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<”ìDœôL¤2ÓÓ ¨ý Ó2/J ÿÿ0_levsl9Ó ¨ý ÓÓ  ÓÓ ôôL¤ÓÔ2ÔÔ3  Ô€Ó  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó2GJ ÿÿ0_levnl1Ó ¨ý ÓÓ X ÓÓ/%4 4Œ ä <”ìDœôL¤/ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó2DJ ÿÿ0_levnl2Ó ¨ý ÓÓ ° ÓÓ,"Œ Œ ä <”ìDœôL¤,ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó2AJ ÿÿ0_levnl3Ó ¨ý ÓÓ  ÓÓ)ä ä <”ìDœôL¤)ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó2>J ÿÿ0_levnl4Ó ¨ý ÓÓ ` ÓÓ&<<”ìDœôL¤&ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó2;J ÿÿ0_levnl5Ó ¨ý ÓÓ ¸ ÓÓ#””ìDœôL¤#ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó28J ÿÿ0_levnl6Ó ¨ý ÓÓ  ÓÓ ììDœôL¤ ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó25J ÿÿ0_levnl7Ó ¨ý ÓÓ h ÓÓDDœôL¤ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó22J ÿÿ0_levnl8Ó ¨ý ÓÓ À ÓÓœœôL¤ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó2/J ÿÿ0_levnl9Ó ¨ý ÓÓ  ÓÓ ôôL¤ÓÔ2ÔÔ3  ÔÓ  ÓÓ2(Ü Ü4Œ ä <”ìDœôL¤2ÓÓ ¨ý Ó (.(3Ä($¤¤Ý ƒüœ!ÝÔUSUS.,ÔÝ  Ýà  àòòÚ  Ú0Ú  Úóó(%Ã$òòÚ  Ú1Ú  Úóó !Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú1Ú  ÚóóÝ  ÝÔ_Ô€€References€to€ð ðplaintiffsðð€in€this€memorandum€decision€include€Gabrielle€Katz€Hudson,Ð ° ÐThomas€R.€Hudson,€Jolly€Roger€Fund€LP,€and€Jolly€Roger€Offshore€Fund,€Ltd.0ÿÿ.Normal AÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú2Ú  ÚóóÝ  ÝÔ_Ô€€Defendant„directors€are€Glenn€D.€Ô_ÔReschkeÔ_Ô,€Howard€Ô_ÔAmsterÔ_Ô,€James€R.€Thompson,€GaryÐ ° ÐÔ_ÔSkoienÔ_Ô,€Kenneth€A.€Randall,€Sharon€Sharp,€and€Marvin€S.€Traub.€€References€to€ð ðPrime€RetailððÐ œì Ðinclude€these€directors,€along€with€PRI€(which€no€longer€exists)€and€Prime€Outlets€AcquisitionÐ ˆØ ÐCompany,€LLC,€successor€in€interest€to€PRI.<ÿÿ:Definition T<AAÿÿ:Definition LÓ , ÓÓ5+Ü Ü` ¸ hÀpÈ xÐ 5ÓÓ  ÓÓ5+° °` ¸ hÀpÈ xÐ 5Ó8ÿÿ6Definitionòòóó(''ÿÿ&H1ò òÔ  ÔÔ‡°°°ÔÔ‡XXXÔó óÔ  Ô(ÿÿ&H2ò òÔ‡„„„ÔÔ‡XXXÔó ó(ÿÿ&H3ò òÔ‡¼¼¼ÔÔ‡XXXÔó ó(ÿÿ&H4ò òÔ‡XXXÔó óÔ‡XXXÔ(ÿÿ&H5ò òÔ‡ôôôÔÔ‡XXXÔó ó(ÿÿ&H6ò òÔ‡ÔÔ‡XXXÔó ó2ÿÿ0Addressòòóó8MMÿÿ6BlockquoteÓ , ÓÓ , ÓÓ5+Ü Ü` ¸ hÀpÈ xÐ 5ÓÓ  ÓÓ  ÓÓ5+° °` ¸ hÀpÈ xÐ 5Ó,ÿÿ*CITEòòóó,dlÿÿ*CODEÔ‡ôôôÔÔK‡Y<þ6X9`(‹Courier NewKÔÔ‡XXXÔÔS‡Zô\  `‹&Times New RomanSÔ4ÿÿ2Emphasisòòóó6ÿÿ4HyperlinkóóòòÔ ÿ ÔóóÔ  Ô<ÿÿ:FollowedHypeóóòòÔ €€ ÔóóÔ  Ô4goÿÿ2Keyboardò 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Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú7Ú  ÚóóÝ  ÝÔ_Ô€€òòSeeóó€Paul€V.€Niemeyer€&€Linda€M.€Schuett,€òòMaryland€Rules€Commentary€óó178„79€(3dÐ ° Ðed.€2003)€(ð ðWhen€separate€causes€of€action€are€not€pleaded€in€separate€counts€.€.€.€the€appropriateÐ œì Ðresponse€to€the€pleading€is€a€preliminary€motion€under€Rule€2„322(b)(2).ðð);€Paul€Mark€Sandler€&Ð ˆØ ÐJames€K.€Archibald,€òòPleading€Causes€of€Action€in€Marylandóó€ðð€1.4€(2d€ed.€1998)€(ð ðThe€failure€toÐ tÄ Ðstate€separate€causes€of€action€in€separate€counts€.€.€.€subject[s]€[the€complaint]€to€a€motion€toÐ `° Ðdismiss€for€failure€to€state€a€claim€upon€which€relief€can€be€granted.ðð). "Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú9Ú  ÚóóÝ  ÝÔ_Ô€€The€third€sentence€of€Rule€2„322(c)€states,€ð ðIf€the€court€orders€dismissal,€an€amendedÐ ° Ðcomplaint€may€be€filed€only€if€the€court€expressly€grants€leave€to€amend.ðð ÞÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú11Ú  ÚóóÝ  ÝÔ_Ô€€Unless€otherwise€stated,€all€statutory€citations€are€to€the€Corporations€and€AssociationsÐ ° ÐArticle. –Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú12Ú  ÚóóÝ  ÝÔ_Ô€€Section€5„417€states,€ð ðA€person€who€performs€the€duties€of€that€person€in€accordanceÐ ° Ðwith€the€standard€provided€under€ðð€2„405.1€of€the€Corporations€and€Associations€Article€has€noÐ œì Ðliability€by€reason€of€being€or€having€been€a€director€of€a€corporation.ðð ËÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú14Ú  ÚóóÝ  ÝÔ_Ô€€Alternatively,€a€director€who€did€not€comply€with€the€disclosure€provisions€may€attemptÐ ° Ðto€show€that€the€transaction€was€ð ðfair€and€reasonable€to€the€corporationðð€under€section€Ð œì Ð2„419(b)(2).€€òòShapiroóó,€136€Md.€App.€at€15.€€The€parties€to€this€litigation€have€not€raised€thatÐ ˆØ Ðprovision. ¯Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú15Ú  ÚóóÝ  ÝÔ_Ô€€The€leading€Maryland€corporations€law€treatise€grounds€the€duty€of€disclosure€inÐ ° Ðdirectorsðð€duty€to€act€in€good€faith,€Hanks,€òòsupraóó,€ðð€6.6[b],€at€165,€whereas€Delaware€law€viewsÐ œì Ðthis€duty€as€underlying€the€duties€of€good€faith,€loyalty,€and€care,òò€Ormanóó,€794€A.2d€at€41. WÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú3Ú  ÚóóÝ  ÝÔ_Ô€€This€background€summary€includes€material€from€PRIððs€proxy€statement,€but€only€to€theÐ ° Ðextent€the€proxy€is€undisputed€and€consistent€with€the€well„pleaded€allegations€of€the€ThirdÐ œì ÐAmended€Complaint. ÅÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú8Ú  ÚóóÝ  ÝÔ_Ô€€Although€the€present€motions€came€before€the€Court€in€the€identical€posture,€the€recordÐ ° Ðhas€now€been€clarified€as€to€which€materials€are€being€considered€by€the€Court€and€which€are€not.€Ð œì ÐSee€pages€13€to€14,€above.€€Thus,€the€Maryland€Rules€compel€different€treatment€of€the€pendingÐ ˆØ Ðmotions. ŸÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú16Ú  ÚóóÝ  ÝÔ_Ô€€Plaintiffs€also€alleged€in€paragraph€68€that€the€directors€owed€a€duty€ð ðto€ascertainÐ ° ÐLightstoneððs€intentions€regarding€its€announcement€of€purchases€of€PRI€securities,ðð€but€neitherÐ œì Ðplaintiffsðð€memorandum,€nor€the€law,€provides€any€support€for€that€contention. œÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú17Ú  ÚóóÝ  ÝÔ_Ô€€Under€Section€2„507(b)(3),€ð ðif€a€person€is€the€record€holder€on€the€record€date€butÐ ° Ðsubsequently€transfers€the€stock€to€another€person€prior€to€the€time€of€voting,€the€transferee€isÐ œì Ðentitled€to€require€the€transferor€to€issue€a€proxy€to€the€transferee.ðð€€Hanks,€òòsupraóó,€ðð€7.09,€at€242.€Ð ˆØ ÐHere,€according€to€plaintiffsðð€complaint,€it€appears€that€Lichtenstein€declined€to€requireÐ tÄ ÐDeephaven€to€transfer€its€proxy,€and€opted€to€have€Deephaven€vote€at€the€meeting€instead. ŒÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú13Ú  ÚóóÝ  ÝÔ_Ô€€Delaware€courts€reviewing€certain€change„in„control€transactions€preliminarilyÐ ° Ðdisregard€the€business€judgment€rule€and€employ€a€heightened€level€of€scrutiny.€€òòSee,€e.g.óó,€òòOrmanóó,Ð œì Ð794€A.2d€at€20„23.€€Unlike€Delaware€law,€in€Maryland€the€business€judgment€rule€applies€even€toÐ ˆØ Ðdirectorsðð€change„in„control€decisions.€€òòSeeóó€Hanks,€òòMaryland€Corporation€Lawóó€ðð€6.6[b],€176.1Ð tÄ Ð(Supp.€2003)€(ð ð[Ô_ÔT]heÔ_Ô€decisions€of€the€Supreme€Court€of€Delaware€in€òòUnocal€v.€Mesa€PetroleumÐ `° ÐCo.óó,€493€A.2d€946€(1985),€and€òòWeinberger€v.€Ô_ÔUOPÔ_Ô,€Inc.óó,€457€A.2d€701€(1983),€should€not€beÐ L œ Ðapplied€in€Maryland.ðð). Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú18Ú  ÚóóÝ  ÝÔ_Ô€€Interestingly,€while€Maryland€Rule€1„104€generally€prohibits€citation€to€unreportedÐ ° Ðdecisions€of€Marylandððs€appellate€courts,€the€rule€is€silent€on€whether€extra„jurisdictionalÐ œì Ðunreported€decisions€may€be€cited.€€In€òòAlternatives€Unlimited,€Inc.€v.€New€Baltimore€City€BoardÐ ˆØ Ðof€School€Commissionersóó,€No.€2818,€Sept.€Term,€2002,€slip€op.€at€45€n.4€(Md.€Ct.€Spec.€App.Ð tÄ ÐMar.€3,€2004),€Judge€Moylan€decided€not€to€consider€an€unreported€Fourth€Circuit€decision€citedÐ `° Ðby€a€party€because€such€citations€are€ð ðdisfavoredðð€under€the€Fourth€Circuitððs€rules.€€UponÐ L œ Ðreviewing€Delawareððs€procedural€rules€and€caselaw,€it€appears€that€Delaware€courts€do€notÐ 8 ˆ Ðdisfavor,€much€less€prohibit€citation€to€unreported€decisions,€as€long€as€counsel€submits€hardÐ $ t Ðcopies€to€the€court.€€òòSeeóó€Chancery€Ct.€R.€171(h)€(this€same€provision€appears€in€the€rules€ofÐ  ` ÐDelawareððs€Supreme€Court€[R.€14],€Superior€Court€[R.€107],€Court€of€Common€Pleas€[R.€107],Ð ü L  Ðand€Family€Court€[R.€107],€as€well€as€the€United€States€District€Court€for€the€District€of€DelawareÐ è 8  Ð[R.€7.1.3]).€€In€any€event,€the€Court€gives€no€weight€to€the€unreported€Delaware€decisionsÐ Ô$  Ðð ðbeyond€the€weight€merited€by€the€persuasive€force€of€the€reasoning€employed.