IN THE COURT OF CHANCERY OF THE STATE OF DELAWAREYUCAIPA AMERICAN ALLIANCE FUND II, )L.P., a Delaware limited partnership, and )YUCAIPA AMERICAN ALLIANCE )(PARALLEL) FUND II, L.P., a Delaware )limited partnership, ))Plaintiffs, ))v. ) C.A. No. 5465-VCS)LEONARD RIGGIO, STEPHEN RIGGIO, )GEORGE CAMPBELL JR., MICHAEL J. )DEL GIUDICE, WILLIAM DILLARD, II, )PATRICIA L. HIGGINS, IRENE R. MILLER, )MARGARET T. MONACO, LAWRENCE S. )ZILAVY, and BARNES & NOBLE, INC., a )Delaware corporation, ))Defendants. )OPINIONDate Submitted: July 22, 2010Date Decided: August 11, 2010David C. McBride, Esquire, Richard H. Morse, Esquire, Melanie K. Sharp, Esquire, MartinS. Lessner, Esquire, Kristen Salvatore DePalma, Esquire, James L. Higgins, Esquire, EmilyV. Burton, Esquire, James M. Yoch, Jr., Esquire, Kathaleen McCormick, Esquire, Megan C.Haney, Esquire, Richard J. Thomas, Esquire, Nicholas J. Rohrer, Esquire, YOUNGCONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Stephen D.Alexander, Esquire, Beth I.Z. Boland, Esquire, J. Warren Rissier, Esquire, Matthew J.Lawson, Esquire, Karen J. Pazzani, Esquire, BINGHAM MCCUTCHEN LLP, LosAngeles, California,
Attorneys for Plaintiffs Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P
.Peter J. Walsh, Jr., Esquire, Michael A. Pittenger, Esquire, Dawn M. Jones, Esquire,William E. Green, Jr., Esquire, Ryan W. Browning, Esquire, POTTER ANDERSON &CORROON, LLP, Wilmington, Delaware; Sandra C. Goldstein, Esquire, Kevin J. Orsini,Esquire, CRAVATH, SWAINE & MOORE, LLP, New York, New York,
Attorneys for Defendant Barnes & Noble, Inc
.
Kenneth J. Nachbar, Esquire, Susan W. Waesco, Esquire, Shannon E. German, Esquire,MORRIS, NICHOLS, ARSHT & TUNNELL, LLP, Wilmington, Delaware,
Attorneys for Defendants George Campbell Jr., Michael J. Del Giudice, William Dillard, II,Patricia L. Higgins, Irene R. Miller, and Margaret T. Monaco
.Gregory P. Williams, Esquire, Lisa A. Schmidt, Esquire, Blake Rohrbacher, Esquire,RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Eric Rieder, Esquire,John Kircher, Esquire, BRYAN CAVE LLP, New York, New York,
Attorneys for Defendants Leonard Riggio, Stephen Riggio, and Lawrence S. Zilavy
.
STRINE, Vice Chancellor.
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I. IntroductionLess than two years ago, billionaire investor Ronald Burkle called LeonardRiggio, the founder of Barnes & Noble, Inc., to indicate that Burkle’s funds, YucaipaAmerican Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P.(collectively, “Yucaipa”), were going to invest in Barnes & Noble. The two men kneweach other well, having participated in a joint investment under Burkle’s leadership.Because that endeavor had not gone well for Riggio and because Riggio generallypreferred not to have other large holders in Barnes & Noble, he tried to persuade Burkleto take his money elsewhere. But Burkle was not dissuaded, and invested in Barnes &Noble.As in their previous venture, Burkle and Riggio soon were at odds. Burkle toutedseveral ideas for Barnes & Noble to Riggio, which Riggio did not cause Barnes & Nobleto pursue. But what really fueled Burkle’s ire was when he learned in August 2009 thatBarnes & Noble was to acquire a college bookstore chain that had been wholly-owned byRiggio. Burkle communicated his disappointment with how Barnes & Noble wasgoverned, and his fund, Yucaipa, began to increase its stake in the company. Over a fourday period in November 2009, Yucaipa approximately doubled its stake in Barnes &Noble to nearly 18%.In response to the rapid accumulation of shares in Barnes & Noble by Yucaipa, theBarnes & Noble board of directors adopted a poison pill. That pill is triggered when ashareholder acquires over 20% of Barnes & Noble’s outstanding stock, or when two ormore shareholders, who combined own over 20%, enter into an “agreement, arrangement
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Strine Decision in Burkle's Lawsuit Against Barnes & Noble
Decision by Delaware's Leo Strine siding with Barnes & Noble in a lawsuit filed by Ron Burkle over the bookseller's poison-pill plan.
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