National private, it was publicly traded. 5

In March 2012, BRF’s co-CEO Bryant Riley participated in an investment

into National through National Securities Growth Partners, LLC (“NSGP”).6

NSGP’s principals included Riley and Robert Fagenson. 7 After NSGP’s investment,

1
Unless otherwise noted, the following facts are drawn from the plaintiff’s Verified Class
Action Complaint and the documents incorporated by reference therein. See Docket Item
(“D.I.”) 1 [hereinafter “Compl.”]; see Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 96
n.2 (Del. 2013) (“A judge may consider documents outside of the pleadings only when []
the document is integral to a plaintiff’s claim and incorporated in the complaint[.]” (citing
Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,
612 (Del. 1996))). Citations to the transcript for the oral argument on BRF’s motion to
dismiss are “Hr’g Tr. at ___,” available at D.I. 48. Citations to Plaintiff’s Brief In
Opposition to Defendant BRF’s Motion to Dismiss are “Pl. Ans. Br. at ___,” available at
D.I. 32.
2
Compl. ¶ 17.
3
Id.
4
Id. ¶¶ 17, 95.
5
Id. ¶ 17.
6
Id. ¶¶ 10, 18.
7
Id. ¶ 18.

3
Riley and Fagenson joined National’s board; Riley stepped down within months. 8

The plaintiff attributes NGSP’s interest in National to BRF. 9

A. BRF Invests In National.

BRF itself offered to buy National in November 2014, May 2015, and October

2015, but nothing came of it.10 In November 2018, BRF acquired 56.1% of

National’s stock and entered into a standstill agreement (the “Standstill

Agreement”).11 As best as can be discerned from the complaint, 12 that deal gave

BRF board observer rights, waived Section 203 of the Delaware General

Corporation Law (“DGCL”), and required a waiver for BRF to propose taking

National private.13 BRF named Riley as its observer.14

8
Id. ¶ 18 n.3.
9
Id. ¶ 18.
10
Id. ¶¶ 18–20.
11
Id. ¶ 26.
12
The complaint does not describe the Standstill Agreement’s terms or attach a copy of
that agreement.
13
Compl. ¶ 26; see, e.g., id. ¶¶ 30–31 (alleging BRF’s “need for a waiver from the Standstill
Agreement” to make a proposal to National); id. ¶¶ 32–33 (alleging the board authorized a
“limited waiver of the Standstill Agreement” and BRF subsequently “sent a letter to the
[b]oard” indicating its intent to acquire National shares it did not already own); id. ¶ 34
(alleging “without the waiver, BRF could not proceed with its quest to acquire the shares
of National it did not yet own”).
14
Id. ¶ 10.

4
Shortly after its investment, BRF identified National’s “executive and board

compensation [wer]e materially above appropriate levels.” 15 In 2019, it twice urged

the board to cut management compensation. 16

B. BRF Bids To Take National Private.

On April 27, 2020, BRF asked the board for permission to submit a take-

private proposal. 17 By then, BRF’s stake had declined to 46.4%.18 National’s

second-largest shareholder, Daniel Asher, held 18% at that time. 19 Defendant

Michael Mullen was National’s CEO and Chairman.20 National’s board also

included nonparties Fagenson, Barbara Creagh, Jeff Gary, Daniel Hume, Nassos

Michas, and Michael Singer.21

On April 30, National’s board granted BRF a limited waiver of the Standstill

Agreement. 22 That same day, BRF submitted its first bid: $2 per share for all

outstanding National shares it did not already own.23 The offer excluded shares held

15
Id. ¶ 27.
16
Id.
17
Id. ¶ 30.
18
Id. ¶ 36.
19
Id. ¶ 45.
20
Id. ¶ 8.
21
Id. ¶¶ 11–16. Michas resigned from the board on or about August 31, 2020, months
before the merger agreement was approved and executed. Id. ¶¶ 15, 75.
22
Id. ¶ 33.
23
Id.

5
by management, citing dilution concerns tied to equity awards that would accelerate

upon a change of control.24 BRF publicly disclosed both the waiver and its

proposal.25

On May 5, the board discussed BRF’s bid and determined to enforce

procedural safeguards set out in Kahn v. M & F Worldwide Corporation (“MFW”).26

It required that any transaction must meet two non-negotiable conditions: approval

by an independent special committee, and approval or tender by a majority of the

minority stockholders unaffiliated with BRF. 27 At that meeting, the board formed a

special committee comprising Creagh, Gary, Hume, and Michas.28 The special

committee retained Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisor

and Keefe, Bruyette & Woods, Inc. (“KBW”) as its financial advisor.29

At its first meeting, the special committee recognized BRF was “a large

stockholder,” and discussed it “could potentially be viewed as a controlling

stockholder.” 30

24
Id. ¶¶ 33, 53, 56, 63, 73.
25
Id. ¶ 33.
26
88 A.3d 635 (Del. 2014), overruled on other grounds by Flood v. Synutra Int’l, Inc., 195
A.3d 754 (Del. 2018); see Compl. ¶ 35.
27
Compl. ¶ 35.
28
Id.
29
Id. ¶¶ 41, 44.
30
Id. ¶ 36.

6
C. Management Submits A Competing Bid.

Management opposed the sale. 31 They believed National should stay

independent. 32 On May 8, they presented a growth plan to the board, pushing back

against a deal with BRF. 33 Riley sat in as an observer.34 Later that day, management

formed a consortium (the “Management Consortium”) and proposed buying up to

five million National shares at $2.75 per share. 35

Faced with competing offers, the special committee met at least six times in

the weeks that followed. 36 It ordered Mullen not to discuss management’s bid with

BRF or anyone else.37 It insisted that BRF’s offer include full MFW protections.38

And it instructed KBW not to begin negotiations until BRF confirmed those

conditions. 39 It predicted BRF would not support the Management Consortium’s

proposal or any alternative bid. 40 BRF confirmed that stance: upon learning of

31
Id. ¶¶ 37, 40.
32
Id. ¶ 40.
33
Id. ¶ 37.
34
Id. ¶ 38.
35
Id. ¶ 39.
36
See, e.g., id. ¶¶ 42–46, 48.
37
Id. ¶¶ 36, 44, 45.
38
Id. ¶¶ 45, 48.
39
Id. ¶ 48.
40
Id.

7
management’s bid, BRF said it had no intention of selling its stake. 41 On June 3, the

special committee decided not to reach out to any other potential buyers.42

D. The Special Committee Negotiates With BRF.

On June 4, BRF resubmitted its $2 offer, formally conditioned on the MFW

protections and again excluding management’s shares. 43 BRF presented the special

committee with projected cost savings, including cuts to management compensation

and similar savings it had achieved at other companies.44

Seeing their compensation at risk under BRF’s plan, management presented

the special committee with a revised proposal.45 They proposed to buy up to five

million shares from Asher and Riley, but not shares held by any minority

stockholders.46 If that failed, their backup plan was to have National issue up to five

million new shares and use the proceeds to fund growth.47

The special committee recognized it had more leverage to negotiate with BRF

before the standstill expired.48 It began evaluating BRF’s proposal and preparing a

41
Id.
42
Id.
43
Id. ¶ 49.
44
Id. ¶ 50.
45
Id. ¶ 51.
46
Id.
47
Id.
48
Id. ¶ 52.

8
response. It directed management and KBW to prepare updated projections to assess

National’s value.49 Those projections were presented in late June. 50 Based on that

data, the special committee countered on June 29 with an offer of $2.75 per share.51

The counteroffer asked BRF to extend its bid to “all stockholders,” including

management. 52 BRF responded with two conditions: management could not tender

their shares, and they had to renegotiate their equity awards to address dilution.53

BRF asked for the special committee’s approval to negotiate those terms directly

with management.54

The special committee knew BRF would not back another deal or sell its stake,

to the Management Consortium or anyone else. 55 On July 12, the special committee

decided to focus on BRF alone and work toward a better price. 56 On July 15, the

special committee countered at $3.25. 57 BRF responded on July 24 with $2.75—

again conditioned on MFW—but stated it could go to $3.25 if it could reach a deal

49
Id. ¶¶ 53, 55.
50
Id. ¶ 55.
51
Id. ¶ 56.
52
Id.
53
Id.
54
Id. ¶ 62.
55
Id. ¶¶ 48, 52, 63, 64.
56
Id. ¶ 63.
57
Id. ¶ 65.

