`
`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`
`
`IN RE GGP STOCKHOLDER
`LITIGATION
`
`
`
`
`C.A. No. 2018-0267-JRS
`
`
`
`
`
`DEFENDANT SANDEEP MATHRANI’S
`OPENING BRIEF IN SUPPORT OF HIS MOTION TO
`DISMISS THE THIRD AMENDED COMPLAINT
`
`
`
`
`
`
`
`
`
`Raymond J. DiCamillo (#3188)
`Susan M. Hannigan (#5342)
`Richards, Layton & Finger, P.A.
`920 North King Street
`Wilmington, Delaware 19801
`(302) 651-7700
`
`Attorneys for Defendant
`Sandeep Mathrani
`
`Of Counsel:
`
`Brian T. Frawley
`Y. Carson Zhou
`SULLIVAN & CROMWELL LLP
`125 Broad Street
`New York, New York 10004
`(212) 558-4000
`
`
`
`
`
`
`
`Dated: July 6, 2020
`
`
`
`
`
`EFiled: Jul 06 2020 04:12PM EDT
`Transaction ID 65745815
`Case No. 2018-0267-JRS
`
`
`
`
`
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`
`
`Page(s)
`
`PRELIMINARY STATEMENT ............................................................................... 1
`
`PLAINTIFFS’ ALLEGATIONS AGAINST MATHRANI ...................................... 3
`
`ARGUMENT ........................................................................................................... 11
`
`
`I.
`
`The Business Judgment Rule Applies and Warrants Dismissal of
`Plaintiffs’ Claims. .......................................................................................... 12
`
`II.
`
`Plaintiffs Fail to State a Claim Regarding the Sale Process (Count II) ........ 13
`
`A.
`
`Plaintiffs Fail to Allege Any Self-Interest That Might Support a
`Duty of Loyalty Claim ........................................................................ 14
`
`B.
`
`Plaintiffs Do Not Plead Bad Faith by Mathrani .................................. 19
`
`i.
`
`Revlon Duties. ........................................................................... 20
`
`ii.
`
`Disclosure Claims ..................................................................... 22
`
`III. Plaintiffs Fail to State a Claim that Defendants Did Not Provide
`Sufficient Appraisal Rights (Count III). ........................................................ 23
`
`IV. Plaintiffs’ Dupliative Fiduciary Duty Claim (Count IV) Likewise Fails
`as a Matter of Law. ........................................................................................ 26
`
`CONCLUSION ........................................................................................................ 28
`
`
`
`ii
`
`
`
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`
`
` Page(s)
`
`In re Alloy, Inc.,
`2011 WL 4863716 (Del. Ch. Oct. 13, 2011) ..................................................... 14
`
`In re AmTrust Fin. Serv., Inc. S’holder Litig.,
`
`2020 WL 914563 (Del. Ch. Feb. 26, 2020) ....................................................... 28
`
`Arnold v. Soc’y for Sav. Bancorp, Inc.,
`650 A.2d 1270 (Del. 1994) ................................................................................. 24
`
`In re BioClinica,
`2013 WL 5631233 (Del. Ch. Oct. 16, 2013) .......................................... 16, 17, 22
`
`In re Books-A-Million,
`2016 WL 5874974 (Del. Ch. Oct. 10, 2016) ...................................................... 12
`
`Central Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC,
`27A.3d 531 (Del. 2011) ...................................................................................... 11
`
`In re Chelsea Therapeutics Int'l Ltd. S’holders Litig.,
`2016 WL 3044721 (Del. Ch. May 20, 2016) ...................................................... 20
`
`Cinerama, Inc. v. Technicolor, Inc.,
`663 A.2d 1156 (Del. 1995) ................................................................................. 18
`
`In re Comverge, Inc.,
`2014 WL 6686570 (Del. Ch. Nov. 25, 2014) ..................................................... 17
`
`Corwin v. KKR Fin. Hldgs. LLC,
`125 A.3d 304 (Del. 2015) ............................................................................. 12, 13
`
`Crescent/Mach I P’rs, L.P. v. Turner,
`846 A.2d 963 (Del. Ch. 2000) ...................................................................... 15, 23
`
`In re Crimson Expl. Inc. S’holder Litig.,
`2014 WL 5449419 (Del. Ch. Oct. 24, 2014) ................................................ 12, 19
`
`iii
`
`
`
`
`
`
`
`
`In re Ebix, Inc. Stockholder Litig.,
`2018 WL 3545046 (Del. Ch. July 17, 2018) ...................................................... 19
`
`In re Emerging Commc’ns S’holders Litig.,
`2004 WL 1305745 (Del. Ch. May 3, 2004) ........................................................ 21
`
`In re Encore Comp. Corp. S’holder Litig.,
`
`2000 WL 823373 (Del. Ch. June, 16, 2000) ...................................................... 16
`
