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DCV Holdings3/24/2005
t instead to seek a cash price reduction, and a significant one at that. All of the individuals involved, Buyers and Sellers alike, were experienced professionals who understood the ramifications of the mishandling of the TMA rebate.
Plaintiff has also failed to show that Defendants' duty of disclosure included any element of so-called self-flagellation. In the context of a board of director's fiduciary duty to disclose material information when it seeks shareholder action, "a board is not required to engage in 'self-flagellation' and draw legal conclusions implicating itself in a breach of fiduciary duty from surrounding facts and circumstances prior to a formal adjudication of the matter." That is, even where material facts must be disclosed, negative inferences or characterizations of misconduct need not be articulated. This rule limits only the duty to admit to misconduct; it does not limit a party's duty to disclose all material facts relating to the party's actions, including those that might relate to misconduct. The Court finds that in this case, the Defendants did exactly that. They related the full range of facts which were material to an understanding of how DuCoa handled the TMA rebate.
Both Halter and Stejskal, a member of the DCV, Inc. management team provided the same information to Winward. This information was also included in the Disclosure Statement to the Purchase Agreement. Stejskal, asked by Halter to investigate the TMA rebate issue, obtained his information from Hilling, Christensen and Fischer. That information was that no final agreement had been reached on the amount of the 1996 TMA rebate although Leddy had furnished a rebate letter; that further negotiation between Du Pont and DuCoa was necessary to establish the rebate amount; and that Hilling, Christensen and Fischer all believed that the rebate was in fact owed to DuCoa.
The memo which Halter provided to Winward on July 23 was penned by Stejskal and Gundersen, both members of the DCV, Inc. management team. Stejskal's own fax to Winward on July 24 was substantially the same. Although neither memo used the phrase "potentially uncollectible," which Stejskal had used in a July 16 memo, the facts themselves made this abundantly clear.
Neither Halter nor Stejskal stated that there was no agreement as to the amount of the 1996 rebate. However, Halter and Stejskal both told Winward executives that DuCoa had booked the rebate in 1996 even though it had not been paid. Again, the Court finds that the disclosure was sufficient and did not leave out any material facts.
Furthermore, Gundersen (DCV, Inc.'s general counsel and a member of the DCV management team) told Halter at a July 21 meeting that the letter appeared to him to be "legitimate" and "legally binding." When Halter was informed about the rebate issue, he did not seek to hide the information but rather directed Stejskal to determine whether there were any other accounting issues that needed to be disclosed to Winward. Halter also told the DCV, Inc. management team that they were free to discuss the issues with Winward after Halter spoke with them himself. Porta and Stejskal both communicated with Winward on these matters. When Winward asked to conduct another audit, Halter agreed, manifesting a willingness to let the truth be known. It was Winward that decided to use the information not to re-examine the books but to obtain a price reduction. The Purchase Agreement included sworn certifications from Porta, Stejskal, Gundersen, Hilling and Christensen as to the veracity of the books. Halter and James rightfully relied on these certifications. The record shows that if any of the key players knew that the rebate was invalid, it wa
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