9
over management compensation.58

The special committee did not respond right away.59 On July 28, Riley filled

the silence: he “stated that if the proposed transaction did not proceed, [BRF]

intended to affect a change-of-control transaction after the Standstill Agreement

expired.”60 Two days later, the special committee moved forward: it told Mullen

the special committee’s decision to exclusively pursue a transaction with BRF, and

authorized Riley and management to negotiate compensation and equity awards.61

From July 31 to August 21, Riley and management (mostly Mullen)

negotiated compensation but failed to reach a deal.62 As talks broke down, BRF saw

two options: wait for the standstill to expire to buy more shares, or sell its stake.63

BRF “hoped” the latter option could also be made available to Asher, National’s

second-largest stockholder, and Mullen looked for buyers for their shares.64 On

August 26, BRF withdrew its proposal and filed a Schedule 13D/A.65

58
Id. ¶ 66.
59
Id. ¶ 67.
60
See id.; Hr’g Tr. at 18. The complaint does not plead when the Standstill Agreement
expired. While I cannot consider this fact on BRF’s motion to dismiss, at oral argument
BRF’s counsel offered that the expiration date was “towards the beginning of 2021.” See
Hr’g Tr. at 18.
61
Compl. ¶ 67.
62
Id. ¶¶ 69–70.
63
Id. ¶ 70.
64
Id. ¶¶ 70, 72.
65
Id. ¶ 73.

10
With BRF’s exit, the Management Consortium saw an opening.66 The special

committee did not see it that way and recommended ending the sale process.67 The

board decided to hear management’s pitch.68 Management’s presentation called out

“[BRF’s] partnership with Asher” as a concern and contended their “controlling

ownership” suppressed the stock price.69

E. Asher Increases His Stake.
At this point, Asher entered the chat. He was dissatisfied with National’s

performance. On September 7, he sent a letter to the board and management

criticizing National’s results and calling for changes to leadership and governance.70

Mullen met with Asher to discuss those concerns.71

Four days after Asher’s letter, Riley emailed the board’s counsel to share his

own frustration with National’s performance (the “September 11 Email”).72 He

wrote that although he would be “better served staying quiet and not ‘threatening’

the board,” National was “by far the worst performing financial services company

66
Id. ¶ 75.
67
Id.
68
Id.
69
Id. ¶ 76.
70
Id. ¶ 77.
71
Id. ¶ 79.
72
Id. ¶ 78.

11
that I track, fraught with conflicts and corporate governance issues.” 73 He closed by

declaring, “I won’t stop holding you, management, and the board accountable.”74

The complaint suggests Mullen then connected with Riley, who conveyed BRF’s

renewed interest in acquiring National.75

With pressure from National’s two largest stockholders, the board met on

September 15.76 Mullen updated the board on his talks with Asher and BRF’s

rekindled interest. 77 The board agreed to reconstitute the special committee to

negotiate with BRF and address management compensation. 78 The board also

sought to understand “how [Mullen’s] compensation arrangement . . . was arrived

at,” and weighed inviting “outside advisors to participate” and to address “remaining

open points (including compensation-related points).” 79

On September 17, 2020, Asher filed a Schedule 13D disclosing a 19.55%

stake in National and his recent conversations with the board.80 The plaintiff alleges

73
Id.
74
Id.
75
Id. ¶ 79.
76
Id.
77
Id.
78
Id. The plaintiff does not allege that the board formally reconstituted the special
committee at that meeting. Id. But later allegations suggest it happened. See id. ¶¶ 84–85
(alleging that by September 16, “the reconstituted special committee met to review” certain
recent events).
79
Id. ¶ 79.
80
Id. ¶ 80.

12
Asher did so “as if [he was] acting in concert” with BRF. 81

F. BRF Reengages, And The Merger Closes.
After the board reconstituted the special committee, Riley connected with

Mullen.82 They made progress on the management equity awards issue and

“outlined” a possible solution.83 Riley then told the board he believed the matter

“can be resolved.”84 Riley reassured the board’s counsel that he could work out a

deal with Mullen and was “now calling Asher.”85

The reconstituted special committee then reviewed the recent developments

involving BRF and Asher.86 It asked about the “relationship between BRF and []

Asher.”87 It also directed its counsel to question BRF’s counsel about that

relationship.88 The plaintiff does not allege anything came out of those inquiries.

The special committee considered that “BRF’s support was necessary for the

[Management] Consortium’s proposal to proceed,” and noted BRF’s recent signal

81
Id.
82
Id. ¶ 81.
83
Id.
84
Id. ¶ 82.
85
Id. ¶ 84.
86
Id. ¶ 85.
87
Id.
88
Id.

13
that it was open to selling its stake.89 The special committee again treated BRF and

management as competing bidders and limited their ability to speak to each other.90

BRF soon clarified it would not sell its National stake, given its tentative

agreement over management compensation.91 Despite that agreement, the

Management Consortium resubmitted its proposal to buy up to five million shares

from Asher and BRF.92

With BRF’s refusal to sell, the special committee determined the Management

Consortium proposal was not in stockholders’ best interest, and continued towards

a deal with BRF.93 It directed its advisor to facilitate compensation negotiations

between BRF and management, with special committee representatives present.94

KBW pushed BRF to raise its offer.95 BRF declined, reiterating it would either

proceed at $2.75 per share or wait for the Standstill Agreement to expire. 96 The

special committee, seeing little room for price movement, prepared to seriously

89
Id. ¶ 87.
90
Id.
91
Id.
92
Id.
93
Id. ¶ 88.
94
Id.
95
Id. ¶ 89.
96
Id.

14
consider the $2.75 offer. 97

On November 11, BRF formally renewed its July 24 offer of $2.75 subject to

MFW. 98 On December 8, Asher disclosed his National stake had risen to 22.14%.99

The special committee decided Asher would count as a “minority stockholder” under

MFW. 100 BRF, management, and their affiliates would not.101

By that time, National’s value had increased. National had invested in Palantir

Technologies Inc. and Airbnb, Inc., both of which had recently gone public and

enjoyed rapid stock price increases.102 At its December 10 meeting, the board

discussed whether those IPOs might entitle National to significant fees. 103 Riley

attended the meeting as an observer—his first and only attendance since the deal

process restarted in September.104 The special committee came to understand the

Palantir fees were significant relative to National’s market capitalization.105 It

ordered management to halt all compensation talks to assess the Palantir fees’ impact

97
Id. ¶ 91.
98
Id. ¶ 92.
99
Id. ¶ 93.
100
Id.
101
Id.
102
Id. ¶ 95.
103
Id.
104
Id.
105
Id. ¶ 97.

15
on National’s value.106

On January 5, 2021, KBW estimated the potential value impact from the

Palantir fees at up to $0.74 per share. 107 The special committee countered BRF’s

$2.75 offer with $3.50. 108 BRF immediately replied at $3.25. 109 On January 6, the

special committee accepted. 110

The parties executed the merger agreement on January 10.111 BRF began the

tender offer on January 27, and National filed its recommendation statement.112 The

merger closed on February 25.113

G. Litigation Ensues.

Just before closing, plaintiff Richard Frank (“Plaintiff”) demanded inspection

of National’s books and records under Section 220 of the DGCL.114 National denied

the request. 115 On February 23, Plaintiff filed suit to compel inspection. 116 I held a

106
Id.
107
Id.
108
Id.
109
Id.
110
Id.
111
Id. ¶ 99.
112
Id. ¶ 102.
113
Id.
114
See Frank v. Nat.’l Hldgs. Corp., C.A. No. 2021-0160-MTZ (Del. Ch.) (the “Section
220 Action”), D.I. 1 Ex. A.
115
Id. at D.I. 1 Ex. B.
116
Id. at D.I. 1.

16
half-day trial on a paper record on July 15, 2022.117 By trial, the issues had narrowed

to “board and management communications.”118 On July 22, I issued a telephonic

ruling denying those documents.119

On March 30, 2023, Plaintiff filed his class action complaint against BRF and

Mullen—not National’s board.120 Plaintiff alleges the merger delivered inadequate

value due to a “flawed and conflicted sales process” that fell short of MFW’s

requirements. 121 The complaint asserts two counts: one against Mullen for breaching

his fiduciary duties as an officer, and one against BRF for breaching its fiduciary

duties as a controlling stockholder.122

Mullen answered the complaint.123 BRF moved to dismiss the claim against

it for failure to state a claim on February 15, 2024, and amended its motion on

October 18. 124 The parties completed briefing on December 3.125 I heard oral

argument on January 22, 2025. 126 This opinion concludes BRF’s motion to dismiss

117
Id. at D.I. 39, D.I. 42.
118
Id. at D.I. 43 at 7–9.
119
Id. at D.I. 43 at 3, 21–22; D.I. 44.
120
Compl. ¶ 1.
121
Id. ¶ 115.
122
Id. ¶¶ 130–41.
123
D.I. 31.
124
D.I. 24, D.I. 25, D.I. 29, D.I. 30.
125
D.I. 32, D.I. 35.
126
D.I. 47.

17
is granted.