`In re Essendant, Inc. S’holder Litig.,
`
`2019 WL 7290944 (Del. Ch. Dec. 30, 2019) ..................................................... 27
`
`In re Goldman Sachs Grp., Inc. S’holder Litig.,
`2011 WL 4826104 (Del. Ch. Oct. 12, 2011) ...................................................... 20
`
`Goodwin v. Live Entm’t, Inc.,
`199 WL 64265 (Del. Ch. Jan. 25, 1999) ............................................................. 15
`
`Grobow v. Perot,
`539 A.2d 180 (Del.1988) .................................................................................... 12
`
`Hamilton Partners L.P. v. Highland Capital Mgmt., L.P.,
`2014 WL 1813440 (Del. Ch. May 7, 2014) ........................................................ 15
`
`The Huff Energy Fund, L.P. v. Gershen,
`2016 WL 5462958 (Del. Ch. Sept. 29, 2016) ..................................................... 16
`
`Kahn v. M & F Worldwide Corp.,
`88 A.3d 635 (Del. 2014) ..................................................................................... 13
`
`In re KKR Fin. Hldgs. LLC S’Holder Litig.,
`101 A.3d 980 (Del. Ch. 2014) ............................................................................ 12
`
`Koehler v. NetSpend Holdings, Inc.,
`2013 WL 2181518 (Del. Ch. May 21, 2013 ....................................................... 17
`
`In re Lukens Inc. S’holders Litig.,
`
`757 A.2d 720 (Del. Ch. 1999) ............................................................................ 12
`
`Lyondell Chem. Co. v. Ryan,
`970 A.2d 235 (Del. 2009) ....................................................................... 20, 21, 26
`
`iv
`
`
`
`
`
`
`
`
`Malpiede v. Townson,
`780 A.2d 1075 (Del. 2001) ................................................................................. 12
`
`McMillan v. Intercargo Corp.,
`768 A. 2d 492 (Del. Ch. 2000) ........................................................................... 18
`
`Morgan v. Cash,
`2010 WL 2803746 (Del. Ch. July 16, 2010) ................................................ 11, 19
`
`Nguyen v. Barrett,
`2016 WL 5404095 (Del. Ch. Sept. 28, 2016) ............................................... 17, 22
`
`In re NYMEX S’holder Litig.,
`2009 WL 3206051 (Del. Ch. Sept. 30, 2009) ..................................................... 14
`
`Orman v. Cullman,
`794 A.2d 5 (Del. Ch. 2002) ................................................................................ 18
`
`In re Paramount Gold and Silver Corp. S’holder Litig.,
`2017 WL 1372659 (Del. Ch. Apr. 13, 2017) ...................................................... 23
`
`Price v. E.I. duPont de Nemours & Co., Inc.,
`26 A.3d 162 (Del. 2011) ................................................................................. 5, 12
`
`
`In re Rouse Properties, Inc.,
`2018 WL 1226015 (Del. Ch. Mar. 9, 2018) ....................................................... 18
`
`Solash v. Telex Corp.,
`1988 WL 3587 (Del. Ch. Jan. 19, 1988). ............................................................ 26
`
`Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera,
`119 A.3d 44 (Del. Ch. 2015). ............................................................................. 20
`
`Tomczak v. Morton Thiokol, Inc.,,
`1990 WL 42607 (Del. Ch. Apr. 5, 1990). ....................................................... 2, 26
`
`In re Transkaryotic Therapies, Inc.,
`954 A.2d 346 (Del. Ch. 2008). ........................................................................... 23
`
`In re Tyson Foods, Inc.,
`
`919 A.2d 563 (Del. Ch. 2007). ........................................................................... 15
`
`
`v
`
`
`
`
`
`
`
`
`In re Walt Disney Co. Deriv. Litig.,
`906 A.2d 27 (Del. 2006) ..................................................................................... 20
`
`In re Western Nat. Corp. S’holder Litig.,
`2000 WL 710192 (Del. Ch. May 22, 2000) ........................................................ 16
`
`Winshall v. Viacom Int’l, Inc.,
`76 A.3d 808 (Del. 2013) ....................................................................................... 5
`
`Statutes and Rules
`
`8 Del. C. § 102(b)(7) ........................................................................................ 1, 9, 10
`
`8 Del. C. § 141 ......................................................................................................... 15
`
`Del. Ct. Ch. Rule 12(b)(6) ..................................................................................... 1, 7
`
`vi
`
`
`
`
`
`
`
`
`PRELIMINARY STATEMENT1
`
`Defendant Sandeep Mathrani respectfully submits this opening brief in
`
`support of his motion to dismiss the breach of fiduciary duty claims against him for
`