ðð€€òòCf.óó€òòE.€OutdoorÐ À  ÐAdver.€Co.€v.€Mayor€of€Balt.óó,€128€Md.€App.€494,€515€(1999)€(Harrell,€J.). ¾Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú19Ú  ÚóóÝ  ÝÔ_Ô€€If€count€2€is€read€as€a€claim€that€the€aggregate€merger€consideration,€or€the€boardððsÐ ° Ðanalysis€and€evaluation€of€the€aggregate€price€were€actionable,€the€same€conclusion€would€obtain.€Ð œì ÐThe€Court€has€made€every€effort€to€understand€the€precise€nature€of€each€count€but,€asÐ ˆØ ÐDelawareððs€Chancellor€Chandler€has€said,€ð ðit€is€not€for€the€Court€to€divine€the€claims€being€made.€Ð tÄ ÐA€plaintiff€must€make€clear€to€the€Court€the€bases€upon€which€his€claims€rest.ðð€€òòOrmanóó,€794€A.2dÐ `° Ðat€24€n.47. áÝ ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú20Ú  ÚóóÝ  ÝÔ_Ô€€The€following€facts€were€disclosed€in€the€September€30€proxy:€(1)€director€G.Ð ° ÐÔ_ÔReschkeÔ_Ôððs€change„in„control€payments€(at€66);€(2)€director€Ô_ÔAmsterÔ_Ôððs€PRI€stock€ownership€(at€77„Ð œì Ð80);€(3)€director€Ô_ÔAmsterÔ_Ôððs€stock€in€Horizon€Group€Properties,€Inc.€(at€68„69);€(4)€directorÐ ˆØ ÐÔ_ÔSkoienÔ_Ôððs€position€within€PRI€and€Horizon,€and€Horizonððs€relationship€to€PRI€(at€68„69);€(5)Ð tÄ Ðdirector€Thompsonððs€relationship€with€Winston€and€Ô_ÔStrawnÔ_Ô,€and€that€law€firmððs€relationship€toÐ `° ÐPRI€(at€68);€(6)€director€Traubððs€consulting€arrangement€with€PRI€(at€69);€(7)€details€regardingÐ L œ ÐFine€Furniture€Direct,€Inc.€(at€69). &Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú6Ú  ÚóóÝ  ÝÔ_Ô€€The€defendants€also€filed€motions€to€enforce€the€October€24€bench€decision,€whichÐ ° Ðplaintiffs€opposed,€but€those€motions€become€moot€upon€resolution€of€the€present€motions. /Ý ƒ5Ä($ÝÔUSUS.,Ôà  àòòÚ  Ú10Ú  ÚóóÝ  ÝÔ_Ô€€òòBut€compareóó€òòDavis€v.€DiPinoóó,€337€Md.€642,€648„49€(1995)€(Chasanow,€J.)€(ð ðWhen€aÐ °  Ðtrial€court€grants€a€motion€to€dismiss€.€.€.€the€court€has€the€discretionary€authority€to€grant€theÐ ° Ðplaintiff€leave€to€amend€the€complaint€.€.€.€[but€there]€is€no€such€discretionary€authority€to€permitÐ œì Ðthe€amendment€of€the€complaint€subsequent€to€the€grant€of€summary€judgment.ðð),€òòwith€FairfaxÐ ˆØ ÐSav.,€F.S.B.óó,€338€Md.€at€9„10€(Rodowsky,€J.)€(describing€without€criticism€trial€courtððs€grant€ofÐ tÄ Ðpartial€summary€judgment€with€leave€to€amend);òò€Kee€v.€State€Highway€Admin.óó,€313€Md.€445,Ð `° Ð452„55,€459„60€(1988)€(Eldridge,€J.)€(sanctioning€filing€of€amended€complaint€after€grant€ofÐ L œ Ðpartial€summary€judgment€as€proper€under€Rule€2„341);€òòPreissman€v.€Harmatzóó,€264€Md.€715,Ð 8 ˆ Ð718„20€(1972)€(same).Ý ƒüœ!ÝÔUSUS.,ÔÝ  ÝÔ_ÔÔ_ÔÑ  Ñò òÌGabrielle€Katz€Hudson,€et€al.,à h àà À à*à  àIN€THEÐ œì ÐÌà  àà ` àPlaintiffs,à  àà h àà À à*à  àCIRCUIT€COURTÐ tÄ ÐÌv.à  àà ` àà ¸ àà  àà h àà À à*à  àFORÐ L œ ÐÌPrime€Retail,€Inc.,€et€al.,à  àà h àà À à*à  àBALTIMORE€CITY,€Part€20Ð $ t ÐÌà  àà ` àDefendants.à  àà h àà À à*à  àCase€No.€24„C„03„5806Ð ü L  ÐÌ******************************************************************************ó óÐ Ô$  ÐÌòòÓ  Óò òORDERó óóóÐ ¬ü  ÐÌÓ  ÓÓÓà  àUpon€consideration€of€all€defendantsðð€motions€to€dismiss€and€plaintiffsðð€oppositionsÐ „Ô  Ðthereto,€arguments€of€counsel€having€been€heard€on€March€25,€2004,€it€is€this€òò1st€day€of€April,Ð \¬ Ð2004óó,€by€the€Circuit€Court€for€Baltimore€City,€Part€20,€ò òORDEREDó ó,€for€the€reasons€set€forth€inÐ 4„ Ðthe€accompanying€Memorandum€Decision€of€this€date,€that€dismissal€is€ò òGRANTEDó ó€as€to€eachÐ d Ðand€every€count€of€the€third€amended€complaint,€and€it€is€further€ò òORDEREDó ó€that€the€motions€toÐ ôD Ðenforce€the€Courtððs€bench€decision€are€ò òDENIEDó ó€as€moot.Ð Ô$ ÐÓBÓà  àà ` àà ¸ àà  àà h àà À àà  àà p à_____________________________Ð ´ Ðà  àà ` àà ¸ àà  àà h àà À àà  àà p àALBERT€J.€MATRICCIANI,€JR.Ð  ð Ðà  àà ` àà ¸ àà  àà h àà À àà  àà p àJudgeÐ ŒÜ Ðcc:Ð x È ÐÌMichael€A.€Stodghill,€Esq.à  àà h àà À àCharles€P.€Scheeler,€Esq.Ð P"   ÐRubin€&€Rubin,€Charteredà  àà h àà À àPiper€Rudnick,€LLPÐ <#Œ! ÐOne€Church€St.,€ste.€201à  àà h àà À à6225€Smith€Ave.Ð ($x" ÐRockville,€MD€20850à ¸ àà  àà h àà À àBaltimore,€MD€21209Ð %d # ÐÌEmily€Komlossy,€Esq.à  àà h àà À àAndrew€J.€Graham,€Esq.Ð ì&<"% ÐGoodkind,€Labaton,€Rudoff€&à h àà À àKramon€&€Graham,€P.A.Ð Ø'(#& ÐSucharow,€LLPà ¸ àà  àà h àà À à1€South€St.,€ste.€2600Ð Ä($' Ð2455€E.€Sunrise€Blvd,€ste.€813à h àà À àBaltimore,€MD€21202Ð °)%( ÐFt.€Lauderdale,€FL€33304Ð  œ*ì%)L ÐØØò òÔ_ÔÑ8€íXXdìdÈ8ÑÑ  ÑÔ_ÔÌÔ_Ôà  àà ` àà ¸ àà  àà h àà À à*Ð œì ÐÌGabrielle€Katz€Hudson,€et€al.,à h àà À à*à  àIN€Ô_ÔTHEÐ tÄ ÐÌà  àà ` àPlaintiffs,à  àà h àà À à*à  àCIRCUIT€COURTÐ L œ ÐÌv.à  àà ` àà ¸ àà  àà h àà À à*à  àFORÐ $ t ÐÌPrime€Retail,€Inc.,€et€al.,à  àà h àà À à*à  àBALTIMORE€CITY,€Part€20Ð ü L  ÐÌà  àà ` àDefendants.à  àà h àà À à*à  àCase€No.€24„C„03„5806Ð Ô$  ÐÌà  àà ` àà ¸ àà  àà h àà À à*Ð ¬ü  ÐÌ******************************************************************************ó óÐ „Ô  ÐÌÓ  Óòòò òMEMORANDUM€DECISIONó óóóÐ \¬ ÐÓÓÌÓÓà  àThis€purported€class€action€litigation€arises€from€the€opposition€mounted€by€severalÐ 4„ Ðminority€stockholders€to€the€cash„out€merger€of€Prime€Retail,€Inc.€(ð ðPRIðð),€a€MarylandÐ  \ Ðcorporation,€into€Prime€Outlets€Acquisition€Company,€LLC,€a€New€Jersey€company€affiliated€withÐ ä4 ÐThe€Lightstone€Group,€LLC€(ð ðLightstoneðð).€€Broadly€stated,€the€plaintiffs׃8×Ý ƒ6%ÃÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×€allege€that€in€arrangingÐ ¼  Ðand€voting€for€the€merger,€various€PRI€directors׃:h×Ý ƒ6%ÃÝòòÚ  Ú2Ú  ÚóóÝ  Ý×  ×€breached€the€duties€they€owed€to€theÐ ”ä Ðcorporation€and€its€stockholders.€€Plaintiffs€also€named€Lightstone€as€an€aiding€and€abettingÐ l¼ Ðdefendant.€€Both€Prime€Retail€and€Lightstone€have€filed€motions€to€dismiss€the€Third€AmendedÐ D!” ÐComplaint€under€Maryland€Rule€2„322(b).Ð #l! ÐÝ‚ QÿÝÔ€XíXXXÔÔ€XíXXXíÔÔÔÔcÿÿÔÔb  Ôò òÝ  ÝI.€€Factual€Background€Summary€and€Procedural€HistoryÝ‚ QÿƒÝÔ€XíXXXíÔÔ€XíXXXíÔÔÔÔcÿÿÔÔb  Ôó óÝ  ÝÐ ° Ðà  àThe€facts€set€forth€here€are€as€alleged€in€the€Third€Amended€Complaint.׃e×Ý ƒ6%ÃÝòòÚ  Ú3Ú  ÚóóÝ  Ý×  ×€€The€purpose€ofÐ ˆØ Ðthis€background€statement€is€to€provide€a€context€for€the€analysis€of€the€pending€motions.€€TheÐ `° ÐCourt€makes€no€findings€of€fact€in€this€decision.€€òòMorris€v.€Osmose€Wood€Preservingóó,€99€Md.Ð 8 ˆ ÐApp.€646€(1994),€òòrevððd€in€part€on€other€groundsóó,€340€Md.€519€(1995).€€In€considering€theÐ  ` Ðpending€motions,€of€course,€the€Court€assumes€the€truth€of€the€well„pleaded€allegations€of€theÐ è 8  ÐThird€Amended€Complaint,€and€fair€inferences€to€be€drawn€therefrom,€but€inconsistencies€andÐ À  Ðambiguities€in€the€complaint€must€be€construed€against€the€plaintiffs.€€òòManikhi€v.€Mass€TransitÐ ˜è  ÐAdmin.óó,€360€Md.€333,€344„45€(2000);€òòFaya€v.€Almarazóó,€329€Md.€435,€443„44€(1993);€òòYoung€v.Ð pÀ ÐHartford€Accident€&€Indem.€Co.óó,€303€Md.€182,€192€(1985).Ð H˜ Ðò òA.€€PRI€and€the€Fortress€proposal.ó óÐ  p Ðà  àPRI€was€a€Maryland€corporation€that€owned€and€operated€outlet€shopping€centers.€€TheÐ øH Ðcompany€had€three€types€of€stock,€Series€A€preferred,€Series€B€preferred,€and€common€stock,€butÐ Ð  Ðdue€to€the€poor€performance€of€its€shopping€centers,€obligations€to€creditors,€and€lack€of€liquidity,Ð ¨ø Ðthe€company€had€not€paid€dividends€to€its€stockholders€since€January€2000.€€Among€otherÐ €Ð Ðfinancial€recovery€(or€survival)€measures,€in€December€2000€the€company€sold€four€of€its€outletÐ X ¨ Ðcenters€and€obtained€a€$90€million€loan€from€an€affiliate€of€Fortress€Investment€Group,€LLCÐ 0"€  Ð(ð ðFortressðð).Ð $X" Ðà  àFortress€submitted€an€unsolicited€proposal€to€PRIððs€board€of€directors€on€June€4,€2002,Ð à%0!$ Ðproposing€that€Fortress€buy€out€all€the€companyððs€outstanding€stock€for€$48€million.€€Two€daysÐ ¸'#& Ðlater€the€board€appointed€directors€Kenneth€A.€Randall,€Sharon€Sharp,€James€R.€Thompson,€andÐ ° ÐMarvin€Traub€to€serve€on€a€Special€Committee€formed€to€evaluate€the€Fortress€offer,€as€well€asÐ ˆØ Ðother€recapitalization€options.