II. ANALYSIS

BRF moves to dismiss the complaint under Court of Chancery Rule 12(b)(6)

for failure to state a claim. 127 The pleading standards under Delaware law are

minimal.128 On a motion to dismiss under Rule 12(b)(6) for failure to state a claim,

the Court must “accept all well-pleaded factual allegations in the complaint as true,

accept even vague allegations in the complaint as well-pleaded if they provide the

defendant notice of the claim, [and] draw all reasonable inferences in favor of the

plaintiff.”129 The Court will grant a Rule 12(b)(6) motion if the “plaintiff could not

recover under any reasonably conceivable set of circumstances susceptible of

proof.”130

Those reasonable inferences “must logically flow from particularized facts

alleged by the plaintiff.” 131 The Court need not “accept as true conclusory

allegations without specific supporting factual allegations.” 132 The Court is not

127
Ct. Ch. R. 12(b)(6).
128
Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del.
2011).
129
Id.
130
Id.
131
Wood v. Baum, 953 A.2d 136, 140 (Del. 2008).
132
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (internal
quotation marks and citations omitted).

18
“required to accept every strained interpretation of the allegations proposed by the

plaintiff.”133

Here, Plaintiff argues BRF exerted control over National for purposes of the

merger, assumed fiduciary duties to National and its stockholders, and forced

National into a conflicted transaction that warrants, and fails, entire fairness

review. 134 Plaintiff pleads that BRF had a great deal of leverage in the negotiations.

But leverage in an arm’s-length negotiation is not tantamount to control over the

special committee or board. The question is not what cards BRF held; the question

is whether BRF controlled how the special committee played its cards. Plaintiff

fails to plead facts that show BRF controlled the special committee or National’s

board in the merger process. BRF’s motion to dismiss is granted.

A. The Standard For Alleging A Controlling Stockholder

“Delaware law imposes fiduciary duties on those who effectively control a

corporation.”135 “As a general rule, stockholders do not owe fiduciary duties to the

corporation or its stockholders and are free to act in their self-interest.” 136 But a

133
Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001).
134
See, e.g., Compl. ¶¶ 103–12, 121–22.
135
Quadrant Structured Prods. Co. v. Vertin, 102 A.3d 155, 183–84 (Del. Ch. 2014).
136
In re Oracle Corp. Deriv. Litig., -- A.3d --, 2025 WL 249066, at *11 (Del. Jan. 21,
2025) (“Oracle II”); see also Voigt v. Metcalf, 2020 WL 614999, at *10 (Del. Ch. Feb. 10,
2020) (“A stockholder that does not control the corporation is not a fiduciary and cannot
be held liable for breaching non-existent duties.”); Basho Techs. Holdco B, LLC v.
Georgetown Basho Invs., LLC, 2018 WL 3326693, at *25 (Del. Ch. July 6, 2018) (noting

19
controlling stockholder is differently situated and will “assume[] fiduciary duties in

certain circumstances.” 137 A stockholder is controlling if she either: “(1) owns more

than 50% of the voting power of a corporation or (2) owns less than 50% of the

voting power of the corporation but ‘exercises control over the business affairs of

the corporation.’” 138 When a stockholder owns less than a mathematical majority of

the company’s voting power, a plaintiff must plead actual control. 139

Under recent Delaware Supreme Court precedent, a minority stockholder may

exercise actual control (i) “over the corporation’s business and affairs” or (ii) “over

a specific transaction.” 140 Plaintiff has not tried to plead general control; his theory

stockholder “status alone does not give rise to fiduciary duties”), aff’d sub nom. Davenport
v. Basho Techs. Holdco B, LLC, 221 A.3d 100 (Del. 2019).
137
Oracle II, 2025 WL 249066, at *11; see also In re Match Gp., Inc. Deriv. Litig., 315
A.3d 446, 460 (Del. 2024) (“Controlling stockholders are at times free to act in their own
self-interest . . . [unless they] stand[] on both sides of a transaction and receive[] a non-
ratable benefit.”); Harris v. Carter, 582 A.2d 222, 234 (Del. Ch. 1990) (“[W]hen a
shareholder presumes to exercise control over a corporation, to direct its actions, that
shareholder assumes a fiduciary duty of the same kind as that owed by a director to the
corporation.” (citing Sterling v. Mayflower Hotel Corp., 93 A.2d 107, 109–10 (Del.
1952))).
138
In re Tesla Motors, Inc. S’holder Litig., 2018 WL 1560293, at *12 (Del. Ch. Mar. 28,
2018) (quoting Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1113–14 (Del. 1994)).
139
Oracle II, 2025 WL 249066, at *12 (“[A] minority stockholder can be a controlling
stockholder by exercising actual control over the corporation’s business and affairs or by
exercising actual control over a specific transaction.”).
140
Id.

20
is limited to transaction-specific control.141 To allege transaction-specific control, a

plaintiff must plead facts supporting the inference that a stockholder “exercised

141
See Hr’g Tr. at 8, 10, 42. Plaintiff’s Answering Brief presses both general and
transaction-specific control theories. See Pl. Ans. Br. at 34. He abandoned general control
at oral argument. See Hr’g Tr. at 42 (“The Court: -- I want to be crystal clear that your
theory of control on opposing the motion is one of transaction-specific control? Attorney
Monteverde: Yes, Your Honor.”).
This opinion proceeds under recent Delaware Supreme Court precedent recognizing
that “a minority stockholder can be a controlling stockholder by exercising actual
control . . . over a specific transaction.” See Oracle II, 2025 WL 249066, at *11–12; see
id. at *12 n.92 (collecting cases). Whether Delaware law has or should have recognized
transaction-specific control is subject to a lively debate before the judiciary and in
academia. See Individual Dir.-Appellants’ Opening Br., In re Tesla, Inc. Deriv. Litig., No.
534, 2024C (Del. appeal docketed Dec. 30, 2024), D.I. 41, at 17–19 (independent director
appellants contending this Court has “never held expressly that transaction-specific control
results in controlling stockholder status” and urging rejection of that doctrine); Answering
Br. of Plaintiff-Below/Appellee, In re Tesla, Inc. Deriv. Litig., No. 534, 2024C (Del. appeal
docketed Dec. 30, 2024), D.I. 81 at 41–43 (plaintiff appellees contending Delaware law
has long recognized transaction-specific control); Elizabeth Pollman & Lori W. Will, The
Lost History of Transaction-Specific Control, __ J. Corp. L. __ (forthcoming 2025),
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5138377 (tracing the
doctrinal evolution of transaction-specific control and arguing Delaware should “jettison
the concept of transactional control as a distinct concept”). As for the legislature, the
DGCL was recently amended in a way that practitioners have read to remove transaction-
specific control as a basis for finding a stockholder to be a controller. See 8 Del. C.
§ 144(e)(2)(c) (defining a minority “controlling stockholder” by voting power and “power
to exercise managerial authority over the business and affairs of the corporation”); see, e.g.,
Richards, Layton & Finger, P.A., Overview of the DGCL’s Newly-Enacted Safe Harbor
Procedures and Books and Records Regime (Apr. 2, 2025), https://www.rlf.com/overview-
of-the-dgcls-newly-enacted-safe-harbor-procedures-and-books-and-records-regime/ (last
visited May 5, 2025) (noting that controlling stockholder definition “functionally
excludes” transaction-specific control); Mayer Brown LLP, Delaware Law Alert: A Step-
By-Step Approach For Boards Evaluating Conflicted Director, Officer, And Controlling
Stockholder Transactions Under The Amended Delaware Corporation Law
(Apr. 14, 2025), https://www.mayerbrown.com/-/media/files/perspectivesevents/
publications/2025/04/legal-update_delaware-law-alert.pdf (last visited May 5, 2025)
(positing “the concept of control is . . . not with reference to individual transactions). That
amendment is not applicable to this dispute. See Del. S. Substitute No. 1 for S.B. 21, 153rd
Gen. Assem. § 6, 85 Del. Laws ch. 6 § 3 (2025).