`failure to state a claim under Court of Chancery Rule 12(b)(6). Mathrani was CEO
`
`of GGP, Inc. (“GGP” or the “Company”) from 2010 and a member of GGP’s board
`
`of directors (the “Board”) from January 2011, until GGP was acquired by Brookfield
`
`Property Partners, L.P. (“Brookfield”) in a cash and stock merger that closed on
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`August 28, 2018 (the “Merger”). (TAC ¶¶ 1-2, 35.)
`
`After filing three complaints and reviewing Defendants’ motion to
`
`dismiss briefing over a year ago, and then receiving GGP books and records pursuant
`
`to 8 Del. C. § 220, Plaintiffs now return for a fourth bite at the apple. But like its
`
`predecessors,
`
`the 330-paragraph, 161-page Third Amended Complaint
`
`(“Complaint” or “TAC”) is long on words and rhetoric, but devoid of legal
`
`substance. It pleads no reasonably conceivable claim against Mathrani. For the
`
`reasons set forth in the opening briefs of Brookfield, GGP and the Special
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`Committee of GGP’s Board (the “Special Committee”), which Mathrani joins, the
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`business judgment rule applies and the Complaint therefore must be dismissed in its
`
`entirety for this reason alone.
`
`
`1
`Exhibits referenced herein are attached to the Transmittal Affidavit of
`Matthew L. Miller in Connection with Defendants’ Opening Briefs in Support
`of Their Motions to Dismiss.
`
`
`
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`-1-
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`
`
`
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`
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`Beyond this, Plaintiffs fail to establish any self-interest or misconduct
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`on Mathrani’s part, or allege that any such self-interest or conduct infected the GGP
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`sale process, which Plaintiffs plead affirmatively was run entirely by the Special
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`Committee, without input or participation of any sort by Mathrani. Indeed, the crux
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`of Plaintiffs’ claim concerning the sale process appears to be that the Special
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`Committee allegedly did not pursue adequately a prior supposed suggestion by
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`Mathrani—described inaccurately in the Complaint via truncated quotation—that
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`GGP liquidate individual properties or groups of properties (TAC ¶¶ 69-77), or that
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`Mathrani failed to intervene and redirect the Special Committee’s sale process (TAC
`
`¶ 119). Plaintiffs nowhere plead anything Mathrani said or did in connection with
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`the sale process, appraisal rights, or the content of Merger-related disclosures, much
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`less (1) with the bad faith required to state a non-exculpated duty of loyalty claim
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`against him as a director, or (2) to the extent Plaintiffs purport to challenge some act
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`by Mathrani as an officer, with “‘reckless indifference to or a deliberate disregard of
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`the whole body of stockholders’ or actions which are ‘without the bounds of reason’”
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`required to state a claim that he breached his duty of care as an officer. Tomczak v.
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`Morton Thiokol, Inc., 1990 WL 42607, at *12 (Del. Ch. Apr. 5, 1990).
`
`With no misconduct to point to, Plaintiffs cling to an allegation that
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`Mathrani “allowed himself to be objectively compromised” through his long-
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`existing contractual compensation rights incident to a 2015 employment agreement,
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`-2-
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`
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`and through substantially similar post-merger employment arrangements with
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`Brookfield, agreed to after the Merger Agreement was signed. (TAC ¶¶ 115-119.)
