EFiled: Feb 04 2015 08:32PM EST Transaction ID 56720190 Case No. 10136-VCL
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE In re GFI GROUP INC. STOCKHOLDER LITIGATION
CONSOLIDATED C.A. No. 10136-VCL
PLAINTIFFS’ SECOND MOTION FOR EXPEDITED PROCEEDINGS Pursuant to Court of Chancery Rules 30, 34, 45, and 173, Plaintiffs hereby move this Court for an order expedited proceedings in the above-captioned action and setting a hearing and/or trial date on Plaintiffs’ forthcoming motion for preliminary and mandatory injunctive relief. The grounds for Plaintiffs’ Motion are set forth in Plaintiffs’ Brief in Support of the Second Motion for Expedited Proceedings filed contemporaneously herewith. February 4, 2015 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP Mark Lebovitch David Wales Edward G. Timlin 1285 Avenue of the Americas 38th Floor New York, NY 10019 Co-Lead Counsel for Plaintiffs
GRANT & EISENHOFER P.A. /s/ Mary S. Thomas Stuart M. Grant (#2526) Mary S. Thomas (#5072) 123 Justison Street Wilmington, DE 19801 (302) 622-7070 Co-Lead Counsel for Plaintiffs
KESSLER TOPAZ MELTZER & CHECK, LLP Marc A. Topaz Lee D. Rudy Michael C. Wagner 280 King of Prussia Rd Radnor, PA 19087 (610) 667-7706 Co-Lead Counsel for Plaintiff
PRICKETT, JONES & ELLIOTT, P.A. Michael Hanrahan (#941) Paul A. Fioravanti, Jr. (#3808) Kevin H. Davenport (#5327) 1310 N. King Street P. O. Box 1328 Wilmington, Delaware 19899-1328 (302) 888-6500 Executive Committee Member
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CERTIFICATE OF SERVICE I, Mary S. Thomas, hereby certify that, on February 4, 2015, I caused a copy of the foregoing Plaintiffs' Second Motion for Expedited Proceedings to be filed and served upon the following counsel of record via File & ServeXpress: William M. Lafferty Leslie A. Polizoti Lindsay M. Kwoka MORRIS, NICHOLS, ARSHT & TUNNELL LLP 1201 N. Market Street Wilmington, Delaware 19899-1347 Samuel A. Nolen Kevin M. Gallagher Rachel E. Horn RICHARDS, LAYTON & FINGER, P.A. One Rodney Square, 920 North King Street Wilmington, Delaware 19801 Edward P. Welch Edward B. Micheletti Jenness E. Parker SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 920 North King Street Wilmington, Delaware 19899-0636
C. Barr Flinn Kathleen S. McCormick YOUNG CONAWAY STARGATT & TAYLOR, LLP Rodney Square, 1000 North King Street Wilmington, Delaware 19801 /s/ Mary S. Thomas Mary S. Thomas (Del. ID #5072)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
In re GFI GROUP INC.
CONSOLIDATED
STOCKHOLDER LITIGATION
C.A. No. 10136-VCL
PLAINTIFFS’ BRIEF IN SUPPORT OF SECOND MOTION FOR EXPEDITED PROCEEDINGS
TABLE OF CONTENTS Page TABLE OF AUTHORITIES .................................................................................... ii INTRODUCTION .....................................................................................................1 RELEVANT FACTUAL AND PROCEDURAL HISTORY ...................................2 ARGUMENT .............................................................................................................9 A.
Plaintiffs Have Alleged Colorable Claims ..................................................11
B.
Plaintiffs Face A Threat Of Immediate and Irreparable Injury ...................15
C.