21
actual control over the board of directors during the course of a particular

transaction.”142 “[T]he potential ability to exercise control is not sufficient.”143

That standard requires well-pled facts supporting a reasonable inference that

the stockholder “dominated or controlled [the board’s] ‘corporate decision-making

process’”144 because it possesses power “so potent that independent directors . . .

cannot freely exercise their judgment, fearing retribution from the controlling

minority blockholder.” 145

142
Oracle II, 2025 WL 249066, at *12 (quoting In re W. Nat’l Corp. S’holders Litig., 2000
WL 710192, at *20 (Del. Ch. May 22, 2000)); see also Voigt, 2020 WL 614999, at *12
(explaining transaction-specific control requires “facts supporting a reasonable inference
that the defendant in fact exercised actual control with regard to the particular transaction”
(internal quotation marks and citation omitted)).
143
Williamson v. Cox Commc’ns, Inc., 2006 WL 1586375, at *4 (Del. Ch. June 5, 2006).
144
In re Rouse Props. Inc., 2018 WL 1226015, at *15 (Del. Ch. Mar. 9, 2018) (internal
citation omitted); see also Superior Vision Servs., Inc. v. ReliaStar Life Ins. Co., 2006 WL
2521426, at *4 (Del. Ch. Aug. 25, 2006) (“[T]he focus of the inquiry has been on the de
facto power of a significant (but less than majority) shareholder, which, when coupled with
other factors, gives that shareholder the ability to dominate the corporate decision-making
process.”).
145
In re Morton’s Rest. Gp., Inc. S’holders Litig., 74 A.3d 656, 665 (Del. Ch. 2013)
(internal quotation marks and citation omitted); see also Kahn, 638 A.2d at 1114 (“[A]
plaintiff must allege domination by a minority shareholder through actual control of
corporation conduct.” (internal quotation marks and citation omitted)); In re Crimson Expl.
Inc. S’holder Litig., 2014 WL 5449419, at *12 (Del. Ch. Oct. 24, 2014) (noting the central
inquiry is whether a stockholder “actually control[s] the board’s decisions about the
challenged transaction”); In re PNB Hldg. Co. S’holders Litig., 2006 WL 2403999, at *9
(Del. Ch. Aug. 18, 2006) (summarizing that transaction-specific control inquiry turns on
whether a plaintiff sufficiently alleges facts indicating that defendants “have such
formidable voting and managerial power that they, as a practical matter, are no differently
situated than if they had majority voting control”).

22
Pleading actual control is “no easy task.”146 It “call[s] for a holistic evaluation

of sources of influence.”147 Delaware law has identified a nonexclusive list of

“possible sources of influence” and “[b]roader indicia of effective control.”148

Ultimately, the inquiry turns on “the facts and circumstances surrounding the

particular transaction.” 149

A take-private by a large blockholder sets the stage for a conflicted controller

transaction warranting entire fairness review.150 But where that large blockholder

does not exercise actual control over the corporation’s business and affairs,

independent directors can still retain their presumed independence and control over

146
Larkin v. Shah, 2016 WL 4485447, at *13 (Del. Ch. Aug. 25, 2016).
147
Anchorage Police & Fire Ret. Sys. v. Adolf, 2025 WL 1000153, at *12 (Del. Ch. Apr.
3, 2025); see also Sciannella v. AstraZeneca UK Ltd., 2024 WL 3327765, at *17 (Del. Ch.
July 8, 2024) (“At the pleadings stage, a reasonable inference of actual control rests on the
totality of the facts and circumstances considered in the aggregate.”), aff’d, 2025 WL
946148 (Del. Mar. 26, 2025); see also In re Vaxart S’holder Litig., 2021 WL 5858696, at
*15 (Del. Ch. Nov. 30, 2021) (“Because the controller analysis is fact-intensive, the court
is unlikely to find control unless plaintiffs can plead a ‘constellation of facts’ supporting
control.” (internal citation omitted)).
148
Basho Techs., 2018 WL 3326693, at *26–27, nn.313–25 (collecting and discussing
cases illustrating the factors Delaware courts have considered in holistically evaluating
actual control).
149
Id. at *28.
150
See In re Oracle Corp. Deriv. Litig., 2023 WL 3408772, at *25–27 (Del. Ch. May 12,
2023) (“Oracle I”) (tracing Delaware’s “development of the fiduciary concept of the
controller” based on recognizing the coercion inherent in a conflicted controller
squeeze-out merger from Kahn, 638 A.2d 1110, to In re Cysive, Inc. S’holders Litig., 836
A.2d 531 (Del. Ch. 2003), to In re EZCORP Inc. Consulting Agreement Deriv. Litig., 2016
WL 301245 (Del. Ch. Jan. 25, 2016)), aff’d, 2025 WL 249066 (Del. Jan. 21, 2025).

23
the transaction. In arm’s-length negotiations, they can keep the blockholder out of

the boardroom and so keep the presumptions of the business judgment rule.151 An

independent target board may agree with—or yield to—a tough negotiator in its own

business judgment: independent concession does not support an inference of

control. 152 When there is an independent special committee, an independent board,

and a clean process, a plaintiff cannot plead actual control over the transaction

simply by pointing to a large blockholder’s negotiating leverage. 153

B. The Complaint Fails To Allege BRF Controlled National For
Purposes Of The Merger.
BRF appointed no directors to the National board, and Plaintiff asserts only

one of National’s six directors on the merger board has any ties to BRF. Plaintiff

does not allege BRF had any operational or managerial influence over National.

BRF was subject to a Standstill Agreement. And National negotiated with BRF

primarily through an undisputedly independent and empowered special committee,

151
E.g., Oracle I, 2023 WL 3408772, at *20–27 (finding post-trial the minority stockholder
did not propose the transaction or control it, directly or indirectly; rather, the special
committee “ran the negotiation process,” was empowered, and “demonstrated a willingness
to walk away from the transaction”).
152
In re USG Corp. S’holder Litig., 2020 WL 5126671, at *24 (Del. Ch. Aug. 31, 2020)
(noting a board’s “‘[f]ear’ of a corporate takeover threat—here fully justified after [the
minority stockholder’s] resounding victory [in a proxy contest]—is a nod to reality, not a
disabling extraneous influence”), aff’d sub nom. Anderson v. Leer, 265 A.3d 995 (Del.
2021).
153
W. Nat.’l, 2000 WL 710192, at *23–24 (finding allegations of “arm’s length bargaining”
precluded the inference of transaction-specific control).

24
whose approval was required under the MFW conditions National imposed. Against

that backdrop, Plaintiff leans on five indicia in an effort to plead BRF exercised

actual control over National’s board for purposes of the merger.

1. Stock ownership: BRF held 46.4% of National’s stock. 154
2. Voting support: BRF had backing from either Asher (raising voting
power to 65%) 155 or from management (raising it to 55%). 156

3. Board and management influence: BRF had “outsized influence”
over the board and management because of its (i) purported
longstanding interest in National, dating back to NGSP’s 2012
investment, (ii) high water mark of ownership of 56.1% in 2018, and
(iii) Riley’s “business relationship” with National director
Fagenson. 157

4. Control over the merger process: BRF pushed the merger, sidelined
the special committee, cut side deals with management, threatened
a potential change-of-control transaction, coordinated with Asher
and Mullen, and dictated the merger terms. 158

5. Perceptions: the board and management viewed BRF as a
controller.159

Assessing transaction-specific control requires “a holistic evaluation of” those

154
Compl. ¶ 36; see Pl. Ans. Br. at 34–36.
155
See Hr’g Tr. at 48–49. At the time of the merger, BRF held 46.4%. Asher held 22.14%.
Their combined voting power was approximately 68.54%. Compl. ¶¶ 36, 93. Plaintiff
derives 65% voting control from aggregating Asher’s September 2020 19.55% stake. See
Compl. ¶ 80. For this opinion, that difference does not render a different conclusion. I
refer to 65% to give proper deference to the complaint’s allegations at this pleading stage.
156
Pl. Ans. Br. at 35–36.
157
Id. at 36–38.
158
Id. at 39–41.
159
Id. at 41–43.

25
sorts of factors. 160 The nature of a written opinion requires considering each factor

in turn before evaluating them holistically.161 Here, none offers the clout over

National’s board Plaintiff says it does, and their combination does not amount to

actual control.

1. Stock Ownership

Plaintiff argues that BRF, with its 46.4% stake in National, held a “large

enough block” to qualify as a controlling stockholder. 162 Delaware law is clear: only

a stake over 50% is “large enough” to confer controller status based solely on

“mathematical voting control.”163

To be sure, the law recognizes “power conferred by large block[s].” 164 BRF’s

46.4% stake is significant. A relatively larger block size means that the stockholder

is more likely to prevail on a vote, and requires any opposition to prevail by

160
Adolf, 2025 WL 1000153, at *12; see also Vaxart, 2021 WL 5858696, at *15 (“Because
the controller analysis is fact-intensive, the court is unlikely to find control unless plaintiffs
can plead a ‘constellation of facts’ supporting control.” (internal citation omitted)).
161
Oracle II, 2025 WL 249066, at *13 n.98 (confirming a trial court may properly consider
“all” the factors individually and “in the aggregate” for a “holistic evaluation”).
162
Pl. Ans. Br. at 34. Plaintiff also points to the fact that BRF’s stake used to exceed fifty
percent. Without more, that does not support an inference of actual control over National
for purposes of BRF’s take-private.
163
Oracle II, 2025 WL 249066, at *11–12 (noting stockholders with “over 50%” stock as
having “hard” control and stockholders owning “less than 50%” are not “presumed to be a
controlling stockholder with fiduciary duties”); see also W. Nat.’l, 2000 WL 710192, at *6
(“[S]ubstantial non-majority stock ownership, without more, does not indicate control.”).
164
Voigt, 2020 WL 614999, at *18.