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`So “compromised,” Mathrani allegedly “sat mute in the face of a duty to speak,
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`motionless in the face of a duty to act” and failed to object to the sale process run,
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`or the terms of the deal agreed to, by the Special Committee. (TAC ¶¶ 119, 313.)
`
`In other words, Plaintiffs concede that Mathrani did exactly what he was supposed
`
`to do given these purported conflicts: allow the Special Committee to run the sale
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`process without external influences.
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`Plaintiffs also conveniently omit that Mathrani’s Merger-related
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`compensation—comprised primarily of Merger consideration Mathrani received as
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`a GGP stockholder—aligned his interests with that of the other stockholders. Nor
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`can Plaintiffs credibly allege that Mathrani breached his fiduciary duties to GGP by
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`accepting—as he is entitled to do under longstanding Delaware law—amounts owed
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`to him under his employment contract or post-merger employment with Brookfield
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`on similar terms.
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`Plaintiffs’ claims against Mathrani should therefore be dismissed.
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`PLAINTIFFS’ ALLEGATIONS AGAINST MATHRANI
`
`The Complaint alleges only a handful of facts that relate in any way to
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`Mathrani. The focus of these allegations is the claim that Mathrani at one time
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`advocated “selling off individual [GGP] properties or groups of properties as a way
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`-3-
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`
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`for shareholders to realize far more value than the market afforded,” but then “did
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`not object when the GGP Special Committee did not even test such an approach.”
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`(TAC ¶ 119.) Plaintiffs assert in conclusory fashion that Mathrani abandoned his
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`support for an asset sale because “Brookfield induced Mathrani to formally change
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`sides,” alleging that Mathrani “lacked disinterest” because he (a) was GGP’s CEO;
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`(b) was supposedly “recruited” “at least in major part by Brookfield”; (c) was
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`compensated in the ordinary course by GGP for his 2015 employment; (d) received
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`additional Merger-related compensation; and (e) was ultimately rehired by
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`Brookfield in another executive position with an “equivalent[]” or “comparabl[e]”
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`compensation package after the Merger. (TAC ¶¶ 115.)
`
`But Mathrani’s supposed support for a “‘sell-off-the-parts’” strategy is
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`a figment of Plaintiffs’ imagination premised entirely on repeated, selective
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`misquotation of a May 1, 2017 investor conference call. (TAC ¶¶ 69-77; 80; 119;
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`154; 158; 174; 197.) These mischaracterizations of Mathrani’s statements were
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`pointed out in detail in Mathrani’s prior motion to dismiss, yet Plaintiffs persist in
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`distorting the facts through ellipses and truncated quotations. What Plaintiffs
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`describe as Mathrani “fervently and persuasively” advocating for a “sell-off-the-
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`parts” strategy (TAC ¶ 154), Mathrani in fact described as “a very extreme position”
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`(TAC ¶ 73). Mathrani did not remotely advocate for this “extreme” strategy, or
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`suggest it was superior to other alternatives, but merely expressed the view that
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`-4-
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`GGP’s stock price undervalued the Company, and that GGP was “reviewing all
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`strategic alternatives to bridge the gap.”2 (TAC ¶ 71; Ex. 20 Tr. at 5, 13 (emphasis
`
`added).) Mathrani explained that “there’s no sacred cow. We will look at all
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`alternatives . . . . It will be naïve for us not to look at all options available to us to
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`create shareholder value. . . . So we’re—we will evaluate one of all multiple paths
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`to go on, and we will make some decisions in the near term.” (Ex. 20 Tr. at 10.)
`
`When asked “[f]rom the plate of options that you have, buying back stocks, spinoff
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`or asset sales or selling the company, is there one or a couple that is part at least
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`attractive,” Mathrani reiterated “[t]here is no sacred cow.” (Ex. 20 Tr. at 8.)