The Balance of Hardships Favors Expedited Proceedings ..........................17
REQUESTED RELIEF ............................................................................................18
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TABLE OF AUTHORITIES Page(s) Cases Alpha Natural Res., Inc. v. Cliff’s Natural Res., Inc., 2008 WL 4951060 (Del. Ch. Nov. 6, 2008) ....................................................... 10 Box v. Box, 697 A.2d 395 (Del. 1997) ..................................................................................... 9 In re Cogent, Inc. S’holder Litig., 7 A.3d 487 (Del. Ch. 2010) ..........................................................................16, 17 Gantler v. Stephens, 965 A.2d 695 (Del. 2009) ................................................................................... 14 Gomi Investors, LLC v. Schimmell Holdings, Inc., 2006 WL 2304035 (Del. Ch. July 27, 2006) ........................................................ 9 Hollinger Int’l v. Black, 844 A.2d 1022 (Del. Ch. 2004) .......................................................................... 13 Icahn Partners L.P. v. Amylin Pharms., Inc., 2012 WL 1526814 (Del. Ch. Apr. 20, 2012) ...................................................... 10 In re InfoUSA, Inc. S’holders Litig., 2007 WL 3325921 (Del. Ch. Aug. 20, 2007) ..................................................... 13 Mills Acquisition Co. v. Macmillan, Inc., 1988 WL 108332 (Del. Ch. Oct. 18, 1988), rev’d on other grounds 550 A.2d 35 (Del. 1988) ..................................................................................... 16 In re Netsmart Techs., Inc. S’holder Litig., 924 A.2d 171 (Del. Ch. 2007) ............................................................................ 15 In re Pure Resources Inc. S’holder Litig., 808 A.2d 421 (De. Ch. 2002) .......................................................................14, 17 In re Southern Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761 (Del. Ch. 2011) .............................................................................. 11 ii
T.Rowe Price Recovery Fund, L.P. v. Rubin, 770 A.2d 536 (Del. Ch. 2000) ............................................................................ 14
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INTRODUCTION Plaintiffs recognized from the beginning of this case that founder and Executive Chairman Mickey Gooch, and his ally, Colin Heffron, were putting their personal interests ahead of their fiduciary duties to the public stockholders of GFI Group Inc. (“GFI” or “the Company”). As the Court is aware, this case arose when Gooch and Heffron tried to conceal a proposed management buyout of GFI’s IDB business by wrapping it in a purported sale to CME Group Inc. (“CME”) of the entire Company (the “CME Transaction”) at an unreasonably low price ($4.55/share, compared to the $6.20 topping bid that should have been paid to GFI’s public stockholders). As described below, in the last few weeks, as the CME Transaction unraveled in the face of the superior proposal by BGC Partners, Inc. (“BGC”), Gooch’s fiduciary breaches, aided by Heffron and former Special Committee member Marisa Cassoni (“Cassoni”), have become ever more egregious. As confirmed by the response of the Special Committee’s counsel to Plaintiffs’ specific inquiries into statements purportedly made on behalf of the GFI Board, Gooch and Heffron have now affirmatively overridden the Board process, issuing unauthorized press releases in order to skew the outcome of BGC’s tender offer. Even in their most skeptical moments, Plaintiffs never envisioned that Gooch and Heffron would resort to outright fraud and such brazen abuse of their
fiduciary powers as they have done in the last few weeks. For the reasons set forth below, immediate judicial intervention is required to protect GFI stockholders. RELEVANT FACTUAL AND PROCEDURAL HISTORY As described in Plaintiffs’ Second Supplement to the Verified Class Action Complaint (the “January 30 Complaint”), CME and the Management Consortium (consisting of Gooch, Heffron, and related individuals and entities) increased their joint bid for GFI to $5.60 per share on January 15, 2015. January 30 Complaint at ¶12.