€€That€same€day€the€Special€Committee€selected€Houlihan€LokeyÐ `° ÐHoward€&€Zukin€Capital€(ð ðHoulihan€Lokeyðð)€to€serve€as€the€Committeeððs€financial€advisor.€Ð 8 ˆ ÐRepresentatives€from€Houlihan€Lokey,€along€with€PRI€director€Howard€Amster€(participating€inÐ  ` Ðhis€capacity€as€stockholder€only),€met€with€Fortress€on€June€21,€2002,€to€discuss€the€proposal.€Ð è 8  ÐFive€days€later€Fortress€increased€its€proposed€offer€to€a€total€of€$66€million.Ð À  Ðà  àAt€a€Special€Committee€meeting€on€August€12,€2002,€Houlihan€Lokey€presented€itsÐ ˜è  Ðassessments€of€PRIððs€financial€condition€and€value,€and€an€analysis€of€the€restructuring€and€otherÐ pÀ Ðstrategic€alternatives€the€company€might€pursue.€€The€next€day€Houlihan€Lokey€made€aÐ H˜ Ðpresentation€to€the€entire€board€on€essentially€the€same€issues.€€The€board€decided€it€could€notÐ  p Ðaccept€Fortressððs€$66€million€proposal,€but€the€board€directed€Houlihan€Lokey€to€continueÐ øH Ðnegotiations€with€Fortress€while€simultaneously€pursuing€other€recovery€options.Ð Ð  Ðò òB.€€PRIððs€continued€efforts€to€find€an€acceptable€proposal.ó óÐ ¨ø Ðà  àOn€August€28,€2002,€the€Special€Committee€retained€Granite€Partners,€LLC€(ð ðGraniteðð),Ð €Ð Ðas€a€second€financial€advisor€to€assist€with€raising€capital,€and€from€September€through€NovemberÐ X ¨ Ð2002€Granite,€Houlihan€Lokey,€and€PRI€representatives€compiled€information€packages€and€anÐ 0"€  Ðoffering€memorandum€with€financial€projections.€€Granite€contacted€approximately€one€hundredÐ $X" Ðpotential€investors€seeking€capital€contributions.€€Meanwhile,€Fortress€filed€a€disclosure€with€theÐ à%0!$ ÐSEC€on€September€26,€2002,€stating€that€it€had€purchased€10%€of€PRIððs€Series€A€stock€fromÐ ¸'#& ÐMerrill€Lynch.€€At€the€conclusion€of€Graniteððs€search,€it€reported€to€PRI€that€capital€investmentÐ )à$( Ðwithout€a€change€in€control€was€not€an€option,€but€that€Lightstone,€among€other€investors,Ð h+¸&* Ðexpressed€strong€interest€in€a€strategic€transaction€with€the€company,€conditioned€upon€theÐ ° Ðinvestor€obtaining€control.Ð ˆØ Ðà  àAfter€Granite€narrowed€the€field€to€twenty€prospective€investors,€thirteen€of€themÐ `° Ðexecuted€confidentiality€agreements€and€were€given€an€offering€memorandum.€€On€November€15,Ð 8 ˆ Ð2002,€those€who€remained€interested€were€instructed€to€submit€detailed€proposals.€€PRI,€with€theÐ  ` Ðassistance€of€its€financial€advisors,€conducted€presentations€for€four€potential€buyers€from€lateÐ è 8  ÐNovember€through€December€4,€2002.€€Those€efforts€attracted€six€written€expressions€of€interest,Ð À  Ðfour€buyout€bids,€and€two€bids€for€all€or€most€of€PRIððs€assets.€€The€buyout€bids€ranged€from€$80Ð ˜è  Ðmillion€to€$120€million,€and€Houlihan€Lokey€went€to€work€evaluating€the€various€bids€during€theÐ pÀ Ðsecond€week€of€December€2002.Ð H˜ Ðà  àThe€Special€Committee,€and€then€the€full€board,€met€with€legal€and€financial€advisors€onÐ  p ÐDecember€13,€2002,€and€the€board€further€winnowed€the€field€to€three€buyout€bidders,€whom€theÐ øH Ðboard€(through€Houlihan€Lokey)€invited€to€submit€best€final€bids.€€Those€final€bids€came€in€onÐ Ð  ÐDecember€19,€2002,€and€they€ranged€from€$125€million€to€$138.5€million.€€Houlihan€LokeyÐ ¨ø Ðadvised€the€Special€Committee€to€pursue€the€highest€bidder,€(whose€identity€does€not€appear€inÐ €Ð Ðthe€record),€and€the€Special€Committee€in€turn€made€the€same€recommendation€to€the€board.€€OnÐ X ¨ ÐDecember€23,€2002,€the€board€directed€PRIððs€management€to€pursue€the€$138.5€million€bidder,Ð 0"€  Ðand€a€week€later€PRI€and€the€bidder€entered€into€an€exclusivity€agreement€giving€the€bidderÐ $X" Ðsufficient€time€to€complete€its€due€diligence€investigation.Ð à%0!$ Ðà  àAt€this€point€$138.5€million€looked€like€the€approximate€merger€consideration,€so€the€nextÐ ¸'#& Ðlogical€step€was€to€devise€a€plan€to€allocate€that€sum€among€the€various€classes€of€stock.€€To€thatÐ )à$( Ðend€the€Special€Committee€directed€Houlihan€Lokey€to€seek€input€from€Series€A€and€Series€BÐ h+¸&* Ðstockholders.€€Nearly€25%€of€PRIððs€Series€A€stock,€and€just€over€20%€of€PRIððs€Series€B€stockÐ ° Ðwas€represented€in€these€initial€allocation€discussions.€€Defendant€Howard€Amster,€along€withÐ ˆØ Ðother€individuals,€participated€as€a€holder€of€both€classes€of€stock.€€The€group€assumed€a€netÐ `° Ðmerger€consideration€of€$133€million,€and€based€on€that€figure€a€subgroup€of€the€stockholdersÐ 8 ˆ Ðarrived€at€a€consensus€on€allocations€of€$18.50€per€Series€A€share,€and€$10.25€per€Series€B€share,Ð  ` Ðwith€$10€million€to€be€divided€among€holders€of€common€stock.Ð è 8  Ðà  àIn€mid„February,€however,€the€bidder€backed€out€of€the€deal€because€of€informationÐ À  Ðgathered€during€its€due€diligence€investigation.€€PRI€was€back€to€square€one,€and€the€boardÐ ˜è  Ðdirected€Houlihan€Lokey€to€resume€courting€one€of€the€other€two€serious€bidders.Ð pÀ Ðò òC.€€Lightstoneððs€bid.ó óÐ H˜ Ðà  àOn€March€1,€2003,€one€of€those€bidders€(whose€identity€is€also€unknown)€submitted€aÐ  p Ð$117.5€million€buyout€proposal,€which€the€Special€Committee€and€the€board€considered€atÐ øH Ðmeetings€two€days€later.€€Upon€Houlihan€Lokeyððs€advising€that€it€could€not€easily€assess€the€valueÐ Ð  Ðof€the€bid€because€of€certain€features€of€the€dealððs€structure,€the€Special€Committee€recommendedÐ ¨ø Ðthat€the€board€not€pursue€the€bid€exclusively,€and€the€board€accepted€the€recommendation.€Ð €Ð ÐConsequently,€Houlihan€Lokey€invited€further€proposals€from€other€interested€investors.Ð X ¨ Ðà  àBy€March€13,€2003,€PRIððs€board€had€three€new€buyout€bids€in€hand,€the€highest€of€themÐ 0"€  Ðbeing€Lightstoneððs€$121€million€bid€(which,€after€transaction€costs,€would€net€PRI€$118€million).€Ð $X" ÐOn€that€date,€based€on€the€Special€Committeeððs€recommendation,€PRI€opted€to€pursue€theÐ à%0!$ ÐLightstone€deal€exclusively,€and€the€parties€entered€into€an€exclusivity€agreement€on€March€19,Ð ¸'#& Ð2003.€€Lightstone€reduced€its€bid€to€$113€million€(net€$111.5€million)€on€April€15,€2003,€based€onÐ )à$( Ðits€due€diligence€investigation.Ð h+¸&* Ðà  àOn€April€18,€2003,€the€Special€Committee€met€for€two€purposes:€first,€to€receive€HoulihanÐ ° ÐLokeyððs€presentation€on€PRIððs€value€(including€a€breakdown€of€its€various€stocks),€and€second,€toÐ ˆØ Ðconsider€director€Michael€Reschkeððs€proposed€alternative€to€the€Lightstone€deal.€€Director€M.Ð `° ÐReschke׃]×Ý ƒ6%ÃÝòòÚ  Ú4Ú  ÚóóÝ  Ý×  ×€proposed€that€PRI€stay€in€business€and€not€merge.€€His€plan€entailed€selling€PRIððsÐ 8 ˆ Ðmajority€interests€in€six€shopping€centers€(some€of€which€were€performing€well),€selling€fiveÐ  ` Ðunder„performing€shopping€centers,€and€a€rights€offering€to€stockholders.€€Director€M.€ReschkeÐ è 8  Ðprojected€this€would€provide€PRI€$70€to€$90€million€more€than€the€Lightstone€deal.€€The€SpecialÐ À  ÐCommittee€recommended€that€the€board€follow€two€parallel€paths:€(1)€continue€pursuing€theÐ ˜è  ÐLightstone€deal,€and€(2)€further€explore€director€M.€Reschkeððs€proposal.Ð pÀ Ðà  àLater€in€April€2003,€Lightstone€increased€its€bid€to€a€figure€that€would€net€PRI€$113Ð H˜ Ðmillion.€€On€April€29,€2003,€Lightstoneððs€president€and€chief€executive€officer€David€LichtensteinÐ  p Ðmet€with€PRIððs€board€to€discuss€the€proposed€merger.€€At€the€same€meeting€director€M.€ReschkeÐ øH Ðpresented€further€details€to€the€board€on€his€alternative€proposal,€director€Amster€presentedÐ Ð  Ðdetails€on€a€possible€rights€offering,€and€director€G.€Reschke€(with€management€members)Ð ¨ø Ðpresented€PRIððs€latest€five„year€business€plan.€€Regarding€the€five„year€plan,€PRIððs€managementÐ €Ð Ðadvised€that€the€planððs€success€depended€on€a€reversal€of€several€lackluster€trends€in€PRIððsÐ X ¨ Ðoperations.€€Three€directors€(Amster,€M.€Reschke,€and€Skoien)€expressed€concerns€thatÐ 0"€  ÐLightstoneððs€offer€was€too€low,€that€a€stockholder€vote€would€be€unsuccessful€if€based€on€theÐ $X" Ðcurrent€allocation€figures,€and€that€the€alternative€proposals€could€be€better€options€for€PRI.Ð à%0!$ Ðà  àThese€proposals€and€concerns€were€considered€at€a€subsequent€Special€CommitteeÐ ¸'#& Ðmeeting,€at€which€it€was€decided€that€the€Special€Committee€would€meet€with€Mr.