`
`More importantly, far from an asset-sale advocate, Mathrani told
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`investors that he was skeptical (though he did not “have an answer” for what other
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`“path” to follow) of an asset sale because “all it does is it takes off the top” of GGP’s
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`valuation, leaving a hollowed-out company with leftover properties and a “zero” or
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`“$0.25 stock price”:
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`I think it’s up to us to sort of think [of] a path just for the
`sake of discussion. If you sold an asset and you dividend
`out the cash to your investor base and they believe they
`can invest their money, it’s—all it does is it takes it off the
`
`
`2
`The call contents, as well as the Proxy, were referenced by and therefore
`incorporated into the Third Amended Complaint, and thus may be considered
`on this motion. Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013)
`(“[A] plaintiff may not reference certain documents outside the complaint and
`at the same time prevent the court from considering those documents’ actual
`terms.”).
`
`
`
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`-5-
`
`
`
`
`
`
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`top. If you buy back your stock, it’s a whole different
`animal.
`
`So, I could take a very extreme situation and say, let me
`sell 80 malls and dividend out $25 in dividends or some
`math better than that. And then I have 50 assets using $0.5
`billion of cash flow with a zero stock price or, say, $0.25
`stock price.
`
`I don’t know the answer. All I’m trying to demonstrate is
`that if the market doesn’t value the real estate, it’s our job
`to make sure that the investors get their appreciation,
`either in the form of dividend or some form of
`demonstration that we are in the real estate business and
`the real estate needs to be valued appropriately. So, I
`don’t really have an answer. All I do realize is the
`disconnect has gotten so wide, it is up to us to demonstrate
`to the market that there’s a real estate value at stake here.
`
`(Ex. 20 Tr. at 13 (italicized text omitted from Complaint); TAC ¶ 73.) Mathrani
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`also explained that just selling assets would not bridge the valuation gap, because
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`“the answer is you just lose whatever x hundreds of millions of dollars of cash flow.
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`It really doesn’t change your portfolio.” (Ex. 20 Tr. at 12.) And the valuation gap
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`Mathrani discussed was not the notion that GGP could be liquidated for value in
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`excess of its market capitalization, but that GGP’s enterprise value should exceed
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`the value of its underlying assets, yet did not. (Ex. 20 Tr. at 12 (“like I said, the way
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`to value the asset pool is to figure out how we demonstrate that the—sum of the parts
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`is greater than the whole”).
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`The Complaint’s remaining allegations regarding Mathrani do not
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`concern the sale process, which was run entirely by the Special Committee and not
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`-6-
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`
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`influenced in any way by Mathrani. In fact, Plaintiffs torpedo their own claims by
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`alleging affirmatively that Mathrani “sat mute” and stayed “motionless” as the
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`Special Committee did its job. (TAC ¶¶ 119, 313.) Plaintiffs go even further and
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`allege that Brookfield “induced” Mathrani into inaction through a “years-long
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`campaign to enrich Mathrani.” (TAC ¶ 115.) Put differently, all agree that Mathrani
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`did not in any way participate in or influence the Special Committee’s sale process.
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`All of Plaintiffs’ specific allegations as to Mathrani are diversions.
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`First, Plaintiffs pronounce without any support that Mathrani was
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`“recruited” “at least in major part by Brookfield” for the GGP job ten years ago
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`(TAC ¶ 115(a)), simply because Brookfield was a member of a consortium that
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`acquired GGP out of bankruptcy in 2010 (TAC ¶¶ 91-96).
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`Second, Plaintiffs point to ordinary-course compensation Mathrani
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`received for his service as CEO, which compensation Plaintiffs acknowledge was
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`approved by stockholder vote yet nevertheless speculate (without any support) was
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`orchestrated by Brookfield (TAC ¶¶ 7, 115(e), 117). In so alleging, Plaintiffs also
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`lather the Complaint with a number of disparaging and irrelevant comments about
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`Mathrani’s historical compensation years prior to the Merger, all of which derives
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`from a publicly filed 2015 employment agreement. (TAC ¶¶ 7, 101-02, 117 n.25.)