BGC immediately offered $5.85 per GFI share if the GFI Board (“the
Board”) counter-signed and returned the executed tender offer, and $5.75 per share if it did not (the “January 15 Revised BGC Proposal”). Id. at ¶13. The Special Committee immediately and unanimously determined that the January 15 Revised BGC Proposal was likely to lead to a “Superior Proposal” under the CME/GFI merger agreement (the “CME Merger Agreement”). Id. at ¶14. As required by basic governance norms, Gooch and Heffron had abstained from earlier votes regarding the Board’s decision on whether to engage in negotiations with BGC. Id. at ¶¶7, 17. Recognizing, however, that their planned purchase of the IDB business was slipping away and that the only alternative would eliminate their control over GFI, Gooch and Heffron suddenly inserted themselves back into the Board’s process, voting against the Special Committee’s January 15, 2015 determination that the January 15 Revised BGC Proposal was 2
likely to lead to a “superior proposal.” Id. at ¶17. This maneuver was effective only because Cassoni reversed her prior position in support of negotiating with BGC and joined Gooch and Heffron in voting against the Special Committee’s determination. Id. Only discovery will tell whether Cassoni’s allegiance to Gooch comes from misplaced loyalties, fear, or something else. The 3-2 Board vote prohibited the Special Committee from negotiating with BGC for enhancements to the tender offer terms. Id. at ¶9. This farce repeated in the ensuing days. On January 20, 2015, CME and the Management Consortium offered $5.85 per share, matching BGC. Id. at ¶18. BGC immediately offered $6.20 per GFI share if the Board counter-signed and returned the executed tender offer, and $6.10 per share if it did not (the “January 20 Revised BGC Proposal”).
Id. at ¶19.
Again, the Special Committee
immediately and unanimously determined that the January 20 Revised BGC Proposal was likely to lead to a “Superior Proposal” under the CME Merger Agreement. Id. at ¶20. Again, Gooch and Heffron voted against the Special Committee’s determination, and in favor of their conflicted self-interest. Again, Cassoni voted with the disloyal fiduciaries and against the obvious best interests of GFI’s public stockholders.
Id. at ¶24.
Again, the Special Committee was
prevented from negotiating with BGC. Id. at ¶¶2, 6.
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Gooch and Heffron understood and acknowledged the way their conflict constrained their ability to use their fiduciary positions, having previously abstained from the Board’s process of evaluating the BGC bid. Id. at ¶17. But to protect their self-interests, they changed course when they could no longer compete with the consistently higher BGC proposals. As set forth herein, Gooch and Heffron, joined by Cassoni, have: (i) hamstrung the Special Committee in its efforts to negotiate with BGC; (ii) misled GFI’s public stockholders about the terms of BGC’s bid and the basis for the Board’s supposed recommendation in favor of the CME Transaction and against tendering to BGC; and (iii) even acted on purported behalf of the Board without any authorization. BGC’s Tender Offer was to remain open until 5:00 p.m. on February 3, 2015. On January 29, BGC publicly reaffirmed its commitment to the $6.10 tender offer and strongly urged stockholders to oppose the CME Transaction at $5.85. On Friday, January 30, 2015, GFI’s public stockholders overwhelmingly rejected the CME Transaction. 1
Both GFI and CME then announced their
termination of the CME Merger Agreement. Later on January 30, 2015, GFI issued a press release (the “January 30 Press Release”), purportedly on behalf of the Board, stating 1
To the extent that Plaintiffs’ allegations, which deal in part with events unfolding over the last several days, are not yet reflected in the current pleadings, Plaintiffs will be filing a Motion for Leave to Further Supplement the Complaint – and a proposed Third Supplement to the Complaint – by the end of this week. 4