€Lichtenstein€inÐ ° Ðan€effort€to€improve€the€Lightstone€proposal.€€The€Special€Committee€also€directed€its€financialÐ ˆØ Ðadvisors€to€further€evaluate€director€M.€Reschkeððs€alternative€proposal.Ð `° Ðà  àMr.€Lichtenstein€met€with€Houlihan€Lokey€and€PRIððs€preferred€board€members€prior€toÐ 8 ˆ ÐMay€2,€2003,€to€discuss€Lightstoneððs€offer.€€Based€on€a€total€purchase€price€of€$115€million,€theÐ  ` Ðpreferred€directors€indicated€their€support€for€(or€acquiescence€to)€an€allocation€of€$16.04€forÐ è 8  ÐSeries€A€shares,€$8.93€for€Series€B€shares,€and€$0.15€for€shares€of€common€stock.€€The€preferredÐ À  Ðdirectors€reported€these€figures,€and€Mr.€Lichtensteinððs€unwillingness€to€increase€the€$115€millionÐ ˜è  Ðoffer,€to€the€Special€Committee€on€May€2,€2003.€€The€preferred€directors€exited€that€meeting€andÐ pÀ Ðthe€Committee€considered€this€report€and€PRIððs€lawyersðð€report€on€the€Lightstone€negotiations.€Ð H˜ ÐThe€Special€Committee€also€considered€its€financial€advisorsðð€reports€on€their€evaluation€ofÐ  p Ðdirector€M.€Reschkeððs€alternative€proposal.€€Later€that€day€the€board€met€and,€based€on€theÐ øH ÐSpecial€Committeeððs€recommendations,€the€board€decided€not€to€pursue€director€M.€ReschkeððsÐ Ð  Ðalternative€proposal,€but€to€persevere€with€the€Lightstone€deal.Ð ¨ø Ðà  àSubsequently,€Houlihan€Lokey€met€again€with€preferred€stockholders€to€discuss€howÐ €Ð ÐLightstoneððs€merger€consideration€could€be€allocated€among€the€various€classes€of€stock.€Ð X ¨ ÐHoulihan€Lokey€asked€the€preferred€stockholders€to€consider€an€allocation€of€$15.90€per€Series€AÐ 0"€  Ðshare,€$8.80€per€Series€B€share,€and€$0.17€per€share€of€common€stock.€€At€a€May€14,€2003Ð $X" ÐSpecial€Committee€meeting€Houlihan€Lokey€advised€the€Committee€of€its€opinion€that€$115Ð à%0!$ Ðmillion€was€a€fair€price€for€PRIððs€stockholders€generally,€and€Houlihan€Lokey€also€presented€itsÐ ¸'#& Ðestimation€of€fair€values€for€each€class€of€stock.€€Houlihan€Lokey€specified€that€its€valuation€ofÐ )à$( Ðeach€class€was€independent€of€its€valuation€of€each€other€class;€that€is,€Houlihan€Lokey€was€notÐ h+¸&* Ðgiving€a€fairness€opinion€on€any€particular€allocation€arrangement.€€The€estimated€ranges€of€valuesÐ ° Ðwere€$16.00€to€$18.60€for€Series€A€shares,€$6.10€to€$7.20€for€Series€B€shares,€and€$0.13€to€$0.14Ð ˆØ Ðfor€shares€of€common€stock.€€Houlihan€Lokey€advised€the€Special€Committee€that,€in€its€view,€aÐ `° Ðcash„out€merger€with€Lightstone€would€be€better€for€PRI€than€continuing€to€operate€as€a€stand„Ð 8 ˆ Ðalone€business.Ð  ` Ðà  àAllocation€was€again€discussed€at€a€May€9,€2003€Special€Committee€meeting.€€Director€G.Ð è 8  ÐReschke€told€the€board€that€the€preferred€directors€would€support€an€allocation€of€$16.25€forÐ À  ÐSeries€A€shares,€$8.66€for€Series€B€shares,€and€$0.18€for€shares€of€common€stock.€€On€June€2,Ð ˜è  Ð2003€the€Special€Committee€directed€Houlihan€Lokey€to€seek€other€preferred€stockholdersðð€inputÐ pÀ Ðon€the€allocation,€and€the€Committee€asked€the€preferred€directors€to€be€prepared€to€explain€theÐ H˜ Ðbasis€for€their€proposal€at€the€next€Special€Committee€meeting.Ð  p Ðà  àThat€next€meeting€was€held€on€June€5,€2003.€€At€the€meeting€the€Special€CommitteeÐ øH Ðinformed€the€preferred€directors€that€ð ðtheir€proposed€allocation€was€problematic€for€the€SpecialÐ Ð  ÐCommittee€because,€under€such€proposal,€the€series€A€stockholders€will€receive€an€amount€perÐ ¨ø Ðshare€at€the€lower€end€of€Houlihan€Lokeyððs€valuation€range€while€the€series€B€stockholders€wouldÐ €Ð Ðreceive€an€amount€per€share€above€Houlihan€Lokeyððs€valuation€range.ðð׃^×Ý ƒ6%ÃÝòòÚ  Ú5Ú  ÚóóÝ  Ý×  ×€€The€preferred€directorsÐ X ¨ Ðstood€their€ground;€they€were€excused€from€the€rest€of€the€meeting€during€which€the€CommitteeÐ 0"€  Ðdiscussed€the€allocation€proposals.Ð $X" Ðà  àThe€Special€Committeeððs€deliberations€continued€to€a€June€9,€2003€meeting,€at€whichÐ à%0!$ ÐHoulihan€Lokey€reported€to€the€committee€that€nearly€all€of€PRIððs€preferred€stockholders€hadÐ ¸'#& Ðexpressed€their€desire€for€liquidity,€at€a€reasonable€allocation.€€Merrill€Lynch,€owner€of€22%€ofÐ )à$( ÐPRIððs€Series€A€stock,€would€not€commit€to€a€particular€allocation€range,€but€Merrillððs€counselÐ ° Ðstated€that€$16.00€was€too€low.€€Fortress€(the€company€that€had€earlier€purchased€10%€of€PRIððsÐ ˆØ ÐSeries€A€stock€from€Merrill)€stated€it€would€consider€a€Series€A€allocation€between€$16.00€andÐ `° Ð$20.00€per€share.€€The€Special€Committee€decided€to€recommend€to€the€board€that€PRI€enter€intoÐ 8 ˆ Ðthe€merger€agreement€with€Lightstone€at€$115€million,€and€that€the€merger€consideration€beÐ  ` Ðallocated€at€$16.25€for€Series€A€shares,€$8.66€for€Series€B€shares,€and€$0.18€for€common€stock.€Ð è 8  ÐIncluded€with€the€recommendation€was€an€explanation€that€the€Special€Committee€factored€theÐ À  Ðpreferred€directorsðð€preferences€into€the€allocation€decision€because€of€the€stockholdersðð€push€forÐ ˜è  Ðliquidity.€€That€is€to€say,€without€the€preferred€directorsðð€support€the€merger€would€probably€fail,Ð pÀ Ðand€PRI€would€be€left€with€no€one€receiving€any€liquidation€of€their€shares.€€The€board€adoptedÐ H˜ Ðthe€Special€Committeeððs€recommendation€on€June€9,€2003.Ð  p Ðà  àHoulihan€Lokey€updated€its€range€of€estimates€on€July€1,€2003,€and€based€on€its€mostÐ øH Ðrecent€analysis€provided€ranges€of€$16.11€to€$18.61€for€Series€A€shares,€$6.15€to€$7.24€for€SeriesÐ Ð  ÐB€shares,€and€$0.14€to€$0.15€for€shares€of€common€stock.€€The€Special€Committee€recommendedÐ ¨ø Ðto€the€board€no€changes€in€the€allocation.€€PRI€and€Prime€Outlets€Acquisition€Company,€LLC,Ð €Ð Ðexecuted€the€merger€agreement€on€July€8,€2003.€€Houlihan€Lokey€updated€its€fairness€opinions€onÐ X ¨ Ðthat€date,€which€included€no€changes.Ð 0"€  Ðò òD.€€Stockholder€objections,€and€the€ongoing€allocation€dialogue.ó óÐ $X" Ðà  àThe€following€week€PRI€received€objections€from€Merrill€Lynch€and€Fortress,€bothÐ à%0!$ Ðarguing€that€the€allocation€of€$16.25€for€Series€A€shares€was€inadequate.€€PRI€held€aÐ ¸'#& Ðteleconference€moderated€by€Granite€on€August€11,€2003,€at€which€50%€of€the€Series€A€stock,Ð )à$( Ðand€47%€of€the€Series€B€stock€were€represented.€€The€meeting€did€not€resolve€the€disagreements.Ð h+¸&* Ðà  àBased€on€information€provided€by€Granite,€the€Special€Committee€and€the€board€foundÐ ° Ðthemselves€in€a€quandary.€€Fortress€and€Merrill€both€appeared€to€need€at€least€$20.00€per€Series€AÐ ˆØ Ðshare€to€support€the€merger€(which€obviously€would€require€concomitant€decreases€elsewhere),Ð `° Ðbut€ROI€Capital€Management,€a€significant€holder€of€PRIððs€Series€B€stock,€would€withdraw€itsÐ 8 ˆ Ðsupport€if€the€Series€B€allocation€dipped€below€$8.30.€€Director€Amster€stated€he€could€tolerate€aÐ  ` ÐSeries€B€allocation€as€low€as€$8.46,€but€only€with€significant€cuts€in€the€common€stock€allocationÐ è 8  Ðand€in€transaction€costs€to€PRIððs€management€and€its€financial€and€legal€advisors.€€DespiteÐ À  Ðrepeated€efforts€at€persuading€Lightstone€to€increase€its€offer€beyond€$115€million,€PRI€simply€didÐ ˜è  Ðnot€have€enough€merger€consideration€to€satisfy€everyoneððs€demands.Ð pÀ Ðà  àPRIððs€financial€advisors€tried€to€iron€out€a€solution€between€August€13€and€August€21,Ð H˜ Ð2003,€but€were€unable€to€bring€the€different€stock€classes€to€a€consensus.€€This€was€reported€at€anÐ  p ÐAugust€21,€2003€Special€Committee€meeting,€where€it€was€also€reported€that€director€AmsterÐ øH Ðcould€support€allocations€of€$18.40€for€Series€A€shares,€$8.169€for€Series€B€shares,€and€$0.17€forÐ Ð  Ðshares€of€common€stock,€but€with€a€$0.514€million€cut€in€transactional€fees.€€On€the€SpecialÐ ¨ø ÐCommitteeððs€recommendation,€the€board€adopted€this€allocation€the€same€date.Ð €Ð Ðò òE.€€The€plaintiffs€file€suit.ó óÐ X ¨ Ðà  àJust€prior€to€those€August€21€allocation€decisions,€the€plaintiffs€filed€this€action€on€AugustÐ 0"€  Ð12,€2003,€seeking€to€enjoin€the€stockholdersðð€vote€on€the€merger.€€Prime€Retail€and€LightstoneÐ $X" Ðmoved€to€dismiss€the€Complaint,€but€before€any€action€was€taken€on€those€motions,€the€plaintiffsÐ à%0!