26
obtaining a supermajority. 165 But beyond those voting dynamics, BRF’s sizable

stake itself “is not particularly probative of whether the large shareholder exercises

actual control” over National for purposes of the merger.166 BRF’s stake shows only

its “potential to control.”167 Plaintiff must still plead facts showing actual control.168

The closest Plaintiff comes is alleging BRF’s refusal to sell deterred the

special committee from pursuing the Management Consortium’s bid or considering

other buyers. This is the first instance where Plaintiff conflates BRF’s arm’s-length

leverage with control over National. Delaware law maintains those as different

165
Id.
166
See W. Nat’l Corp., 2000 WL 710192, at *8 (“The shareholders’ right to voice their
view as to the advisability of a proposed merger, however, does not indicate that they
exercise actual control over the corporation’s business and affairs.”); e.g., Rouse Props.,
2018 WL 1226015, at *19–20 (concluding a complaint failed to allege a 33.5% stockholder
was a controller); Superior Vision, 2006 WL 2521426, at *1–2, *5 (concluding a complaint
did not adequately allege that a 44% stockholder was a controller); W. Nat.’l, 2000 WL
710192, at *1, *6 (finding on a motion for summary judgment a 46% stockholder was not
a controller); In Re: Sea-Land Corp. S’holders Litig., 1987 WL 11283, at *4–5 (Del. Ch.
May 22, 1987) (concluding that a complaint did not adequately allege a 39.5% stockholder
was a controller).
See Williamson, 2006 WL 1586375, at *5 (“Delaware law requires actual control, not
167

merely the potential to control.”).
168
Voigt, 2020 WL 614999, at *19–22 (evaluating 34.8% ownership “in conjunction with”
indicia of actual control, including (i) the board composition, and (ii) the minority
stockholder’s contractual rights and limitations, right to proportionate representation on
board committees, and “relatively weak” but additive relationship with the key managers
or advisors); see also Sea-Land, 1987 WL 11283, at *5 (“That Simmons had a 40% stock
interest might permit the inference that Simmons had the potential ability to frustrate a
competing bid. But that circumstance, without more, will not suffice to elevate Simmons’
status to that of a controlling stockholder with concomitant fiduciary obligations.”).

27
concepts. 169 In Western National, the 46% blockholder who bought the shares it did

not own indicated it was not willing to sell, and this Court was adamant that the

blockholder was within its rights to do so and was not exercising actual control by

doing so.170 In USG, a 10.6% blockholder who fought tooth-and-nail in a proxy

contest against the board’s nominees did not have actual control over the board.171

Had it “exercised control over [the] board, it inferably would have been able to

control” the board’s nominees.172

BRF’s refusal to sell was certainly an obstacle the special committee had to

address to get a deal done, and narrowed the options available. 173 But Plaintiff

alleges nothing showing BRF controlled or coerced the special committee into

exclusive negotiations. Rather, the special committee deliberated its options

169
W. Nat.’l, 2000 WL 710192, at *23–24.
170
Id. at *4, *8 (addressing control over the corporation’s “business and affairs”). Even if
BRF was a controller, BRF was free to decide not to sell its stock without heed to National
or its other stockholders. In re Sears Hometown & Outlet Stores, Inc. S’holder Litig., 309
A.3d 474, 508–10 (Del. Ch.), modified on reargument, (Del. Ch. July 2, 2024).
171
USG, 2020 WL 5126671, at *14–15.
172
Id. at *15.
173
See In re MFW S’holders Litig., 67 A.3d 496, 508–09 (Del. Ch. 2013) (observing a
significant stockholder’s refusal to sell could make it “unlikely that any potentially
interested party would” pursue a transaction, but it did not equate to control as the special
committee “ha[d] the leeway to get advice” and “evaluat[e] other options”), aff’d sub nom.
Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014).

28
independently and chose to engage with BRF. 174

2. Significant Voting Support
Plaintiff argues BRF effectively wielded a majority of National’s voting

power by combining forces with Asher (aggregating to 65%) and management

(aggregating to 55%). 175 For Asher, Plaintiff points to two moments where it

appeared “as if [BRF] were acting in concert” with Asher.176 For management,

Plaintiff alleges BRF and management excluded the board and special committee

from their talks on management compensation,177 and that once they were aligned,

they “acted in concert” to push for a sale.178 Plaintiff offers no basis to combine

BRF’s holdings with any other National stockholder. Nor has Plaintiff shown how

any such combined voting power amounted to actual control over National’s board

in the merger process.

To aggregate different stockholders’ power in a way that imposes fiduciary

174
See W. Nat.’l, 2000 WL 710192, at *4 (finding no actual control when the special
committee independently determined “the optimal course of action” was a negotiated deal
with the significant stockholder after evaluating the stockholder’s unwillingness to sell, the
company’s financial and liquidity situation, the market conditions, and “[t]he imminent
expiration of the Standstill Provision,” which suggested “the optimal time to negotiate . . .
was sooner rather than later”); see also USG, 2020 WL 5126671, at *14–15 (finding actual
control not well-pled when the board independently concluded the minority stockholder
was likely to prevail in the proxy contest and authorized merger talks).
175
Pl. Ans. Br. at 35–36.
176
Compl. ¶¶ 78, 80.
177
Id. ¶¶ 90, 95.
178
Pl. Ans. Br. at 35–36.

29
duties, Delaware law requires more than an alignment of interests: it requires some

indication of an actual agreement.179 And that agreement must be well-pled: this

Court will not “pile up questionable inferences until [a control group] conclusion is

reached.”180

Plaintiff does not allege any actual agreement to support coupling BRF’s

voting power with either Asher’s or management’s. As to Asher, Plaintiff pleads

BRF and Asher took separate actions that appeared “as if they were acting in

concert” “to “pressure the [b]oard to accept [BRF’s] proposal,” 181 and that Asher

boosted his holdings “as if” he was aligned with BRF or had advance knowledge of

a deal.182 He points to their separate communications with the board and

179
Sheldon v. Pinto Tech. Ventures, L.P., 220 A.3d 245, 251–52 (Del. 2019) (requiring
stockholders to be “connected in some legally significant way—such as by contract,
common ownership, agreement, or other arrangement—to work together toward a shared
goal”) (internal quotation marks and citation omitted); Crimson Expl., 2014 WL 5449419,
at *15 (rejecting a control group because the plaintiff did not plead “any voting agreement
regarding the Merger or . . . any agreement, formal or otherwise” and alleged only “an
alignment of interests”); Frank v. Elgamal, 2012 WL 1096090, at *8, *8 n.57 (Del. Ch.
Mar. 30, 2012) (looking to “legally significant” connections, such as “contemporaneously
entered into” voting agreements, exchange agreements and employment agreements with
a post-merger entity, as evidence of a control group); Dubroff v. Wren Holdings, LLC, 2011
WL 5137175, at *7 (Del. Ch. Oct. 28, 2011) (reiterating that a control group is not
demonstrated merely by alleging a “group of shareholders hav[ing] parallel interests,” and
finding a control group is pled when the stockholders engaged in a series of meetings “to
establish the exact terms and timing” of the challenged transaction).
180
Crimson Expl., 2014 WL 5449419, at *15.
181
Compl. ¶¶ 78, 80.
182
Id. ¶ 93.

30
management, and their shared disappointment in National’s performance.183 Even

viewed in Plaintiff’s favor, those allegations suggest independent actions, not joint

planning. Plaintiff alleges no preexisting coordination between BRF and Asher

regarding a shared intent to sell their National stake. 184

Other allegations reinforce that point: BRF merely “hoped” National would

offer Asher the opportunity to sell his shares.185 Riley told the board’s counsel he

“was calling Asher” only after reaching a preliminary agreement with Mullen on

management compensation.186 At best, Plaintiff pleads BRF and Asher held similar

views about National’s performance, and took similar independent actions. 187 Those

coinciding or parallel interests are not enough.188

There is even less reason to aggregate management’s voting power with

BRF’s. At the start of merger negotiations, BRF and management were distinct

183
Pl. Ans. Br. at 35 (citing Compl. ¶¶ 76–78, 80, 84–85, 93).
184
Plaintiff does not allege Asher participated in the sale process until after BRF withdrew
its bid. See Compl. ¶¶ 73, 77.
185
Id. ¶ 70.
186
Id. ¶ 84.
187
Id. ¶¶ 77–78, 80.
188
Sheldon, 220 A.3d at 251–52; see also Gilbert v. Perlman, 2020 WL 2062285, at *6
(Del. Ch. Apr. 29, 2020) (“To demonstrate the existence of a control group, it is insufficient
to identify a group of stockholders that merely shares parallel interests.”); Crimson Expl.,
2014 WL 5449419, at *15 (holding “mere concurrence of self-interest among certain
stockholders” insufficient to allege a control group).