GFI Group Inc. . . . announced today that the Company’s Board of Directors will explore strategic alternatives with any and all interested parties to maximize shareholder value for all shareholders. These alternatives could include, among others, joint ventures, mergers and/or acquisitions. This was a deeply troubling announcement. The Board had just muddled through a six-month public auction process. Exploring “alternatives” now would not yield any benefits commensurate with the risk of losing the BGC transaction. An even more surprising follow-up press release was issued on Monday, February 2, 2015 (the “February 2 Press Release”), also purportedly on behalf of the Board, stating: The GFI Board urges shareholders to take no action on the BGC tender offer at this time. As announced on Friday, the GFI Board is actively engaged in a process to explore strategic alternatives with any and all interested parties to maximize shareholder value for all shareholders. These alternatives could include, among others, joint ventures, mergers and/or acquisitions. The Board has previously reviewed the unsolicited BGC tender offer, which contains provisions and conditions that make it highly unlikely to succeed in providing any value for shareholders. The Board urges GFI shareholders not to tender into the BGC tender offer and wait for the Board to conduct its strategic review. These press releases were baffling. Even before stockholders rejected the CME Transaction, the January 20 Revised BGC Proposal offered materially better value to stockholders (i.e., $6.10 versus $5.85 per share). But after GFI stockholders’ rejection of that deal, there was no reasonable justification for continued Board opposition to BGC’s tender offer. 5
In order to determine whether the Special Committee, having previously supported engagement with BGC, was now turning against the public stockholders (like Cassoni had) and supporting a futile “strategic alternatives” review instead of engaging with BGC, Plaintiffs contacted the Special Committee’s counsel. In response to Plaintiffs’ specific questions, the Special Committee’s counsel gave the following remarkable response, stating that the Special Committee members: (i) [] did not vote to issue the February 2 [P]ress [R]elease; (ii) [] never saw a draft of the February 2 [P]ress [R]elease; (iii) [] did not know that GFI intended to issue the February 2 [P]ress [R]elease; (iv) [] did not vote to urge stockholders to not tender into the BGC tender offer or to not take any action on the BGC tender offer after the CME merger agreement was terminated; and (v) [] did not vote [on] Friday[, January 30, 2015] to explore new strategic alternatives as described in the January 30 and February 2 [P]ress [R]eleases. Lebovitch Aff., ¶7. The January 30 and February 2 Press Releases clearly had one purpose: to discourage GFI’s public stockholders from tendering to BGC so that BGC would not meet the 45% threshold for completion of BGC’s outstanding tender offer. Gooch and Heffron breached their duty of loyalty by issuing these press releases in the Board’s name in an effort to influence stockholder decision-making on the pending tender offer, but without proper Board authority and without even consulting the Special Committee that the Board had charged with keeping the conflicted directors in check. Stockholders were misled into thinking that the independent Board members still opposed the January 20 Revised BGC Proposal 6
and that further “exploration” of alternatives was fruitful and without grave risks to the public stockholders. This morning, BGC announced that 37.9 million shares had been tendered, which, including shares already owned by BGC, was 43.3% of GFI’s outstanding shares and 70% of shares not owned by GFI executives and directors. Especially in a heated proxy fight, the position of a board matters to many stockholders. Surely BGC would have met the 45% threshold had Gooch and Heffron not misled stockholders through the January 30 and February 2 Press Releases. There is still (limited) time to remedy these misdeeds, however, because BGC also announced that the tender offer has been extended to February 19, 2015. Thus, assuming that another 1.7% of stockholders (armed with correct information) tender their shares in the next two weeks, the only hurdle to closing the tender offer will be BGC’s condition of two-thirds board representation (the “BGC Board Condition”). This condition should be no hurdle to completing a deal. Any director acting in good faith would recognize that the Board should act to meet this condition in order to allow public stockholders to obtain the $6.10 price per share offered by BGC.