$ Ðfiled€their€First€Amended€Complaint€on€October€8,€2003,€along€with€motions€for€preliminaryÐ ¸'#& Ðinjunction€and€expedited€discovery.€€The€Court€held€a€scheduling€conference€with€the€parties€onÐ )à$( ÐOctober€20,€2003,€at€which€plaintiffs€stated€their€intention€to€convert€their€motion€for€preliminaryÐ h+¸&* Ðinjunction€into€a€motion€for€a€temporary€restraining€order,€and€at€which€the€Court€set€a€hearing€onÐ ° Ðthe€motions€for€October€24,€2003.€€PRI€and€Lightstone€moved€to€dismiss€the€First€AmendedÐ ˆØ ÐComplaint€on€October€23,€2003.€€The€stockholdersðð€vote€was€scheduled€for€October€30,€2003.Ð `° Ðà  àAt€the€conclusion€of€the€October€24,€2003€hearing€the€Court€rendered€a€decision€from€theÐ 8 ˆ Ðbench.€€The€parties€dispute€the€legal€effect€of€the€Courtððs€bench€decision,€and€the€Court€resolvesÐ  ` Ðthis€dispute€by€clarifying€what€actually€happened€in€section€II.B.,€below.€€At€this€point,€it€sufficesÐ è 8  Ðto€say€(and€the€parties€agree)€that€the€Courtððs€bench€decision€dismissed€all€but€one€of€theÐ À  Ðplaintiffsðð€claims.€€The€Court€reserved€ruling€on€the€motion€for€temporary€restraining€order€toÐ ˜è  Ðallow€plaintiffs€to€conduct€limited€discovery.€€On€October€27,€2003,€plaintiffs€deposed€PRIÐ pÀ Ðdirector€Kenneth€A.€Randall,€who€chaired€the€Special€Committee,€and€plaintiffs€withdrew€theirÐ H˜ Ðmotion€for€a€temporary€restraining€order€a€day€later.Ð  p Ðò òF.€€Merger€efforts€continue.ó óÐ øH Ðà  àPRIððs€stockholders€did€not€approve€the€merger€on€October€30,€2003.€€A€vote€to€mergeÐ Ð  Ðwould€have€required€approval€of€at€least€two„thirds€of€each€of€the€two€preferred€classes,€and€moreÐ ¨ø Ðthan€half€of€the€common€stockholders.€€Only€57.96%€of€the€Series€A€shares€were€voted€for€theÐ €Ð Ðmerger€(both€the€other€classes€would€have€approved€the€merger).€€The€meeting€was€adjournedÐ X ¨ Ðand€rescheduled€for€November€4,€2003.€€At€that€meeting€63.59%€of€the€Series€A€shares€wereÐ 0"€  Ðvoted€for€the€merger,€and€the€meeting€was€adjourned€and€rescheduled€for€November€18,€2003.Ð $X" Ðà  àOn€November€13,€2003,€David€Lichtenstein€and€PRI€both€disclosed€that€Lightstone€mightÐ à%0!$ Ðtry€purchasing€PRI€stock.€€(Lichtenstein€filed€a€disclosure€with€the€SEC,€while€PRI€issued€a€pressÐ ¸'#& Ðrelease.)€€On€November€18,€2003,€before€the€stockholder€vote,€Lightstone€contracted€to€purchaseÐ )à$( Ðshares€of€PRI€Series€A€stock€at€$22€per€share€from€Deephaven€Capital€Management.€€TheÐ h+¸&* Ðpurchase€contract€also€obligated€Deephaven€to€vote€for€merger.€€All€three€classes€of€stockholdersÐ ° Ðapproved€the€merger€later€that€day.Ð ˆØ Ðò òG.€€The€pending€motions.ó óÐ `° Ðà  àPlaintiffs€filed€their€Second€Amended€Complaint€on€December€3,€2003,€and€Prime€RetailÐ 8 ˆ Ðand€Lightstone€filed€corresponding€motions€to€dismiss€on€January€9,€2003.€€Before€any€action€wasÐ  ` Ðtaken€on€those€motions,€plaintiffs€filed€their€Third€Amended€Complaint€on€February€4,€2004,€andÐ è 8  Ðthe€defendants€filed€their€corresponding€dismissal€motions€on€February€23,€2004.׃n×Ý ƒ6%ÃÝòòÚ  Ú6Ú  ÚóóÝ  Ý×  ×€€Prime€RetailððsÐ À  Ðmotion€argues€that€all€but€one€of€the€plaintiffsðð€claims€are€precluded€by€virtue€of€the€prior€benchÐ ˜è  Ðdecision,€and€that€the€entirety€of€the€Third€Amended€Complaint€fails€to€state€a€cause€of€action€forÐ pÀ Ðwhich€relief€can€be€granted.€€Lightstone€adopts€Prime€Retailððs€arguments,€and€also€moves€forÐ H˜ Ðdismissal€arguing€that€the€Third€Amended€Complaint€fails€to€state€a€cause€of€action€for€aiding€andÐ  p Ðabetting.€€The€Court€heard€arguments€of€counsel€on€March€25,€2004.Ð øH ÐÝ‚ QÿÝÔ€XíXXXíÔÔ€XíXXXíÔÔÔÔcÿÿÔÔb  Ôò òÝ  ÝII.€€AnalysisÝ‚ QÿÃwƒÝÔ€XíXXXíÔÔ€XíXXXíÔÔÔÔcÿÿÔÔb  Ôó óÝ  ÝÐ Ð  Ðà  àTo€analyze€the€defendantsðð€motions€it€must€first€be€determined,€in€procedural€terms,€howÐ ¨ø Ðto€treat€the€motions€appropriately€under€the€Maryland€Rules€and€in€the€context€within€which€theyÐ €Ð Ðwere€presented€to€the€Court.€€Then€it€is€necessary€to€resolve€the€partiesðð€dispute€over€the€legalÐ X ¨ Ðeffect€of€the€Courtððs€late„October€bench€decision,€before€finally€moving€to€the€merits€of€theÐ 0"€  Ðmotions.Ð $X" Ðò òA.€€€Motions€to€dismissð"ðwith€exhibits.ó óÐ à%0!$ Ðà  àThe€defendants€submitted€motions€styled€ð ðMotion€to€Dismiss,ðð€and€all€parties€haveÐ ¸'#& Ðpresented€to€the€Court€and€relied€upon€various€documentary€exhibits€including€Prime€RetailððsÐ ° Ðfilings€with€the€SEC.€€However,€in€ruling€on€motions€to€dismiss€the€Court€may€only€considerÐ ˆØ Ðmatters€presented€within€the€plaintiffsðð€Third€Amended€Complaint,€and€the€Court€assumes€theÐ `° Ðtruth€of€the€well„pleaded€facts€and€inferences€fairly€drawn€therefrom.€€òòBennett€Heating€v.Ð 8 ˆ ÐNationsBankóó,€342€Md.€169,€174€(1996).Ð  ` Ðà  àPrime€Retail€argues,€ð ðEven€on€a€motion€to€dismiss,€the€Court€may€properly€considerÐ è 8  Ðdocuments€integral€to€the€complaint,€relied€upon€in€the€complaint,€incorporated€into€theÐ À  Ðcomplaint,€or€that€the€plaintiff€had€knowledge€of€in€framing€the€complaint,€as€well€as€publicÐ ˜è  Ðdocuments€filed€with€the€SEC,ðð€citing€òòIn€re€Merrill€Lynch€&€Co.óó,€273€F.€Supp.€2d€351,€355Ð pÀ Ð(S.D.N.Y.€2003).€€Essentially€the€same€rule€applies€in€Delaware.€€òòE.g.óó,€òòOrman€v.€Cullmanóó,€794Ð H˜ ÐA.2d€5,€15„17€(Del.€Ch.€2002)€(Chandler,€C.).€€Although€one€portion€of€Prime€Retailððs€proposedÐ  p Ðrule€applies€in€Maryland,€òòsee€óóMd.€R.€2„303(d)€(ð ðany€written€instrument€that€is€an€exhibit€to€aÐ øH Ðpleading€is€a€part€thereofðð),€the€rest€of€the€proposed€rule€runs€counter€to€Maryland€law.€€òòSeeÐ Ð  ÐMuthukumarana€v.€Montgomery€Countyóó,€370€Md.€447,€474„75€(2002);€òòHrehorovich€v.€HarborÐ ¨ø ÐHosp.óó,€93€Md.€App.€772,€779„89€(1992);€òòsee€alsoóó€òòFayaóó,€329€Md.€at€444€(taking€judicial€notice€onÐ €Ð Ðmotion€to€dismiss).Ð X ¨ Ðà  àAt€the€March€25€argument,€however,€plaintiffsðð€counsel€joined€in€the€defendantsðð€positionÐ 0"€  Ðthat€the€Court€could,€on€a€motion€to€dismiss,€consider€PRIððs€SEC€filings€as€incorporated€into€theÐ $X" ÐThird€Amended€Complaint.€€The€Court€accepts€plaintiffsðð€counselððs€statement€as€an€oralÐ à%0!$ Ðamendment€to€the€pleadings,€incorporating€into€the€complaint€those€documents€on€which€it€relies.€Ð ¸'#& ÐòòSeeóó€òòNichols€v.€Wilsonóó,€296€Md.€154,€156€n.3€(1983);€òòRTKL€Assocs,€Inc.€v.€Four€Villages€Ltd.Ð )à$( ÐPððshipóó,€95€Md.€App.€135,€138€(1993);€òòHoffman€v.€Hoffmanóó,€93€Md.€App.€704,€709€(1992).€€TheÐ h+¸&* ÐCourt€excludes€from€its€consideration€all€other€documents€the€parties€submitted,€and€consequentlyÐ ° Ðwill€treat€the€pending€motions€as€motions€to€dismiss.Ð ˆØ Ðò òB.€€The€effect€of€the€bench€decision€on€the€Third€Amended€Complaint.ó óÐ `° Ðà  àThe€plaintiffsðð€initial€complaint€did€not€set€forth€causes€of€action€in€separately€numberedÐ 8 ˆ Ðcounts,€and€thus€it€was€improper€in€form€and€not€in€compliance€with€the€pleading€requirements€ofÐ  ` ÐMaryland€Rule€2„303(a).׃_×Ý ƒ6%ÃÝòòÚ  Ú7Ú  ÚóóÝ  Ý×  ×€€At€the€October€24€hearing€the€Court€stated:Ð è 8  ÐÓhÓà  à[T]he€complaint€itself€is€not€set€forth€in€counts,€at€least€they€arenððt€delineated€in€the€Ð À  Ðà  àtraditional€fashion,€and€I€am€going€to€say€that€it€appears€to€me€to€attempt€to€set€forth€Ð ¬ü  Ðà  àcauses€of€action€for€both€a€breach€of€fiduciary€duty€and€a€breach€of,€to€the€extent€that€Ð ˜è  Ðà  àthese€are€different,€the€duty€of€candor€with€respect€to€the€material€nondisclosures,€the€Ð „Ô  Ðà  àfirst€issue€going,€I€suppose,€to€the€independence€of€the€special€committee€and€the€second€Ð pÀ Ðà  àgoing€to,€whether€they€were€independent€or€not,€whether€there€is€sufficient€material€and€Ð \¬ Ðà  àinformation€contained€in€the€proxy€materials€to€allow€the€shareholders€in€the€mix€of€it€all€Ð H˜ Ðà  àto€make€reasoned€decisions€about€the€vote€that€they€are€to€undertake€next€Thursday€.€.€.€.€€Ð 4„ Ðà  àAm€I€missing€something?Ð  p ÐÌÓ7ÓPlaintiffsðð€counsel€then€confirmed€that€the€Courtððs€understanding€was€correct.€€In€part€because€ofÐ øH Ðthe€lack€of€enumerated€counts,€the€Court€rendered€an€ambiguous€bench€decision:Ð Ð  ÐÓRŒÓà  à[D]efendantsðð€motion€[to€dismiss]€.€.€.