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`Third, despite acknowledging Mathrani played no role in the Special
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`Committee’s sale process, Plaintiffs claim that Mathrani’s loyalties were
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`-7-
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`
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`
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`compromised because he agreed to a post-closing employment agreement with
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`Brookfield that was entered into after the Merger Agreement was signed (TAC ¶¶
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`115(f) & (h), 116), and which contained terms “comparable to his current
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`employment terms.” (Ex. 3 (June 27, 2018 GGP Inc. Definitive Schedule 14A) (the
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`“Proxy”) at 142.) In particular, Plaintiffs bizarrely fixate on Brookfield’s agreement
`
`to pay Mathrani the $7.1 million in cash severance benefits provided under his GGP
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`employment agreement, entered into in 2015, if the agreement was terminated
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`“without clause” or for “good reason.” (TAC ¶¶ 8, 17, 115(d), 116, 247, 311) The
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`TAC alleges for the first time—falsely—that the “Proxy does not disclose this”
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`aspect of Mathrani’s post-merger agreement with Brookfield, even though the same
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`paragraph of the TAC references a “footnote” in Mathrani’s previous motion to
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`dismiss where Mathrani pointed Plaintiffs to the exact location in the Proxy (Proxy
`
`at 142-43) where the severance payment was disclosed. (Compare TAC ¶ 247 n.54,
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`with Mathrani’s Op. Br. in Support of his Motion to Dismiss the Second Amended
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`Complaint 6 n.3, with Proxy at 142-43 (“Under the BAM Employment Arrangement
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`and in connection with the closing of the Transactions, Mr. Mathrani will receive
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`the cash severance provided in the 2015 Employment Agreement for a termination
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`without ‘cause’ or for ‘good reason’ . . . .”).)3
`
`
`3
`Plaintiffs’ assertion that Mathrani’s prior Motion to Dismiss “admitted” that
`Mathrani was not contractually entitled to severance benefits is bizarre. Mathrani
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`
`
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`-8-
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`
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`Fourth, Plaintiffs also attack Mathrani’s Merger-related compensation,
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`all of which was dictated by the terms of GGP’s option plans and Mathrani’s 2015
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`GGP employment agreement. (Proxy at 139.) Plaintiffs’ assertion that Mathrani
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`“recovered all his unvested stock options in GGP and unvested restricted GGP stock,
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`worth $42.1 million, in the buyout” (TAC ¶ 115(b)); “received an additional $145
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`million in instant liquidity through Brookfield’s purchase in the Buyout of his stock
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`and vested options in GGP” (TAC ¶ 115(c)); or “would receive excise-tax gross-up”
`
`on his Merger-related compensation (TAC ¶ 115(c)) is both misleading and of no
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`help to Plaintiffs. Under the 2015 employment agreement, Mathrani’s restricted
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`stock and partnership units, which otherwise would have vested over time, vested at
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`closing. (Proxy at 139, 143.) Likewise, that agreement “entitled” Mathrani “to
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`reimbursement for excise taxes.” (Proxy at 144.) Besides this, Mathrani owned
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`more than 6.3 million GGP shares and vested options, worth about $145 million at
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`the deal price. (Ex. 1 (Apr. 27, 2018 GGP Inc. Definitive Schedule 14A) at 44.)
`
`And Mathrani received equity and cash in the Merger for his GGP stock just like
`
`everyone else, confirming that his interests were aligned fully with other GGP
`
`stockholders.
`
`
`merely pointed out that it was not the Merger that caused severance to be due to
`Mathrani, but Brookfield’s subsequent decision to terminate Mathrani’s 2015
`employment agreement without cause. Mathrani plainly was “entitled” to receive
`the severance payment, but that legal right arose from the post-signing termination
`of his employment agreement, not the Merger.
`
`
`
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`-9-
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`
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`Finally, unable to plead any actual or relevant conflict, Plaintiffs seek
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`to invent one by speculating without explanation that Mathrani began using a
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`Brookfield email account before the stockholder vote. (TAC ¶ 120.) This, too, is
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`wrong, and simply a diversion. The emails to which Plaintiffs refer, among hundreds
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`of documents produced to them in response to their Section 220 demand, reveal that
`
`every communication to Mathrani and other GGP employees in the body of the
`
`emails are to generalgrowth.com email accounts, while the last reply email in the
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`chain (and none other), in each case minutes or hours later, refers to the same GGP
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`employees but at a brookfieldproperties.com email address. As is evident from the
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`documents themselves, the brookfieldproperties.com domain appears on these
`
`emails simply because those emails were transferred post-closing from a GGP to
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`Brookfield email server, from which the documents were retrieved and provided to
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`Plaintiffs.4
`
`
`4
`See,
`e.g.,
`to
`p.m
`8:27
`(5/1/2018
`21
`Exs.