Indeed, the Special Committee’s financial
advisor, Greenhill, has now given four fairness opinions (at $4.55 per share, $5.25 per share, $5.60 per share, and $5.85 per share). But, as explained in Plaintiffs’ January 30 Complaint, Gooch and Heffron have repeatedly voted against proposals 7
supported by the Special Committee that would have allowed for negotiations with BGC. If they are allowed to do the same with respect to any vote regarding satisfaction of the BGC Board Condition, they will outvote the now two-member Special Committee. Unless Gooch and Heffron are enjoined from interfering, the stockholders will lose the transaction now on the table. Thus, Plaintiffs seek an order: (i) requiring that Gooch and Heffron correct the statements made in the unauthorized January 30 and February 2 Press Releases; (ii) enjoining Heffron and Gooch from making further statements or taking action with respect to any possible strategic transaction on the purported behalf of GFI, without the Special Committee’s prior approval; (iii) enjoining Gooch and Heffron from participating in any discussions or attending any meetings (except at the Special Committee’s request or as a counterparty) on any issues regarding a potential sale of all or part of GFI to BGC, including any Board meetings or discussions regarding the BGC Board Condition; (iv) enjoining Gooch and Heffron from taking any action that would prevent the Special Committee from convening a Board meeting to consider and/or vote on the sale or potential sale of all or part of GFI to BGC, or on any contemplated or actual steps to satisfy the BGC Board Condition; and (v) in the event that BGC obtains the 45% tender offer condition, mandating that the Special Committee (with assistance from Heffron, Gooch, and Cassoni as necessary), take all steps necessary to meet the BGC Board Condition. 8
Plaintiffs seek an expedited hearing and/or trial in order to provide the necessary evidentiary support for the requested relief. Whether Plaintiffs’ claims are litigated at a preliminary injunction hearing or through trial, all Plaintiffs need in terms of discovery (subject to future developments) are updated custodial documents and communications from the Special Committee, Cassoni, Gooch, and Heffron, and depositions of Cassoni and Gooch. In the event this Court schedules a trial, one day should suffice, as Plaintiffs do not anticipate submitting live evidence, other than the testimony of these two individuals and potentially one Special Committee member. In light of the pending BGC tender offer, Plaintiffs are prepared to present their evidence before the tender offer expires. ARGUMENT The Court should expedite this Action because Plaintiffs have articulated colorable breach of fiduciary duty claims and shown a sufficient possibility of irreparable injury. See Gomi Investors, LLC v. Schimmell Holdings, Inc., 2006 WL 2304035, at *1 (Del. Ch. July 27, 2006) (Good cause exists for granting a motion to expedite where “a plaintiff. . . . articulate[s] a sufficiently colorable claim and show[s] a sufficient possibility of a threatened irreparable injury’); Box v. Box, 697 A.2d 395, 399 (Del. 1997) (“Delaware courts are always receptive to expediting any type of litigation in the interests of affording justice to the parties”). Expedited proceedings are particularly appropriate when, as here, stockholders will 9
lose an opportunity to maximize their stockholdings should Defendants continue to breach their fiduciary duties. See, e.g., Icahn Partners L.P. v. Amylin Pharms., Inc., 2012 WL 1526814, at *2-3 (Del. Ch. Apr. 20, 2012) (granting expedited proceedings where board’s refusal to engage with a potential acquirer offering a substantial premium put stockholders’ opportunity to receive the premium at risk). The threshold for expediting proceedings is low. To prevail, the “court merely needs to find that ‘the plaintiff has articulated a sufficiently colorable claim and shown a sufficient possibility of a threatened irreparable injury.’” Alpha Natural Res., Inc. v. Cliff’s Natural Res., Inc., 2008 WL 4951060, at *2 (Del. Ch. Nov. 6, 2008) (quoting Giammargo v. Snapple Beverage Corp., 1994 Del. Ch. LEXIS 199, at *4 (Del. Ch. Nov. 15, 1994)). A claim may be “sufficiently colorable” even where it is not “brightly colored.”
City of Miami General
Employees’ and Sanitation Employees’ Retirement Trust v. C&J Energy Servs. Inc., C.A. No. 9980-VCN (Del. Ch. Aug. 29, 2014) ORDER (finding cause to expedite where there was no competing bidder but existing bidder did not offer a premium). Here, where Plaintiffs allege that disloyal insiders are engaged in a noholds-barred attempt to undermine a high-premium offer in order to advance their own personal interests and vendettas, and notwithstanding the significant risk that GFI’s stock price will drop if BGC walks away, Plaintiffs’ claims are more than sufficiently colorable to warrant expedited proceedings. 10
A.