€should€be€denied€with€respect€to€this€aspect€of€the€Ð ¨ø Ðà  àcomplaint€[i.e.,€the€nondisclosure€of€allocation€analysis]€with,€I€think,€leave€to€amend€Ð ”ä Ðà  àbecause€I€donððt€know€that€the€complaint€actually€clearly€sets€forth€the€appropriate€cause€ofÐ €Ð Ðà  àaction,€but€granted€as€to€all€other€aspects€and€claims€of€material€nondisclosure.Ð l¼ ÐÌÓ7ÓThe€Courtððs€denial€of€the€motion€to€dismiss€the€allocation€nondisclosure€claim,€with€leave€toÐ D!” Ðamend€that€claim,€is€inconsistent€on€its€face.€€Although€not€articulated€precisely€this€way€from€theÐ #l! Ðbench,€what€the€Court€intended€in€that€statement€was€to€grant€the€motions€to€dismiss€with€leaveÐ ô$D # Ðto€amend€on€the€nondisclosure€of€allocation€analysis€count€and€to€grant€the€motions€to€dismiss€asÐ ° Ðto€the€remaining€counts.€€The€plaintiffs€did€amend€their€complaint,€and€in€the€Third€AmendedÐ ˆØ ÐComplaint€the€plaintiffs€have€re„alleged€causes€of€action€which€were€dismissed€at€the€OctoberÐ `° Ðhearing.Ð 8 ˆ Ðà  àPrime€Retail€argues€that€the€doctrine€of€res€judicata€bars€the€plaintiffs€from€re„alleging€inÐ  ` Ðthe€Third€Amended€Complaint€those€claims€which€were€previously€dismissed.€€The€sum€total€ofÐ è 8  Ðlegal€authority€cited€by€Prime€Retail€in€support€of€that€argument€is€òòPoteet€v.€Sauteróó,€136€Md.Ð À  ÐApp.€383€(2001).€€In€òòPoteetóó,€Judge€Hollander€wrote€for€the€Court€of€Special€Appeals:Ð ˜è  ÐÓKÓà  àIn€determining€whether€res€judicata€is€applicable,€a€court€must€consider:Ð pÀ ÐÌà  àà ` à(1)€whether€the€parties€are€the€same€as,€or€in€privity€with,€the€parties€to€the€earlier€Ð H˜ Ðà  àà ` àdispute;Ð 4„ ÐÌà  àà ` à(2)€whether€the€cause€of€action€presented€is€identical€to€the€one€determined€in€the€Ð  \ Ðà  àà ` àprior€adjudication;€and,Ð øH ÐÌà  àà ` à(3)€whether€there€was€a€final€judgment€on€the€merits€in€the€initial€action.Ð Ð  ÐÌòòÓ7ÓId.óó€at€411.€€òòPoteetóó,€like€every€other€res€judicata€case€reviewed€by€this€Court,€spoke€in€terms€ofÐ ¨ø Ðð ðfinal€judgmentsðð€in€ð ðinitial€actionsðð€as€barring€relitigation€in€a€ð ðsubsequent€action.ðð€€òòPoteetóóÐ €Ð Ðprovides€no€support€for€the€proposition€that€res€judicata€bars€a€plaintiff€from€re„alleging€in€anÐ X ¨ Ðamended€complaint,€within€a€single€civil€action,€claims€which€were€previously€disposed€of€onÐ 0"€  Ðpreliminary€motions€attacking€the€initial€complaint.Ð $X" Ðà  àBecause€the€bench€decision€left€at€least€one€claim€in€the€case,€that€decision€ð ðis€not€a€finalÐ à%0!$ Ðjudgment,ðð€it€did€not€ð ðòòterminateóó€the€action€as€to€any€of€the€claims€or€any€of€the€parties,ðð€and€it€isÐ ¸'#& Ðð ðsubject€to€revision€at€any€time€before€the€entry€of€a€judgment€that€adjudicates€all€of€the€claims€byÐ )à$( Ðand€against€all€of€the€parties.ðð€€Md.€R.€2„602(a)€(emphasis€added).€€Also,€in€addition€to€the€threeÐ h+¸&* Ðres€judicata€requirements€described€by€Judge€Hollander€in€òòPoteetóó,€the€doctrine€presumes€anÐ ° Ðadditional€element:€two€distinct€lawsuits.€€In€this€case€we€have€only€one€civil€action,€in€which€theÐ ˆØ ÐCourt€has€rendered€a€non„final€decision€on€less€than€all€the€claims;€res€judicata€has€no€applicationÐ `° Ðhere.Ð 8 ˆ Ðà  àAs€explained€in€section€II.A.,€above,€generally€motions€to€dismiss€which€present€additionalÐ  ` Ðmaterials€not€contained€in€the€complaint€require€the€Court€to€treat€the€motions€as€motions€forÐ è 8  Ðsummary€judgment.€€All€the€parties€assume€(as€did€the€Court,€at€the€time),€that€the€October€24Ð À  Ðbench€decision€granted€dismissal,€but€because€the€Court€considered€additional€materials€submittedÐ ˜è  Ðby€both€parties,€the€Court€was€actually€granting€defense€motions€for€summary€judgment€on€all€butÐ pÀ Ðone€of€the€plaintiffsðð€claims.׃f×Ý ƒ6%ÃÝòòÚ  Ú8Ú  ÚóóÝ  Ý×  ×€€òòSee,€e.g.óó,€òòFairfax€Sav.,€F.S.B.€v.€Kris€Jen€Ltd.€Pððshipóó,€338€Md.€1,€9„Ð H˜ Ð10€(1995);€òòHrehorvichóó,€93€Md.€App.€at€783.€€Therefore,€the€rules€governing€plaintiffsðð€latestÐ  p Ðamendments€would€be€rules€governing€amendments€after€a€court€grants€defense€motions€forÐ øH Ðpartial€summary€judgment,€not€dismissal.Ð Ð  Ðà  àÓŽ–ÓÓ—ÓPlaintiffsðð€memorandum€in€opposition€to€the€defense€motions€posits€that€ð ðdismissal€isÐ ¨ø Ðwithout€prejudice,€unless€otherwise€specified,ðð€citing€òòWilliams€v.€Snyderóó,€221€Md.€262,€267Ð €Ð Ð(1960),€and€plaintiffs€conclude€that€because€ð ðthe€Courtððs€dismissal€was€unspecified,ðð€theirÐ X ¨ Ðamended€pleading€is€proper.€€òòWilliamsóó,€however,€was€a€voluntary€dismissal€case€where€the€CourtÐ 0"€  Ðapplied€the€predecessor€to€current€Rule€2„506(c).€€Unlike€òòWilliamsóó,€the€plaintiffs€here€have€notÐ $X" Ðvoluntarily€dismissed€their€case.€€òòWilliamsóó€and€Rule€2„506(c)€have€no€application€here.€Ð à%0!$ Ðà  àPlaintiffs€also€invoke€Maryland€Rule€2„341,€the€general€rule€governing€amendingÐ ° Ðpleadings.€€Under€subparagraph€(a)€of€that€rule,€ð ðA€party€may€file€an€amendment€to€a€pleading€atÐ ˆØ Ðany€time€prior€to€15€days€of€a€scheduled€trial€date.ðð€€Subparagraph€(c)€limits€the€scope€ofÐ `° Ðpermissible€amendments:Ð 8 ˆ ÐÓÖ Óà  àAn€amendment€may€seek€to€(1)€change€the€nature€of€the€action€or€defense,€(2)€set€forth€a€Ð  ` Ðà  àbetter€statement€of€facts€concerning€any€matter€already€raised€in€a€pleading,€(3)€set€forth€Ð ü L  Ðà  àtransactions€or€events€that€have€occurred€since€the€filing€of€the€pleading€sought€to€be€Ð è 8  Ðà  àamended,€(4)€correct€misnomer€of€a€party,€(5)€correct€misjoinder€or€nonjoinder€of€a€party€Ð Ô$  Ðà  àso€long€as€one€of€the€original€plaintiffs€and€one€of€the€original€defendants€remain€as€partiesÐ À  Ðà  àto€the€action,€(6)€add€a€party€or€parties,€(7)€make€any€other€appropriate€change.€à Ð àÐ ¬ü  Ðà  àAmendments€shall€be€freely€allowed€when€justice€so€permits.€Errors€or€defects€in€a€Ð ˜è  Ðà  àpleading€not€corrected€by€an€amendment€shall€be€disregarded€unless€they€affect€the€Ð „Ô  Ðà  àsubstantial€rights€of€the€parties.Ð pÀ ÐÌÓ;£ÓBefore€applying€Rule€2„341€to€this€case,€the€Court€must€inquire€whether€this€general€rule,€and€notÐ H˜ Ða€more€specific€rule,€controls€whether€plaintiffs€may€resubmit€by€amendment€claims€on€which€theÐ  p ÐCourt€previously€granted€defense€motions€for€summary€judgment.€€For€example,€had€this€CourtÐ øH Ðactually€been€granting€defense€motions€to€dismiss€at€the€October€24€hearing,€then€under€RuleÐ Ð  Ð2„322(c)€the€plaintiffs€could€not€file€an€amended€complaint€on€all€counts€because€the€Court€didÐ ¨ø Ðnot€expressly€grant€leave€to€amend€any€claim€other€the€count€for€nondisclosure€of€mergerÐ €Ð Ðallocation€analysis.׃`×Ý ƒ6%ÃÝòòÚ  Ú9Ú  ÚóóÝ  Ý×  ×€€Thus,€in€the€context€of€a€motion€to€dismiss,€Rule€2„322(c)€takes€away€theÐ X ¨ Ðbroad€freedom€to€amend€generally€granted€by€Rule€2„341.Ð 0"€  Ðà  àIn€legal€terms,€however,€the€Court€granted€defense€motions€for€partial€summary€judgmentÐ $X" Ðunder€Rule€2„501,€and€that€rule€contains€no€corollary€to€Rule€2„322(c)ððs€amendment€provision.׃oh×Ý ƒ6%ÃÝòòÚ  Ú10Ú  ÚóóÝ  Ý×  ׀Рà%0!$ ÐUnlike€Rule€2„322(c),€Rule€2„501€on€summary€judgments€contains€no€specific€restriction€to€limitÐ ° Ðthe€liberal€amendment€provisions€of€Rule€2„341.€€Even€so,€under€the€general€amendment€rule€aÐ ˆØ Ðplaintiff€may€not€re„allege€the€very€same€claims€on€which€summary€judgment€has€already€beenÐ `° Ðgranted,€because€such€an€amendment€does€not€fall€within€one€of€the€seven€types€of€amendments€inÐ 8 ˆ ÐRule€2„341(c).€€Although€amendments€ð ðshall€be€freely€allowed€when€justice€so€permits,ðð€for€theÐ  ` Ðsame€policy€reasons€underlying€the€doctrines€of€res€judicata,€collateral€estoppel,€and€law€of€theÐ è 8  Ðcase,€justice€does€not€permit€a€plaintiff€to€beset€the€Court€and€defendants€with€duplicitous,Ð À  Ðmeritless€claims.€€òòSee€generallyóó€John€A.€Lynch€&€Richard€W.€Bourne,€òòModern€Maryland€CivilÐ ˜è  ÐProcedureóó€ðððð€12.1€ð!ð€12.3€(1993€&€Supp.€2003).Ð pÀ Ðà  àTo€determine€whether€the€plaintiffsðð€Third€Amended€Complaint€falls€within€the€scope€ofÐ H˜ ÐRule€4„341(c),€the€Court€must€compare€the€First€Amended€Complaint€with€the€Third,€and€to€theÐ  p Ðextent€that€the€comparison€reveals€that€plaintiffs€have€re„alleged€in€the€Third€Amended€ComplaintÐ øH Ðcauses€of€action€on€which€summary€judgment€has€already€been€granted€for€the€defendants,€theÐ Ð  ÐCourt€could€strike€those€amendments€on€its€own€initiative€under€Rule€2„322(e)€as€beingÐ ¨ø Ðð ðimproperðð€and€ð ðnot€in€compliance€withðð€Rule€2„341.