31
competing bidders for National. 189 The special committee repeatedly instructed

Mullen not to speak with BRF. 190 Then the special committee granted management

and BRF permission to negotiate management compensation, and they struggled for

months to reach a deal. 191 BRF negotiated with management only on management

equity awards, and only after BRF and Mullen agreed on the preliminary terms.192

Plaintiff does not allege any actual agreement to effectuate the merger.

Perhaps recognizing his allegations fail to plead the necessary agreement or

cooperation, Plaintiff was clear he is not alleging a control group: he seeks to

aggregate BRF with Asher or management for “atmospherics.” 193 Given Delaware

law’s insistence on an actual agreement to bind stockholders together, I have my

doubts that Delaware law would recognize “atmospherics,” short of a control group,

as a source of actual control.

Regardless, Plaintiff has pled no facts showing that any such “atmospherics”

contributed to actual control over National’s board for purposes of the merger.194

189
Compl. ¶¶ 4, 36, 39, 44, 58–59, 85–86.
190
Id. ¶¶ 45, 59, 86.
191
Id. ¶¶ 62, 67, 69–71, 73.
192
Id. ¶¶ 81, 84, 90, 94.
193
Hr’g Tr. at 48–49 (counsel for Plaintiff conceding he was “not actually asking [the
Court] to conclude that there was a control group” or that “BRF [wa]s actually bringing
the weight of 65 percent. These are just atmospherics”).
Sheldon, 220 A.3d at 251–52; Patel, 2021 WL 4482157, at *11 (discussing a plaintiff
194

must “allege that the control group exercised de facto control by actual domination or

32
The allegations show the opposite. In response to pressure from Asher and BRF, the

board took independent action. It questioned Mullen’s compensation. 195 It

reconstituted the special committee to negotiate with BRF. 196 It proposed involving

outside advisors on “open points (including compensation-related points).197 The

reconstituted special committee also ran its own independent inquiry into BRF’s

relationship with Asher. 198 It concluded Asher qualified as a “minority stockholder”

unaffiliated with BRF. 199

As for BRF and management, they did not dominate the special committee.

The special committee hired independent advisors.200 It treated BRF and

management as “competing bidders” and barred Mullen from communicating with

BRF. 201 It determined the Management Consortium’s proposal “was not in the best

interest of stockholders,” and chose to pursue a deal with BRF. 202 It ordered

management and its advisors to prepare updated projections to prepare responses to

control of the board generally, or actual domination or control of the corporation, its board,
or the deciding committee with respect to the challenged transaction”).
195
Compl. ¶ 79.
196
Id.
197
Id.
198
Id. ¶ 85.
199
Id. ¶ 93.
200
Id. ¶¶ 41, 44.
201
Id. ¶¶ 45, 59, 86.
202
Id. ¶ 88.

33
BRF’s bid. 203 It instructed its advisors to facilitate compensation negotiations

between BRF and management.204

Plaintiff offers nothing to support the inference that BRF and Asher, or BRF

and management, agreed to work together to exert actual control over National in its

transaction with BRF.

3. No Control Over The Board

Next, Plaintiff swings for the fences and claims BRF controlled the board. He

points to three assertions: (i) NGSP’s 2012 investment in National, which Plaintiff

attributes to BRF solely based on Riley’s involvement; (ii) BRF’s high-water mark

of 56.1%, which had dropped to 46.4% by the time of the merger; and (iii) Riley’s

“business relationship” with Fagenson, a National director.205

It takes a great deal to plead that a tough negotiator across the table actually

controlled the other side’s board, such that it must be deemed a fiduciary and

subsume its own interests to those of the other side and its stockholders. 206 Control

over a corporation’s board may exist if the stockholder holds or controls “high-status

203
Id. ¶¶ 53, 55.
204
Id. ¶ 88.
205
Pl. Ans. Br. at 36–38.
206
Oracle I, 2023 WL 3408772, at *19–20, 24–25 (concluding post-trial the evidence did
not support a 28.4% stockholder had such power “that independent directors cannot freely
exercise their judgment for fear of retribution” (internal quotation marks and citations
omitted)).

34
roles . . . [or] key executive or managerial roles,” “interfere[s] with or kibosh[es]

management decisions,” or “has substantial influence [in decisions to] replace

management.”207 Plaintiff’s allegations do not meet the mark.

First, NGSP’s 2012 investment and BRF’s 2018 majority stake are not pled

to give BRF any influence over National’s board at the time of the merger.208

Plaintiff offers no facts connecting those facts to the merger board.

Second, Plaintiff points to Riley’s past dealings with Fagenson. Fagenson is

one of six directors on the merger board 209—far from a majority controlled by BRF.

And Plaintiff’s allegations as to Fagensen fall short as well. His connection with

Riley dates back to 2012, when both were NSGP principals during its National

transaction.210 But being co-directors and having a single past related business

relationship does not undermine a director’s independence or disinterestedness.211

207
Tornetta v. Musk, 310 A.3d 430, 504–03 (Del. Ch. 2024) (internal citations omitted).
208
Recall Plaintiff’s allegation that BRF was interested in National in 2012 because Riley
was a principal at NSGP. See Compl. ¶ 18. Plaintiff alleges no other connection between
NGSP and BRF. BRF’s supposed interest in 2012 is not well-pled. But even taking it at
face value, it is irrelevant to my control analysis. See Morton’s Rest., 74 A.3d at 664
(finding allegations of a stockholder’s previous ownership of the company before its IPO
fell short of pleading control).
209
Compl. ¶¶ 8, 11–16.
210
Id. ¶ 18.
211
See, e.g., United Food & Com. Workers Union & Participating Food Indus. Emps. Tri-
State Pension Fund v. Zuckerberg, 262 A.3d 1034, 1061 (Del. 2021) (“[A]n outside
business relationship [is] insufficient to raise a reasonable doubt that the director lacked
independence.” (internal quotation marks and citation omitted)); Beam ex rel. Martha

35
Plaintiff offers no facts explaining how Riley, a nonvoting board observer, could

have “dominated” Fagenson, at all or in connection with the merger.212

Fundamentally, Plaintiff does not allege any director “w[as] employed by or

directly under” BRF’s control.213 No one from BRF “played an active role” on the

board, before or during the merger.214 BRF’s observer, Riley, attended only two

board meetings. 215 Plaintiff alleges nothing about “what [Riley] did or said at those

Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1051–52 (Del. 2004) (“Mere
allegations that they move in the same business and social circles, or a characterization that
they are close friends, is not enough to negate independence for demand excusal
purposes.”); Orman v. Cullman, 794 A.2d 5, 27 (Del. Ch. 2002) (“The naked assertion of
a previous business relationship is not enough to overcome the presumption of a director’s
independence.”).
212
See Newman v. KKR Phorm Invs., L.P., 2023 WL 5624167, at *5 (Del. Ch. Aug. 31,
2023) (finding directors’ independence not impugned absent allegations that the controller
“dominated ‘them’ through a ‘close relationship’ or ‘force of will’”); see also Morton’s
Rest., 74 A.3d at 665 (“The fact that two employees of Castle Harlan sat on the board,
without more, does not establish actual domination of the board, especially given that there
were eight directors not affiliated with Castle Harlan.”). There are no facts showing
Fagenson’s NSGP position depended on Riley, that his compensation from NSGP was
material to him, or that he had any “bias-producing” ties to Riley. See Beam, 845 A.2d at
1050. Relationships materially greater in extent, duration, and nature have been found
insufficient to rebut a director’s presumed independence. See generally Zuckerberg, 262
A.3d at 1060–64; see also Ligos v. Tsuff, 2022 WL 17347542, *8 (Del. Ch. Nov. 30, 2022)
(finding plaintiff’s bare allegation that a director had a 30-year history as a director or
employee of controller-related entities, without more, was insufficient to indicate lack of
independence).
213
W. Nat.’l, 2000 WL 710192, at *10 (finding plaintiffs’ board conflict assertions
“counterintuitive” when no director “w[as] employed by or directly under” the minority
stockholder’s control).
214
Id. at *11.
215
Compl. ¶¶ 38, 95.

36
meetings.”216 Plaintiff also pleads no facts showing BRF could control or reward

any director. 217 Plaintiff has not shown any means by which BRF exerted actual

control over the National board.