Plaintiffs Have Alleged Colorable Claims Plaintiffs allege colorable breach of fiduciary duty claims when, as here,
they allege “facts suggesting that the directors [exercised a] bad faith preference for some other interest than that of the company and the stockholders.” In re Southern Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 787 n.72 (Del. Ch. 2011). Gooch and Heffron are not opposing the BGC tender offer because they believe that GFI stockholders are better off holding on to their GFI shares, and likely suffering a steep stock price decline when the BGC deal is lost, rather than selling to BGC for at least $6.10. Instead, Gooch and Heffron are opposing BGC for at least two improper and self-interested reasons. First, Gooch and Heffron are unwilling to surrender control of the Company that they built, particularly to a hated rival like BGC’s Howard Lutnick. But, unable to use their equity stake to forestall such a change of control, Gooch and Heffron are now openly using their fiduciary powers to serve their personal and disloyal purposes. Throughout the sales process beginning in 2013, Gooch used his equity position to veto any possible transaction that would not result in him controlling the core brokerage business of GFI. Now that the CME Transaction has been rejected, Gooch and Heffron have resorted to more overt measures, using their 11
fiduciary position to sabotage any transaction where they lose control. Gooch and Heffron would not allow the Board to negotiate with BGC when BGC made its first approach late last July, and they definitely will not engage with BGC now that BGC thwarted Gooch’s hoped-for transaction with CME. This, and Gooch and Heffron’s disloyalty, is confirmed by the fact that they broke their previous pattern of abstention when they voted down the Special Committee’s recommendations that the January 15 and January 20 Revised BGC Proposals were each likely to lead to a “Superior Proposal.” It is a fair inference that Gooch and Heffron will forever vote against any Board action to satisfy the BGC Board Condition, solely so they can avoid losing control of “their” company to BGC (and Lutnick). Second, and relatedly, despite their own equity stakes, Gooch and Heffron’s economic interests are adverse to GFI’s public stockholders.
Because of the
unlawful 12-month “dead hand tail” provision embedded in the CME Support Agreement, Gooch and Heffron cannot tender their shares to BGC for almost a year, no matter what price is offered. Because the Management Consortium faces a year of being locked in an investment with BGC as a controlling shareholder, Gooch and Heffron are inherently against any BGC offer, regardless of price. Plaintiffs have also stated a colorable claim that Gooch, Heffron, and Cassoni unlawfully interfered with the Special Committee. On January 15, 2014, the Board resolved to form the Special Committee, and empowered it to, among 12
other things, consider the CME deal, negotiate with CME and the Management Consortium, decide not to pursue the CME deal, and explore other transformative transactions. No Board action or intervening event has disbanded the Special Committee or curtailed its powers or authority. Nevertheless, Gooch, Heffron, and Cassoni are interfering with the Special Committee by refusing to call prompt board meetings and overriding its determinations regarding the BGC proposals for disloyal reasons. There is every reason to think that they will continue to do so to sabotage the Special Committee’s effort to fulfill the BGC Board Condition. Unless these flagrantly disloyal fiduciaries are prevented from actively and continually using their fiduciary powers as a weapon against BGC, GFI’s stockholders will lose this high-premium transaction, and the stock price will plummet. This Court has broad powers to fashion equitable relief when fiduciaries so blatantly abuse their position to benefit themselves to the detriment of stockholders. See, e.g., Hollinger Int’l v. Black, 844 A.2d 1022 (Del. Ch. 2004) (invalidating a controlling stockholder’s disloyal effort to disband a committee formed to consider alternatives in order to protect a personally beneficial transaction); In re InfoUSA, Inc. S’holders Litig., 2007 WL 3325921, at *23 (Del. Ch. Aug. 20, 2007) (disloyalty adequately pled where the five board members who were not on the special committee voted to abolish it before it could assess 13
