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Chancellor Strine's opinion in Martin Marietta Materials v. Vulcan Materials

Chancellor Strine's opinion in Martin Marietta Materials v. Vulcan Materials

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Published by: DealBook on May 04, 2012
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) Civil Action No. 7102-CS)VULCAN MATERIALS COMPANY, ))Defendant. )OPINIONDate Submitted: April 13, 2012Date Decided: May 4, 2012Robert S. Saunders, Esquire, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,Wilmington, Delaware; Robert E. Zimet, Esquire, James A. Keyte, Esquire, Susan L.Saltzstein, Esquire, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, New York,New York; Eric J. Gorman, Esquire, SKADDEN, ARPS, SLATE, MEAGHER & FLOMLLP, Chicago, Illinois,
 Attorneys for Plaintiff.
Collins J. Seitz, Jr., Esquire, David E. Ross, Esquire, Garrett B. Moritz, Esquire, Eric D.Selden, Esquire, Anthony A. Rickey, Esquire, SEITZ ROSS ARONSTAM & MORITZLLP, Wilmington, Delaware; Kenneth B. Forrest, Esquire, William Savitt, Esquire,Theodore N. Mirvis, Esquire, Vincent G. Levy, Esquire, Adam S. Hobson, Esquire, OliviaA. Maginley, Esquire, WACHTELL, LIPTON, ROSEN & KATZ, New York, New York,
 Attorneys for Defendant.
STRINE, Chancellor.
1I. IntroductionThis case presents interesting questions regarding the meaning of confidentialityagreements entered into by two industry rivals at a time when both were intrigued by thepossibility of a friendly merger and when neither wished to be the subject of anunsolicited offer by the other or a third-party industry rival.May one of the parties – especially the one who evinced the most concern forconfidentiality and who most feared having its willingness to enter into mergerdiscussions become public – decide that evolving market circumstances make itcomfortable enough to make a hostile bid for the other and then without consequencefreely use and disclose publicly all the information that it had adamantly insisted be keptconfidential? In this decision, I conclude that the answer to that question is no and that,consistent with Delaware’s pro-contractarian public policy, the parties’ agreement thatthe victim of any breach of the confidentiality agreements should be entitled to specificperformance and injunctive relief should be respected.Here, I find that, although the confidentiality agreements did not include anexpress standstill, they did bar either party from:
Using the broad class of “evaluation material” defined by theconfidentiality agreements except for the consideration of acontractually negotiated business combination transaction between theparties, and not for a combination that was to be effected by hostile,unsolicited activity of one of the parties;
Disclosing either the fact that the parties had merger discussions or anyevaluation material shared under the confidentiality agreements unlessthe party was legally required to disclose because: (i) it had received“oral questions, interrogatories, requests for information or documentsin legal proceedings, subpoena, civil investigative demand or other
2similar process”
; and (ii) its legal counsel had, after giving the otherparty notice and the chance for it to comment on the extent of disclosurerequired, limited disclosure to the minimum necessary to satisfy therequirements of law; or
Disclosing information protected from disclosure by the confidentialityagreements through press releases, investor conference calls, andcommunications with journalists that were in no way required by law.
The breaching party engaged in each of these contractually impermissible coursesof conduct. Because the victim of the breach has sought a temporally reasonableinjunction tailored to the minimum period of time that the breaching party was precludedby the confidentiality agreements from misusing the information it had received ormaking disclosures that were not legally required in the sense defined in theconfidentiality agreements, I grant the non-breaching party’s request, which has the effectof putting off the breaching party’s proxy contest and exchange offer for a period of fourmonths.II. Factual BackgroundAs the introduction indicates, this is an M&A case that turns on the meaning of confidentiality agreements between the parties. The plaintiff and counterclaim-defendantin this case is Martin Marietta Materials, Inc., a North Carolina corporationheadquartered in Raleigh. Martin Marietta is the second largest domestic participant inthe aggregates industry. That industry mines large rocks and similar materials, andprocesses them into materials for roads, buildings, and other infrastructure. Thedefendant and counterclaim-plaintiff is Vulcan Materials Company, the largest domestic
JX 1 (Letter Agreement (May 3, 2010)) (“NDA”) ¶ 4.

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