`to
`reply
`p.m.
`9:40
`sandeep.mathrani@generalgrowth.com,
`5/1/2018
`sandeep.mathrani@broofieldpropertiesretail.com); 22 (6/24/2018 11:06 p.m. email
`from sandeep.mathrani@generalgrowth.com, and 6/25/2018 4:00 a.m. reply to
`sandeep.mathrani@brookfieldpropertiesretail.com); 23 (6/25/2018 5:34 a.m. email
`to sandeep.mathrani@generalgrowth.com, and 6/25/2018 7:16 a.m. email to
`sandeep.mathrani@brookfieldpropertiesretail.com); 24 (6/25/2018 7:19 a.m. email
`to sandeep.mathrani@generalgrowth.com and 6/26/2018 8:03 p.m. email to
`sandeep.mathrani@brookfieldpropertiesretail.com). The same shifting domain
`address phenomena similarly affected each GGP employee on the email chains, with
`the exception of two employees (Rosemary Feit and Heath Fear) who did not join
`Brookfield. These documents were produced as part of the Section 220 production
`
`
`
`
`-10-
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`
`
`
`
`
`
`Regardless, Plaintiffs never explain the relevance of any of these
`
`alleged conflicts of interest. Plaintiffs tout repeatedly that GGP treated Mathrani as
`
`a director “affiliated with Brookfield” for purposes of the Merger (TAC ¶¶ 9, 35),
`
`and thus Plaintiffs never explain why allegations of Mathrani’s ties to Brookfield
`
`matter when Mathrani played no part in a sale process run exclusively by the Special
`
`Committee. Plaintiffs’ legal theory against Mathrani is inherently contradictory:
`
`Plaintiffs charge that Mathrani was conflicted yet participated in a purportedly unfair
`
`sale process, all whilst alleging that the sale process was unfair exactly because
`
`Mathrani sat it out entirely and deferred to the Special Committee instead of forcing
`
`the implementation of Plaintiffs’ imagined “sell-off-the-parts” strategy.
`
`ARGUMENT
`
`A motion to dismiss under Court of Chancery Rule 12(b)(6) must be
`
`granted where the “plaintiff could not recover under any reasonably conceivable set
`
`of circumstances susceptible of proof.” Central Mortg. Co. v. Morgan Stanley
`
`Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011). Although the Court must
`
`accept all well-pleaded factual allegations in the complaint as true, and although “the
`
`plaintiff is entitled to all reasonable inferences that logically flow from the face of
`
`the complaint,” the Court need not “accept every strained interpretation of the
`
`
`and are incorporated by reference into the Complaint under Paragraph 12 of the
`confidentiality agreement governing that production. (Ex. 13 ¶ 12.)
`
`
`
`
`-11-
`
`
`
`
`
`
`
`allegations proposed by the plaintiff.” Malpiede v. Townson, 780 A.2d 1075, 1083
`
`(Del. 2001). In evaluating the sufficiency of a complaint in the context of a motion
`
`to dismiss, “[a] trial court need not blindly accept as true all allegations, nor must it
`
`draw all inferences from them in plaintiffs’ favor unless they are reasonable
`
`inferences.” In re Lukens Inc. S’holders Litig., 757 A.2d 720, 727 (Del. Ch. 1999)
`
`(quoting Grobow v. Perot, 539 A.2d 180, 187 & n.6 (Del. 1988)). In other words,
`
`“[t]he court . . . need not ‘accept conclusory allegations unsupported by specific facts
`
`or . . . draw unreasonable inferences in favor of the non-moving party.’” In re
`
`Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *8 (Del. Ch. Oct. 24, 2014)
`
`(quoting Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011)).
`
`I.
`
`THE BUSINESS JUDGMENT RULE APPLIES AND WARRANTS
`DISMISSAL OF PLAINTIFFS’ CLAIMS.
`
`Where, as here, a majority of the shares held by disinterested, fully
`
`informed stockholders approves a merger with a third party in an uncoerced vote,
`
`the business judgment rule applies and the transaction is insulated “from all attacks
`
`other than on the grounds of waste.” In re KKR Fin. Hldgs. LLC S’Holder Litig.,
`
`101 A.3d 980, 1001 (Del. Ch. 2014), aff’d sub nom., Corwin v. KKR Fin. Hldgs.