4. No Control Over The Merger Process

Plaintiff alleges BRF exerted “outsized influence, threats, and intimidation”

over the merger process. 218 Process inquiries are fact-intensive. 219 Evaluating

process integrity for the purpose of determining actual control considers all “possible

sources of influence” and “[b]roader indicia of effective control.” 220

Arm’s-length, hard-fought negotiations to which the board independently

accedes are not tantamount to control over that board. Two cases illustrate the

difference. In Western National, the plaintiff failed to plead a passive 46%

216
Turnbull v. Klein, 2025 WL 353877, at *14 (Del. Ch. Jan. 31, 2025) (“Without
additional allegations of what [the minority stockholder’s board representatives] said or
did at those meetings, [the representatives’] attendance on its own does not support an
inference of control.”).
217
Orman, 794 A.2d at 25 n.50 (discussing control over a board focuses on if the
stockholder had “unilateral power (whether direct or indirect through control over other
decision makers), to decide whether [any] director continues to receive a [material] benefit,
financial or otherwise”); see also Telxon Corp. v. Meyerson, 802 A.2d 257, 264 (Del. 2002)
(“A controlled director is one who is dominated by another party, whether through close
personal or familial relationship or through force of will . . . [or] is beholden to the allegedly
controlling entity.”).
218
Pl. Ans. Br. at 39.
219
Crimson Expl., 2014 WL 5449419, at *10 (observing “the actual control factor[s]” are
“fact-intensive”).
220
Basho Techs., 2018 WL 3326693, at *26–28.

37
stockholder was a controller. 221 The stockholder nominated two of eight directors,

did not employ or control any director, was not involved in daily operations,

bargained at “arm’s length,” and “never improperly forced a merger.” 222 The

plaintiff alleged the stockholder had vetoed an earlier transaction, pointing to that as

evidence of domination and control; the court rejected that inference.223

In Kahn v. Lynch Communication Systems, by contrast, the court found a 43%

stockholder was a controller. 224 The stockholder held five of eleven board seats;

threatened to employ a tender offer if no “negotiated” deal was reached; “vetoed”

the acquisition target the independent committee supported; and, through its board

designee, warned the other directors, “[w]e are a forty-three percent owner. You

have to do what we tell you . . . you are pushing us very much to take control of the

company.”225 That designee “scared [the other directors] to death.” 226 The Delaware

Supreme Court agreed the record was clear: the directors deferred to the blockholder

“because of its position as a significant stockholder”—not because they “decided in

221
2000 WL 710192, at *6–10, *23–25.
222
Id.
223
Id. at *23 (holding a significant minority stockholder “tak[ing] steps to ‘veto’ a
[proposed transaction] . . . is not particularly probative of whether the large shareholder
exercises actual control over the business and affairs of the corporation”).
224
638 A.2d 1110 (Del. 1994).
225
Id. at 1112–14.
226
Id. at 1114.

38
the exercise of their own business judgment that [the stockholder]’s position was

correct.”227

Plaintiff’s allegations do not support an inference that BRF actually controlled

the merger process. First, the merger’s initiation. BRF proposed the deal, but only

after securing a limited waiver of the Standstill Agreement.228 An indisputably

independent board, following its own deliberation, approved that waiver.229

Next, the merger’s process and terms. Plaintiff asserts BRF dictated the deal

by announcing a low offer and the standstill waiver, refusing to sell to a third-party

bidder, and setting the merger price.230 But Plaintiff has not pled BRF controlled

National’s board or special committee. The complaint tells a story of a board and

special committee acting with demonstrated independence. The special committee

insisted on MFW procedural safeguards, which BRF accepted—not once, but

thrice.231 When both the Management Consortium and BRF were in play, it

instructed Mullen not to discuss the bid with BRF. 232 It made room to deliberate,

and BRF responded by raising its offer. 233 The special committee directed its

227
Id. at 1115.
228
Compl. ¶¶ 30–33.
229
Id. ¶¶ 30, 33.
230
See Pl. Ans. Br. at 39–40.
231
Compl. ¶¶ 49, 66, 92.
232
See, e.g., id. ¶¶ 45, 59, 86.
233
Id. ¶¶ 47, 51, 53, 95–97.

39
financial advisor to prepare National’s projections to guide its response. 234 It also

set its own schedule to counter BRF’s offer. 235 Each step shows independent

decisionmaking.236 BRF did not attend any special committee meetings or try to

influence its process and deliberation.237 That BRF withdrew its initial bid—not

forcing a deal—shows even on a plaintiff-friendly reading that the special committee

234
Id. ¶¶ 49, 53, 55, 97–98.
235
The special committee took approximately two months before making a
counterproposal to BRF’s April 30 proposal, despite BRF’s “frustration with the timeline”
and repeated request for a “speedy process.” See, e.g., id. ¶¶ 33, 44–45, 47–49, 51, 53, 56.
After the merger talks resumed in September, the special committee took nearly a month
to assess the value impact from the Palantir fees. See id. ¶¶ 95, 97.
236
See USG, 2020 WL 5126671, at *25 (observing the board “declin[ing stockholder’s
advocated action], instead proceeding with negotiations on a more measured timeline” was
not control).
Plaintiff’s cases involve stronger control factors. Pl. Ans. Br. at 34–38. In Voigt, a
34.8% blockholder was found a controlling stockholder when it (i) filled one-third of the
board seats with individuals it controlled, (ii) had another third of the directors beholden to
it, (iii) had broad blocking rights, (iv) possessed additional sources of board-level
influence, and (v) maintained relationships with key executives and advisors. 2020 WL
614999, at *15–22. In Tornetta, a 21.9% stockholder was found to have actual control
when he had maximum managerial authority, controlled half of the board, and dictated the
transaction’s timing, process, and terms. 310 A.3d 430. In Basho Technologies, a
significant minority stockholder was found to be a controlling stockholder based on an
avalanche of factors, including its contractual blocking rights, dominance over
management, and actual threat to withhold critical funding the company needed. 2018 WL
3326693, at *24.
237
Turnbull, 2025 WL 353877, at *14 (finding transaction-specific control not pled absent
any allegations that the minority stockholder “steered the negotiations or otherwise
dominated the [b]oard” (internal quotation marks and citation omitted)); see also W. Nat.’l,
2000 WL 710192, at *21–27 (finding no control over the special committee process when
it retained independent advisors, was informed and not misguided, and vigorously
negotiated on an arm’s length basis).

40
“had a genuine choice as to the ultimate fate of the [c]ompany.”238

Plaintiff argues BRF controlled the process through “unauthorized

conversations” with Mullen-led management and a supposed conspiracy to hide

facts about the Palantir fees. 239 Neither amounts to actual control.

BRF’s talks with Mullen amidst a bidding war may reflect an imperfect

process, but not control over National. In May 2020, presented with BRF’s and

management’s competing bids, the special committee barred management from

discussing its bid with BRF.240 The complaint does not allege the ban applied to

BRF or that BRF even knew of it. Almost a month later, Riley called Mullen and

learned he was helping with the Management Consortium’s bid.241 Plaintiff does

not allege they discussed the merger terms or plotted against the special committee.

BRF did not negotiate compensation with management until it had the special

committee’s approval. 242 In September, after BRF renewed its bid, it discussed

management compensation with Mullen—before the special committee was

238
W. Nat.’l, 2000 WL 710192, at *24 (“[T]he fact that American General was willing to
terminate the negotiations and place Western National in a status quo ante posture indicates
that the Special Committee had a genuine choice as to the ultimate fate of the Company.
That is, American General was simply not going to force a deal on Western National if the
Special Committee did not accept its terms.”).
239
Pl. Ans. Br. at 39–40.
240
Compl. ¶ 45.
241
Id. ¶ 54.
242
Id. ¶¶ 62, 67.

41
reconstituted and before any new restriction on their communications was

imposed. 243 Mullen allegedly “steered” the special committee toward BRF’s deal

by resubmitting a management proposal the special committee had already

rejected. 244 Once reconstituted, the special committee “prohibit[ed BRF and

management] from engaging in unauthorized discussions”245 and required its

representatives to attend any negotiations. 246 BRF and Mullen allegedly disobeyed

those directives and negotiated management compensation without the special

committee’s oversight. 247

Those talks may have strayed from the ideal. But they do not support an

inference that BRF controlled National, or overrode the special committee. BRF

and management were negotiating counterparties as to management compensation,

and remained competitors as to the merger, with rival offers before the special

committee. The complaint does not allege BRF and management negotiated the

merger terms 248 or infiltrated the special committee. Nor does it allege the

committee lacked the power to reject or revise any compensation deal.

243
Id. ¶¶ 79, 86.
244
Id. ¶¶ 87–88.
245
Id. ¶ 86.
246
Id.
247
Id. ¶ 90.
248
Cf. id. ¶ 89 (alleging BRF negotiated merger price with KBW).

42
Plaintiff’s claim of a BRF-management conspiracy to hide the Palantir fees is

not well-pled. 249 The complaint does not allege BRF even knew about the fees

before December 2020, when management disclosed them to the board. 250 That

meeting was only the second (and final) one Riley attended as an observer.251 There

is no basis to infer a conspiracy that wielded actual control. Rather, the special

committee halted all merger talks, ordered management to quantify the value impact,

and raised its counteroffer to $3.50 252: evidence of its independence.

