Morrison v. Berry

This case is about a friendly tender offer and a lying CEO. The question is, did the board breach its fiduciary duty by not telling the shareholders that the CEO had lied to them?

Berry was the CEO of The Fresh Market, a grocery store chain. Apollo is a private equity group and wanted to buy The Fresh Market. Berry met with Apollo and agreed that if its bid was successful he would invest in the new company.

But Berry seems to have lied to the board about agreeing to this. And the board seems to have caught him in the lie.

When the board prepared its disclosures to the shareholders encouraging them to accept the tender offer, the disclosures didn't mention that Berry had lied. So a shareholder sued, arguing that the board breached its fiduciary duties by not letting them know the CEO had lied to help the deal go through.

In this opinion, they say the CEO agreed to "roll over" his equity. That just means that when the deal closed instead of getting cash for his shares like everyone else, Berry would get shares in the new entity created in the merger. This was helpful to Apollo because having Berry's support means they're more likely to win the vote and they'll need to pay out less cash (because they can pay Berry with stock in the new company, rather than cash).