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`LLC, 125 A.3d 304 (Del. 2015); see also In re Books-A-Million, 2016 WL 5874974,
`
`at *8 (Del. Ch. Oct. 10, 2016) (“When the business judgment rule provides the
`
`operative standard of review, then a court will not consider the substance of the
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`transaction unless its terms are so extreme as to constitute waste.”), aff’d, 164 A.3d
`
`
`
`
`-12-
`
`
`
`
`
`
`
`56 (Del. 2017) (TABLE). The “long-standing policy” of Delaware, the Supreme
`
`Court has held, “has been to avoid the uncertainties and costs of judicial second-
`
`guessing when the disinterested stockholders have had the free and informed chance
`
`to decide on the economic merits of a transaction for themselves.” Corwin, 125 A.3d
`
`at 313. And even if the Court found that Brookfield controlled GGP pre-Merger (it
`
`did not), the Merger was also negotiated and approved by the Special Committee
`
`and therefore irrebuttably subject to dismissal under the business judgment rule.
`
`Kahn v. M & F Worldwide Corp., 88 A.3d 635, 639 (Del. 2014).
`
`For the reasons set forth in the Opening Briefs of the Special Committee
`
`and Brookfield and the Company, business judgment is the governing standard here
`
`whether or not, as Plaintiffs contend, Brookfield is adequately alleged to have had
`
`“control” over GGP.5 For these reasons, which Mathrani joins, this action should be
`
`dismissed.
`
`II.
`
`PLAINTIFFS FAIL TO STATE A CLAIM REGARDING THE SALE
`PROCESS (COUNT II).
`
`Plaintiffs allege in Count II that the “Director Defendants,” which is
`
`defined to include Mathrani, breached their “Duty of Loyalty” by supposedly
`
`“participating in an unfair Buyout process.” (TAC ¶¶ 38, 297.) By its terms, Count
`
`
`5
`See generally Special Comm. Defs.’ Opening Br. in Supp. of Their Mot. to
`Dismiss §§ I, II, III; Brookfield Prop. Partners, L.P.’s Opening Br. in Supp.
`of Their Mot. to Dismiss §§ I, II.
`
`
`
`
`-13-
`
`
`
`
`
`
`
`II is alleged against all GGP directors, and asserts no claims against Mathrani as an
`
`officer of GGP. Yet, because GGP’s certificate of incorporation “contains an
`
`exculpatory provision pursuant to § 102(b)(7) barring claims for monetary liability
`
`against directors for breaches of the duty of care, the complaint must state a
`
`non-exculpated claim, i.e., a claim predicated on a breach of the directors’ duty of
`
`loyalty or bad faith conduct.” In re Alloy, Inc., 2011 WL 4863716, at *7 (Del. Ch.
`
`Oct. 13, 2011). The Complaint here does not remotely plead any reasonably
`
`conceivable duty of loyalty or bad faith claim.
`
`A.
`
`Plaintiffs Fail to Allege Any Self-Interest That Might
`Support a Duty of Loyalty Claim
`
`In order to state a non-exculpated claim for a breach of the duty of
`
`loyalty, Plaintiffs must plead facts that demonstrate that “a majority of the Director
`
`Defendants either stood on both sides of the merger or were dominated and
`
`controlled by someone who did.” In re NYMEX S’holder Litig., 2009 WL 3206051,
`
`at *6 (Del. Ch. Sept. 30, 2009) (citation omitted). “Moreover, as to any individual
`
`director, the disqualifying self-interest or lack of independence must be material,
`
`i.e., ‘reasonably likely to affect the decision-making process of a reasonable
`
`person.’” In re Alloy, Inc., 2011 WL 4863716, at *7 (citation omitted).
`
`
`
`First, because the Brookfield transaction was negotiated and approved
`
`by the Special Committee, all of whose five members were disinterested and
`
`independent for the reasons set forth in the Special Committee’s Opening Brief,
`
`
`
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`-14-
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`
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`
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`Plaintiffs’ duty of loyalty claims must fail. To prevail on a duty of loyalty claim,
`
`Plaintiffs must show self-
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