Next, BRF’s alleged threats. “A pattern of threats aimed at intimidating [the

board]” could support an inference of domination over the board.253 Plaintiff asserts

BRF repeatedly threatened a change of control and that National caved in

249
Pl. Ans. Br. at 40.
250
Compl. ¶ 95.
251
Id.
252
Id. ¶ 97.
253
N.J. Carpenters Pension Fund v. Infogroup, Inc., 2011 WL 4825888, at *11 (Del. Ch.
Sept. 30, 2011); see also Kahn, 638 A.2d at 1114 (finding a 43.3% stockholder a
controlling stockholder when it “dominat[ed] [the company’s] corporate affairs,” including
by threatening the board with references to its sizable stake); In re Loral Space &
Commc’ns Inc., 2008 WL 4293781, at *21–22 (Del. Ch. Sept. 19, 2008) (finding post-trial
that a stockholder owning 35.9% of the company’s stock was a controller where the
controller had rights to block important strategic initiatives, was a significant creditor that
could unilaterally force redemption of notes, and maintained publicly that it controlled the
board); O’Reilly v. Transworld Healthcare, Inc., 745 A.2d 902, 912–13 (Del. Ch. Aug. 20,
1999) (finding 49% stockholder to be a controller where that stockholder also held an
option to purchase 2% more of the outstanding stock, owned all of the company’s debt,
and successfully threatened the board into reducing the per share merger price from $1.30
to $0.30).

43
response. 254 In late July, having heard nothing from the special committee, Riley

“stated that if the proposed transaction did not proceed, he intended to affect a

change-of-control transaction after the standstill expired.”255 In August, after talks

about management’s equity awards fell apart, BRF told National its options were

seeking control after the standstill expired, or selling to somebody willing to pay

more.256

BRF’s statements manifest a bidder pointing out it has alternatives down the

road, leaving the directors free to respond in their independent business judgment.257

They did not exert control over the special committee. Compare the bidder in Kahn.

There, one of the blockholder’s five directors told the other six, “You have to do

what we tell you.”258 The blockholder then threatened a tender offer unless a deal

was struck. 259 That is an example of a bidder using the threat of a tender offer

together with its board presence to cow other directors. No such coercion is alleged

here.

254
Pl. Ans. Br. at 39–41.
255
Compl. ¶ 67.
256
Id. ¶ 70.
257
See Sears, 309 A.3d at 507 (“A share of stock is a form of intangible property that reifies
a bundle of rights that its holder can exercise. The three most familiar are the rights to sell,
vote, and sue.”).
258
Kahn, 638 A.2d at 1114.
259
Id.

44
Plaintiff next raises the September 11 Email as a “threat.” In it, Riley voiced

frustration with National’s performance and management.260 He opened by saying

he would be “better served staying quiet and not ‘threatening’ the board,” and closed

with, “I won’t stop holding you, management, and the board accountable.” 261 That

email made no demands, contained no ultimatums, and conveyed no consequences.

Crucially, it came after BRF had withdrawn its bid—and before negotiations

resumed. 262 At most, the email voiced Riley’s dissatisfaction with National’s

performance. Riley had raised similar concerns since 2019, long before any

transaction was on the horizon. 263

Plaintiff alleges no fact to suggest the email—on its own or with other indicia

of control—caused the board to bend to BRF’s will. 264 Plaintiff argues he has

“probative evidence” that the board gave in to BRF’s “threat.”265 First, that National

260
Compl. ¶ 78.
261
Id.
262
Id. ¶¶ 73, 81, 92.
263
Id. ¶ 27.
264
See supra n.253.
265
Plaintiff also argued the special committee’s insistence on MFW protections is a
dispositive “acknowledge[ment]” that BRF was a controller. Compl. ¶ 45; see also Pl.
Ans. Br. at 42. But when questioned at oral argument, Plaintiff’s counsel quickly dropped
the point. Hr’g Tr. at 59–60 (“The Court: Is there any precedent for the establishment and
pursuit of an MFW framework to eliminate the opportunity to argue that the counterparty
is not a controller? That seems to be a remarkable conclusion. Attorney Monteverde:
Well, then I would fall back . . .”). “Forming a special committee serves as evidence of
sound corporate governance, not control—and it limits a stockholder’s ability to exercise

45
questioned Mullen about executive pay. 266 When BRF challenged management’s

above-market pay, the board considered the issue seriously, and independently, then

let Mullen negotiate revised terms.267 These actions do not reflect control. They

reflect an engaged board making independent, informed decisions in response to a

bidder’s concerns.

Plaintiff also asserts National pushed away potential bidders in response to

BRF’s “threats.”268 The special committee’s decision not to explore third-party

transactions is at the core of Plaintiff’s control theory.269 But the special committee

recognized it would lose leverage once the standstill expired before Riley brought it

up.270 And it concluded it would not consider any third-party proposal or pursue

management’s bid before any alleged “threat.”271 The special committee had

decided against third-party bidders and to focus on BRF weeks before Riley’s July

28 email.272 Riley’s email only prompted the special committee to tell Mullen about

transaction-specific control.” Turnbull, 2025 WL 353877, at *14 (internal quotation marks
and citation omitted) (cleaned up).
266
See Pl. Ans. Br. at 38.
267
Compl. ¶¶ 27, 50, 67, 79, 88.
268
See Pl. Ans. Br. at 38.
269
Compl. ¶¶ 4, 48, 63.
270
Id. ¶ 51.
271
Id. ¶¶ 48, 63.
272
Id. ¶ 63 (alleging “[o]n July 12, 2020, the [s]pecial [c]ommittee determined not to
engage with a third-party that had reached out regarding a transaction”); see also id. at ¶ 48

46
that decision.273 The complaint does not plead BRF controlled those decisions or

the board.

And in any event, BRF did not block alternatives: the special committee,

exercising its independent business judgment, concluded that a third-party

transaction was not feasible. It evaluated the Management Consortium’s competing

proposal, “acknowledged” any alternative transaction likely required BRF’s support,

recognized BRF’s stated intention not to sell could deter rival bidders, and ultimately

“determined not to reach to any third parties.”274 It recognized BRF’s substantial

ownership in National would likely discourage other potential bidders. 275 That

reflects an independent practical assessment of reality, not being controlled.276

5. Internal Correspondence
Finally, Plaintiff argues BRF is a controller because National said it was.

Management claimed National’s “controlling ownership” suppressed the stock

(alleging “[o]n June 3, 2020, the [s]pecial [c]ommittee . . . likewise determined not to reach
to any other third party”).
273
Id. ¶ 67.
274
See, e.g., id. ¶¶ 45, 52 (alleging the special committee “acknowledged” BRF’s support
would likely be a requisite for any alternative transaction and its stated intention not to sell
could make such alternative “impossible”); id. ¶ 48 (asserting the special committee
“determined not to reach out to any third parties”); id. ¶¶ 48, 52 (BRF’s stated intention
not to sell its National stake).
275
Id. ¶ 88.
276
USG, 2020 WL 5126671, at *24.

47
price. 277 And the special committee recognized BRF “could potentially be viewed

as a controlling stockholder.”278 And in the Section 220 Action, National pled that

“[National] admits that [BRF] was a majority shareholder of the Company.279

But as Plaintiff’s counsel conceded during oral argument, National’s internal

characterizations and Section 220 Action filing are not dispositive on actual

control. 280 They are “indication[s]” to support control allegations. 281 They do not

supplant Plaintiff’s pleading burden to allege actual control. 282

At bottom, the complaint fails to allege BRF exercised transaction-specific

control over the merger process. While BRF held a significant stake, it had no

agreement or arrangement with Asher or management to wield more voting power

than its own. It did not control the board or dictate decisions belonging to the board.

It participated in the merger process at arm’s length from the board and special

committee. And perception of its (potential) controlling stockholder status does not

equate to actual control. Plaintiff has not shown the combination of BRF’s historic

interest in National, its historic and current holdings, National’s recognition of those

277
Compl. ¶ 76.
278
Id. ¶ 36.
279
Pl. Ans. Br. at 42.
280
Hr’g Tr. at 50.
281
Id.
282
Id. at 50–51.

48
holdings, and negotiation leverage rose to the level of actual control over National’s

board. There is no well-pled allegation BRF dictated terms, directed decisions, or

compelled outcomes. The board functioned independently. The special committee

led the merger negotiations and reached its conclusions based on its own judgment.

BRF’s motion to dismiss is granted.

III. CONCLUSION

BRF’s motion to dismiss is GRANTED. Count II of Plaintiff’s complaint is

dismissed with prejudice.

49