€€The€Court€would€then€consider€theÐ €Ð Ðdefendantsðð€motions€to€dismiss€whatever€remains€after€that€comparison.€€But€perhaps€due€to€theÐ X ¨ Ðlack€of€clarity€in€the€Courtððs€bench€decision,€the€defendants€have€not€moved€to€strike€the€amendedÐ 0"€  Ðcomplaint€under€Rule€2„341(a),€(c),€and€Rule€2„322(e),€and,€of€course,€plaintiffs€have€notÐ ° Ðconfronted€such€a€motion.€€Although€Rule€2„322(e)€empowers€the€Court€to€strike€pleadings€on€itsÐ ˆØ Ðown€initiative,€under€the€circumstances,€here€the€Court€declines€to€do€so.€€To€cleanse€the€recordÐ `° Ðof€further€confusion€stemming€from€the€Courtððs€October€24€decision,€the€Court€will€proceed€toÐ 8 ˆ Ðaddress€here€the€viability€of€each€of€the€Third€Amended€Complaintððs€counts.Ð  ` Ðò òC.€€Third€Amended€Complaint.Ð è 8  Ðà  àó óPlaintiffsðð€Third€Amended€Complaint€alleges€that€the€director„defendants€breached€theÐ À  Ðduties€of€good€faith,€loyalty,€and€care,€which€they€owed€to€the€corporation€and€its€stockholders.€Ð ˜è  ÐThe€plaintiffs€allege€that€various€directorsðð€decisions€were€not€independent,€that€directors€wereÐ pÀ Ðinterested€in€transactions€they€were€addressing,€and€that€the€directors€failed€to€disclose€materialÐ H˜ Ðfacts€to€the€stockholders€who€were€to€vote€on€the€merger.€€Before€addressing€each€count,€it€willÐ  p Ðbe€helpful€to€review€generally€the€duties€imposed€upon€directors,€and€the€standards€by€whichÐ øH Ðcourts€review€director€actions.Ð Ð  Ðò ò1.€€Corporate€directorsðð€duties€and€the€business€judgment€rule.ó óÐ ¨ø Ðà  àIn€Maryland,€corporate€directors€must€perform€their€duties€(1)€in€good€faith,€(2)€in€aÐ €Ð Ðmanner€[the€director]€reasonably€believes€to€be€in€the€best€interests€of€the€corporation,€and€(3)Ð X ¨ Ðwith€the€care€that€an€ordinarily€prudent€person€in€a€like€position€would€use€under€similarÐ 0"€  Ðcircumstances.€€Md.€Code€Ann.€Corps.€&€Assððns€ðð€2„405.1(a)€(1999).׃a×Ý ƒ6%ÃÝòòÚ  Ú11Ú  ÚóóÝ  Ý×  ×€€Under€section€Ð $X" Ðâ â2„405.1(c),€directors€who€fulfill€these€duties€enjoy€the€immunity€from€liability€defined€in€section€Ð à%0!$ Ð5„417€of€the€Courts€and€Judicial€Proceedings€Article.׃b×Ý ƒ6%ÃÝòòÚ  Ú12Ú  ÚóóÝ  Ý×  ×€€Maryland€has€codified€the€ð ðbusinessÐ ° Ðâ âjudgment€ruleðð€at€section€2„405.1(e),€which€provides,€ð ðAn€act€of€a€director€of€a€corporation€isÐ ˆØ Ðpresumed€to€satisfy€the€standardsðð€imposed€by€section€2„405.1(a).€€In€the€context€of€mergersÐ `° ÐDelaware€law€imposes€upon€directors€what€have€become€known€as€ð ðòòRevlonóó€duties,ðð€after€òòRevlonÐ 8 ˆ Ðv.€MacAndrews€&€Forbes€Holdings,€Inc.óó,€506€A.2d€173,€182,€(Del.€1985),€requiring€directors€toÐ  ` Ðtry€to€secure€the€best€merger€terms€available€for€stockholders.€€Maryland€law€appears€to€imposeÐ è 8  Ðthe€same€duty,€òòWittman€v.€Crookeóó,€120€Md.€App.€369,€376„77€(1998),€but€the€business€judgmentÐ À  Ðrule€presumes€that€directors€satisfied€this€duty.׃iT×Ý ƒ6%ÃÝòòÚ  Ú13Ú  ÚóóÝ  Ý×  ×€€òòSee€óóðð€2„405.1(f).Ð ˜è  Ðà  àThe€business€judgment€ruleððs€presumption€that€directors€fulfilled€their€duties€does€notÐ pÀ Ðrender€directors€impervious€to€a€plaintiffððs€claims.€€òòSee€NAACP€v.€Goldingóó,€342€Md.€663,€673Ð H˜ Ð(1996).€€Rather,€the€business€judgment€rule€merely€places€upon€plaintiffs€the€burden€of€rebuttingÐ  p Ðthe€presumption.€€òòId.óó€€To€survive€the€motions€to€dismiss,€therefore,€the€Third€Amended€ComplaintÐ øH Ðmust€allege€facts€showing€a€failure€of€the€directors€to€adhere€to€their€duties.Ð Ð  Ðà  àFinally,€in€performing€their€duties€directors€may€rely€on€information€from€(1)€officers€orÐ ¨ø Ðemployees€of€the€corporation,€to€the€extent€the€director€reasonably€believes€the€person€is€reliableÐ €Ð Ðand€competent€in€the€matter€presented;€(2)€lawyers,€CPAs,€or€other€persons€on€matters€theÐ X ¨ Ðdirector€reasonably€believes€to€be€within€the€personððs€professional€or€expert€competence;€and€(3)Ð ° Ða€subcommittee€of€the€board€on€which€the€director€did€not€serve,€as€to€a€matter€within€theÐ ˆØ Ðsubcommitteeððs€authority,€to€the€extent€the€director€reasonably€believes€the€committee€to€meritÐ `° Ðconfidence.€€Corps.€&€Assððns€ðð€2„405.1(b).Ð 8 ˆ Ðò ò2.€€Duty€of€Loyalty.ó óÐ  ` Ðà  àDirectorsðð€obligations€to€perform€their€duties€ð ðin€good€faithðð€and€in€a€manner€reasonablyÐ è 8  Ðbelieved€to€be€ð ðin€the€best€interests€of€the€corporationðð€impose€a€duty€of€loyalty€to€theÐ À  Ðcorporation.€€òòUnited€Wire,€Metal€&€Machine€Health€&€Welfare€Fund€v.€Bd.€of€Sav.€&€Loanóó,€316Ð ˜è  ÐMd.€236,€245€(1989);€Hanks,òò€supraóó,€6.6[c],€at€177.€€The€duty€of€loyalty€embodies€two€related€butÐ pÀ Ðdistinct€requirements€relevant€to€this€case:€first,€in€exercising€their€judgment€directors€must€decideÐ H˜ Ðmatters€independently,€and€second,€directors€generally€may€not€have€a€material€personal€interest€inÐ  p Ðthe€transaction.€€òòSeeóó€òòOrmanóó,€794€A.2d€at€19„25€&€n.50;€òòsee€alsoóó€òòShapiro€v.€Greenfieldóó,€136€Md.Ð øH ÐApp.€1,€13„15€(2000);€òòWittmanóó,€120€Md.€App.€at€377„78€(1998).Ð Ð  Ðà  àA€directorððs€ð ðindependentðð€exercise€of€the€directorððs€judgment€ð ðmeans€that€a€directorððsÐ ¨ø Ðdecision€is€based€on€the€corporate€merits€of€the€subject€before€the€board€rather€than€extraneousÐ €Ð Ðconsiderations€or€influences.ðð€€òòOrmanóó,€794€A.2d€at€24.€€Chancellor€Chandler,€of€DelawareððsÐ X ¨ ÐCourt€of€Chancery,€has€explained,Ð 0"€  ÐÓg©Óà  àSuch€extraneous€considerations€or€influences€may€exist€when€the€challenged€director€is€Ð $X" Ðà  àcontrolled€by€another.€€To€raise€a€question€concerning€the€independence€of€a€particular€Ð ô$D # Ðà  àboard€member,€a€plaintiff€asserting€the€control€of€one€or€more€directors€must€allege€Ð à%0!$ Ðà  àparticularized€facts€manifesting€a€direction€of€corporate€conduct€in€such€a€way€as€to€Ð Ì&"% Ðà  àcomport€with€the€wishes€or€interests€of€the€corporation€(or€persons)€doing€the€controlling.€Ð ¸'#& Ðà  àThe€shorthand€shibboleth€of€ð ðdominated€and€controlled€directorsðð€is€insufficient.Ð ¤(ô#' ÐÌòòÓ²©ÓId.óó€(most€internal€quotation€marks€omitted);€òòsee€alsoóó€Corps.€&€Assððns€ðð€2„401(b);€òòWharton€v.Ð |*Ì%) ÐFidelity„Baltimore€Natððl€Bankóó,€222€Md.€177,€185€(1960);€òòWarren€v.€Fitzgeraldóó,€189€Md.€476,Ð ° Ð488„89€(1948);€òòMartin€Marietta€Corp.€v.€Bendixóó,€549€F.€Supp.€623,€633€n.5€(D.€Md.€1982).€Ð ˆØ ÐUnder€Maryland€law,Ð `° ÐÓÐÓà  à[W]hen€a€director€does€not€personally€benefit€from€the€transaction€but,€because€of€that€Ð 8 ˆ Ðà  àdirectorððs€relationship€to€a€party€interested€in€the€transaction,€it€would€reasonably€be€Ð $ t Ðà  àexpected€that€the€directorððs€exercise€of€independent€judgment€would€be€compromised,€Ð  ` Ðà  àthat€director€will€be€deemed€an€interested€director€within€the€meaning€of€the€statute.Ð ü L  ÐÌòòÓÓÖÓShapiroóó,€136€Md.€App.€at€24.Ð Ô$  Ðà  àRelated,€but€distinct€loyalty€issues€arise€in€cases€where€directors€stand€to€receive€benefitsÐ ¬ü  Ðfrom€a€transaction€that€are€not€generally€enjoyed€by€the€stockholders,€or€where€a€director€standsÐ „Ô  Ðon€both€sides€of€a€corporate€transaction.€€òòOrmanóó,€794€A.2d€at€23;€òòShapiroóó,€136€Md.€App.€at€15.€Ð \¬ ÐBy€implication€of€section€2„419(a),€the€benefit€must€be€ð ðmaterialðð€to€the€director€to€render€theÐ 4„ Ðdirector€even€arguably€interested€in€the€transaction.€€The€requirement€of€materiality€imposes€uponÐ  \ Ðplaintiffs€the€burden€of€pleading€facts€to€show€that€ð ðthe€alleged€benefit€was€significant€enough€òòinÐ ä4 Ðthe€context€of€the€directorððs€economic€circumstancesóó,€as€to€have€made€it€improbable€that€theÐ ¼  Ðdirector€could€perform€[the€directorððs]€fiduciary€duties€to€the€.€.€.€shareholders€without€beingÐ ”ä Ðinfluenced€by€[the]€overriding€personal€interest.ðð€€òòOrmanóó,€794€A.2d€at€23€&€n.44€(internalÐ l¼ Ðquotation€marks€omitted);€òòIn€re€General€Motors€Class€H€Shareholders€Litigationóó,€734€A.2d€611,Ð D!” Ð617„18€(Del.€Ch.€1999).€€The€duty€of€loyalty€imposes€only€a€general€prohibition€of€suchÐ #l! Ðtransactions,€but€section€2„419€establishes€procedures€by€which€such€transactions€may€be€validlyÐ ô$D # Ðaccomplished.