alternatives to the controlling stockholder’s personally beneficial proposal); T.Rowe Price Recovery Fund, L.P. v. Rubin, 770 A.2d 536 (Del. Ch. 2000) (finding a substantial likelihood of liability and granting an injunction where the controlling stockholder disbanded a special committee that refused to accede to his demands). Gooch and Heffron have also breached their fiduciary duties by making improper and unauthorized disclosures concerning the BGC tender offer, including the January 30 and February 2 Press Releases. GFI has now been publicly “on the market” since at least the end of July 2014. If Defendants are to be believed, GFI was quietly shopped to interested bidders since early 2014 or before. Since BGC emerged as a potential intervening bidder, Gooch himself engaged with other potential buyers. After a bidding war between CME/Gooch and BGC, BGC is clearly the high bidder. Accordingly, the Company’s public statements, made at the beshest of Gooch and Heffron – purportedly with Board authorization – pretending to start considering alternatives at this point are affirmatively misleading and a breach of duty. See, e.g., In re Pure Resources Inc. S’holder Litig., 808 A.2d 421, 450-51 (De. Ch. 2002) (holding that plaintiffs had a reasonable probability of success on disclosure claims regarding omissions about special committee involvement in a transaction); Gantler v. Stephens, 965 A.2d 695, 711-12 (Del. 2009) (holding that alleged misrepresentations regarding board 14
consideration of an alternative transaction were materially misleading and alleged a breach of duty). B.
Plaintiffs Face A Threat Of Immediate and Irreparable Injury Plaintiffs and the Class face “a sufficient possibility of a threatened
irreparable injury” to justify expedited proceedings.
The only two remaining
impediments to GFI stockholders selling their shares at a 90% premium to the price just prior to the announcement of the CME Transaction are (i) the tender by an additional 1.7% of GFI stockholders to BGC and (ii) satisfaction of the BGC Board Condition. As long as Gooch and Heffron are allowed to issue misleading statements to stockholders and to interfere with the Board’s decision-making process, there is risk that neither condition will be satisfied. Stockholders who believe the Board is truly shopping for a superior proposal, or who believe the Board properly resolved to oppose BGC’s offer, may not tender. And as long as Gooch and Heffron are permitted to vote in favor of their improper self-interests and use their influence over Cassoni to create a bloc on the Board, there is no prospect of the Special Committee succeeding in protecting stockholder rights. Preventing stockholders from taking advantage of a superior offer is plainly irreparable harm. In re Netsmart Techs., Inc. S’holder Litig., 924 A.2d 171, 208 (Del. Ch. 2007) (“In cases where the refusal to grant an injunction presents the possibility that a higher, pending, rival offer might go away forever, our courts 15
have found a possibility of irreparable harm.”) (citing QVC Network, Inc. v. Paramount Commc’ns, Inc., 635 A.2d 1245, 1273 n.50 (Del. Ch. 1993) (“Since the opportunity for shareholders to receive a superior control premium would be irrevocably lost if injunctive relief were not granted, that alone would be sufficient to constitute irreparable harm”). See also Mills Acquisition Co. v. Macmillan, Inc., 1988 WL 108332, at *18 (Del. Ch. Oct. 18, 1988), rev’d on other grounds 550 A.2d 35 (Del. 1988) (taking action to deprive stockholders of the opportunity to consider a higher offer following a full auction threatens irreparable harm to stockholders). Yet this is precisely the harm that Gooch, Heffron and Cassoni are trying to accomplish through manipulation of the Board process. Absent expedition, GFI’s public stockholders will forever be deprived of the information necessary to make an informed decision as to whether or not to tender their shares to BGC and, if the breaches remain uncured and/or if the breaches continue, GFI’s public stockholders may be deprived of the ability to obtain $6.10 per share in BGC’s tender offer. Such a threat poses a sufficient risk of irreparable harm. Delaware courts have recognized that “[t]he importance of proxy disclosure in the context of a tender offer cannot be overstated.” In re Cogent, Inc. S’holder Litig., 7 A.3d 487, 514 (Del. Ch. 2010). Therefore, “t[h]is court has recognized that irreparable injury is threatened when a stockholder might make a tender or voting decision on the basis of materially misleading or inadequate information.” 16
