A recent decision of the Court of Chancery may significantly affect how breach of fiduciary litigation is conducted in the Delaware courts. In re Rural/Metro Stockholders Litigation, 2014 Del. Ch. LEXIS 202, held that RBC Capital Markets as a financial adviser to Rural/Metro was liable for about $75.8 million as a result of the Rural/Metro directors improperly negotiating a merger at too low a price and sending stockholders misleading information. Even more startling, the directors had settled the claims against them for just $6.6 million and had no obligation to contribute to the $75 million that RBC had to pay. How could this happen?
To begin with, it is important to note that the liability decision issued earlier in the Rural/Metro case had laid much of the blame for the board of directors’ bad acts at the feet of RBC. The court concluded that RBC’s advice to the Rural/Metro board was tainted by RBC’s efforts to get a piece of the financing in another deal involving Rural/Metro’s competitor. Hence, RBC was far from blameless for the liability incurred by the board of directors. Moreover, after the directors had settled before trial, RBC had elected to contest any liability, not just for itself, but even on behalf of the directors. RBC did not cross-claim to try to prove the directors were more culpable than RBC.