In re Pure Resources, 808 A.2d at 452; see also In re Cogent, 7 A.3d at 514 (finding that misleading or inadequate disclosures potentially give rise to irreparable harm because “a post-hoc evaluation of a plaintiff’s disclosure claim necessarily will require a court to speculate about the effect that certain deficiencies may have had on a stockholder vote, resulting in an award of a lessthan-certain amount of money damages.”). More concretely, the breaches of duty have already caused and threaten to cause additional irreparable harm to GFI stockholders as a result of credit rating downgrades. Fitch has already downgraded GFI’s credit rating, in part because “[o]n a stand-alone basis, GFI’s financial and credit profile continued to weaken in the nine months ended Sept. 30, 2014 . . . primarily due to increased professional fees related to the CME transaction.” Fitch has also indicated that further delay in consummating a transaction stands to further harm GFI because, “if GFI is unable to close on a material transaction, Fitch believes that this would call into question the long-term viability of GFI’s business on a stand-alone basis, which could put further pressure on the ratings.” Stockholders will be irreparably harmed if Gooch, Heffron, and Cassoni’s disloyalty is left unchecked and the BGC tender offer is no longer a viable option. C.
The Balance of Hardships Favors Expedited Proceedings The balance of hardships favors the entry of an order granting Plaintiffs’ 17
request for expedited proceedings. Defendants’ breaches of fiduciary duty will forever deprive GFI’s public stockholders of information necessary to make an informed decision as to whether or not to tender to BGC. And, should existing or future breaches convince enough stockholders not to tender, or, more critically, preempt fulfillment of the BGC Board Condition, GFI’s stockholders could be forever deprived of BGC’s $6.10 offer. GFI’s credit rating will tumble and its stock price will likely fall as well. In contrast, Defendants will suffer no undue harm if Plaintiffs are granted expedited relief. There is no competing offer on the table that will be lost in the next two weeks. And Plaintiffs are merely asking that Defendants be required to comply with the fiduciary duties they have blatantly ignored. REQUESTED RELIEF Plaintiff respectfully requests that the Court enter a schedule governing expedited proceedings as follows: Filing of Plaintiffs’ Motion for Leave to File Third Supplement to Complaint (including draft Supplement) Updated Document Productions By Gooch, Heffron, the Special Committee, and Cassoni Depositions of Gooch and Cassoni Filing of Plaintiff’s Opening Brief in Support of Motion for Preliminary Injunction and/or Trial Brief
February 6, 2015 February 9, 2015 February 11-12, 2015 February 13, 2015
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Filing of Defendants’ Answering Briefs February 16, 2015 in Opposition to Plaintiff’s Motion for Preliminary Injunction and/or Trial Brief Hearing on Plaintiffs’ Motion for February 17, 2015 Preliminary Injunction and/or Trial February 4, 2015 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP Mark Lebovitch David Wales Edward G. Timlin 1285 Avenue of the Americas 38th Floor New York, NY 10019
GRANT & EISENHOFER P.A. /s/ Mary S. Thomas Stuart M. Grant (#2526) Mary S. Thomas (#5072) 123 Justison Street Wilmington, DE 19801 (302) 622-7070 Co-Lead Counsel for Plaintiffs
Co-Lead Counsel for Plaintiffs KESSLER TOPAZ MELTZER & CHECK, LLP Marc A. Topaz Lee D. Rudy Michael C. Wagner 280 King of Prussia Rd Radnor, PA 19087 (610) 667-7706 Co-Lead Counsel for Plaintiff
PRICKETT, JONES & ELLIOTT, P.A. Michael Hanrahan (#941) Paul A. Fioravanti, Jr. (#3808) Kevin H. Davenport (#5327) 1310 N. King Street P. O. Box 1328 Wilmington, Delaware 19899-1328 (302) 888-6500 Executive Committee Member
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