Ð Ì&"% Ðà  àSection€2„419€ð ðprovides€that€an€interested€director€transaction€is€not€void€or€voidableÐ ¤(ô#' Ðsolely€because€of€the€conflict€of€interest€and€creates€a€ððsafe€harborðð€for€certain€transactions€whichÐ |*Ì%) Ðsatisfy€the€statute.ðð€€òòId.óóat€14.€€Section€2„419€clearly€applies€to€protect€transactions€in€whichÐ ° Ðdirectors€were€materially€interested,€and€the€Court€of€Special€Appeals€has€held€section€2„419Ð ˆØ Ðapplicable€to€transactions€in€which€extraneous€forces€influence€a€directorððs€decision,€rendering€theÐ `° Ðdirector€ð ðnon„independent.ðð€€òòShapiroóó,€136€Md.€App.€at€18„24.€€To€qualify€for€the€statuteððsÐ 8 ˆ Ðprotections,€ð ðan€interested€director€could€inform€the€shareholders€or€directors€of€[the€directorððs]Ð  ` Ðconflicting€interests€and€give€the€board€of€directors€or€shareholders€an€opportunity€to€approve€orÐ è 8  Ðratify€the€transaction.ðð׃c×Ý ƒ6%ÃÝòòÚ  Ú14Ú  ÚóóÝ  Ý×  ×€€òòId.óó€at€15.Ð À  Ðò ò3.€€Duty€to€disclose.ó óÐ ˜è  Ðà  àDirectors€also€owe€a€duty€to€disclose€to€stockholders€material€information€within€theÐ pÀ Ðdirectorsðð€control€regarding€transactions€on€which€the€stockholders€will€vote.€€ContemporaryÐ H˜ ÐMaryland€caselaw€has€not€had€occasion€to€develop€this€duty€of€candor,€but€none€of€the€parties€toÐ  p Ðthis€action€dispute€that€some€such€duty€exists€under€Maryland€law.€€òòSee€Parish€v.€Milk€ProducersÐ øH ÐAssððnóó,€250€Md.€24,€72„74€(1968);€òòHomer€v.€Crown€Cork€&€Seal€Co.óó,€155€Md.€66€(1928);Ð Ð  ÐòòPaskowitz€v.€Wohlstadteróó,€151€Md.€App.€1,€10„11€(2003)€(applying€Delaware€law);€òòWilcom€v.Ð ¨ø ÐWilcomóó,€66€Md.€App.€84,€95€(1986)€(assuming€a€duty€to€inform€existed,€no€breach€found).׃d@×Ý ƒ6%ÃÝòòÚ  Ú15Ú  ÚóóÝ  Ý×  ׀Р€Ð ÐBecause€of€the€paucity€of€Maryland€law€on€the€subject€the€parties€direct€the€Courtððs€attention€toÐ X ¨ ÐDelawareððs€well„developed€corporate€law,€so€the€Court€will€rely€primarily€on€that€body€of€law€toÐ 0"€  Ðresolve€the€nondisclosure€allegations€in€this€action.Ð ° Ðà  àThe€current€state€of€Delawareððs€disclosure€requirements€can€be€gleaned€from€a€trio€ofÐ ˆØ Ðdecisions€authored€by€the€Delaware€Supreme€Courtððs€Chief€Justice€Veasey:€òòMalpiede€v.€Townsonóó,Ð `° Ð780€A.2d€1075€(Del.€2001)òòóó;€òòLoudon€v.€Archer„Daniels„Midland€Co.óó,€700€A.2d€135€(Del.€1997);Ð 8 ˆ Ðandòòóó€òòArnold€v.€Society€for€Savings€Bancorp,€Inc.óó,€650€A.2d€1270€(Del.€1994).€€Under€thoseÐ  ` Ðdecisions,€information€is€material€and€must€be€disclosed€if€there€is€ð ða€substantial€likelihood€that€theÐ è 8  Ðdisclosure€of€the€omitted€fact€would€have€been€viewed€by€the€reasonable€investor€as€havingÐ À  Ðsignificantly€altered€the€ððtotal€mixðð€of€information€made€available.ðð€€òòMalpiedeóó,€780€A.2d€at€1086.€Ð ˜è  ÐThe€disclosure€duty€has€its€limits:Ð pÀ ÐÓLÔÓà  àThe€directorsðð€duty€of€disclosure€does€not€oblige€them€to€characterize€their€conduct€in€Ð H˜ Ðà  àsuch€a€way€as€to€admit€wrongdoing.€.€.€.€[A]€board€is€not€required€to€engage€in€self„Ð 4„ Ðà  àflagellation€and€draw€legal€conclusions€implicating€itself€in€a€breach€of€fiduciary€duty€from€Ð  p Ðà  àsurrounding€facts€and€circumstances€prior€to€a€formal€adjudication€on€the€matter.Ð  \ ÐÌòòÓc¬ÓLoudonóó,€700€A.2d€at€143.€€Also,€because€directorsðð€roles€differ€significantly€from€the€roles€ofÐ ä4 Ðstockholders,€òòWerbowsky€v.€Collombóó,€362€Md.€581,€599€(2001),€the€disclosure€duty€does€notÐ ¼  Ðentitle€stockholders€to€so€much€information€as€to€enable€them€to€replicate€the€directorsðð€efforts,Ð ”ä Ðòòseeóó€òòIn€re€Staples,€Inc.€Shareholders€Litigationóó,€792€A.2d€934,€953„54€(Del.€Ch.€2001).€€Rather,Ð l¼ Ðdirectors€must€disclose€sufficient€information€to€enable€a€ð ðreasonable€investorðð€to€make€anÐ D!” Ðinformed€decision€on€the€matter€presented.€€òòArnoldóó,€650€A.2d€1277.€€Chief€Justice€Veasey€has€hadÐ #l! Ðoccasion€to€clarify€that€disclosure€duties€do€not€rise€and€fall€with€the€level€of€sophistication€of€theÐ ô$D # Ðindividual€investors;€rather,€the€standard€remains€an€objective€ð ðreasonable€investorðð€standard.€Ð Ì&"% ÐòòHubbard€v.€Hibbard€Brown€&€Co.óó,€633€A.2d€345,€352„53€(Del.€1993).Ð ¤(ô#' Ðà  àFinally,€Delaware€law€provides€plaintiffs€with€a€useful€analytical€framework€for€pleadingÐ |*Ì%) Ðcauses€of€action€for€nondisclosure,€requiring€plaintiffs€to:Ð ° Ðà  à(1)€ð ðallege€that€facts€are€missing€from€the€proxy€statement,ððÐ ˆØ Ðà  à(2)€ð ðidentify€those€facts,ððÐ `° Ðà  à(3)€ð ðstate€why€they€meet€the€materiality€standard,ðð€andÐ 8 ˆ Ðà  à(4)€ð ðhow€the€omission€caused€injury.ððÐ  ` ÐòòLoudonóó,€700€A.2d€at€141.€€This€Court€would€add€one€additional€pleading€requirement:€TheÐ è 8  Ðplaintiff€must€allege€that€the€information€was€known€to€the€directors,€or€within€the€directorsððÐ À  Ðcontrol.€€òòId.óó€at€143.Ð ˜è  Ðò ò4.€€Stockholder€ratification.ó óÐ pÀ Ðà  àAs€explained€in€section€II.C.2.,€above,€section€2„419€provides€a€procedure€for€informedÐ H˜ Ðstockholder€ratification€of€interested€and€non„independent€director€transactions.€€In€addition€toÐ  p Ðthat€specialized€statutory€ratification€provision,€Maryland€common€law€provides€that€generallyÐ øH Ðdirectors€cannot€be€held€liable€for€acts€which€were€ratified€by€informed€stockholders.€€òòCoffman€v.Ð Ð  ÐMd.€Pubððg€Co.óó,€167€Md.€275,€289€(1934);€òòWittmanóó,€120€Md.€App.€at€377„78.€€StockholderÐ ¨ø Ðratification€is€only€as€good€as€the€disclosure€which€preceded€it,òòid.óó,€and€such€disclosures€mustÐ €Ð Ðcomply€with€the€standards€described€in€section€II.C.3.,€above.Ð X ¨ Ðò ò5.€€The€allegations.Ð 0"€  Ða.€€Count€1:€ð ðImproper€Diversion€of€Merger€Consideration.ððó óÐ $X" Ðà  àThe€plaintiffs€entitled€count€1,€ð ðBreach€of€Fiduciary€Duty€(Improper€Diversion€of€MergerÐ à%0!$ ÐConsideration),ðð€and€the€plaintiffsðð€memorandum€in€opposition€to€dismissal€illuminates€theÐ ¸'#& Ðtheories€underlying€this€count:Ð )à$( ÐÓPéÓà  à[I]t€is€not€simply€attacking€the€allocation€of€merger€consideration€.€.€.€.€€It€challenges€the€Ð h+¸&* Ðà  àmanner€by€which€the€negotiations€were€handled€by€interested€defendants,€òònotóó€the€Special€Ð ° Ðà  àCommittee,€and€the€diversion€of€money€from€the€public€stockholders€to€executives€and€Ð œì Ðà  àadvisors€through€extremely€lucrative€change€of€control€agreements€and€exorbitant€fees€to€Ð ˆØ Ðà  àadvisors.Ð tÄ ÐÌÓßßÓThe€defendants€argue€that€count€one€must€be€dismissed€because,€assuming€its€allegations€amountÐ L œ Ðto€a€breach€of€the€directorsðð€duties,€PRIððs€stockholders€ratified€the€directorsðð€actions€after€fullÐ $ t Ðdisclosure.Ð ü L  Ðà  àThe€bulk€of€the€facts€alleged€in€count€1€were€fully€disclosed€in€the€September€30€proxyÐ Ô$  Ðstatement.€€Paragraph€99€of€the€Third€Amended€Complaint€contains€no€allegations€of€fact;€rather,Ð ¬ü  Ðit€contains€only€conclusory€characterizations.€€Md.€R.€2„303(b);€òòRead€Drug€&€Chem.€Co.€v.Ð „Ô  ÐColwill€Constr.€Co.óó,€250€Md.€406,€412„16€(1968).€€To€the€extent€paragraphs€101„104€containÐ \¬ Ðòòfactsóó€rather€than€plaintiffsðð€conclusory€characterizations€of€fact,€those€facts€were€also€disclosed€inÐ 4„ Ðthe€proxy€materials€at€pages€15€through€28€(ð ðBackground€to€the€Mergerðð),€66€through€69Ð  \ Ð(ð ðInterests€of€Certain€Persons€in€the€Mergerðð),€and€77€(ð ðSecurity€Ownership€of€Management€andÐ ä4 ÐCertain€Beneficial€Ownersðð).€€Thus,€even€assuming€those€facts€were€actionable,€the€informedÐ ¼  Ðstockholdersðð€vote€for€the€merger€to€which€those€allegations€relate€ratified€the€boardððs€actions€andÐ ”ä Ðextinguished€the€prospect€of€director€liability€for€those€acts.€€òòWittmanóó,€120€Md.€App.€at€377„78.Ð l¼ Ðà  àThe€remaining,€undisclosed€allegation€is€that,€ð ðThe€Deephaven€transaction€was€improperÐ D!” Ðand€the€Individual€Defendants€turned€a€blind€eye€to€Lightstoneððs€actions.ðð׃g×Ý ƒ6%ÃÝòòÚ  Ú16Ú  ÚóóÝ  Ý×  ×€€Paragraphs€71Ð #l! Ðthrough€81€of€the€Third€Amended€Complaint€describe€the€Deephaven€stock€sale.€€Plaintiffs€allegeÐ ô$D # Ðthat€Lichtenstein€paid€$22€per€share€for€Deephavenððs€Series€A€stock,€and€the€agreement€alsoÐ Ì&"% Ðbound€Deephaven€to€vote€in€favor€of€the€merger€at€the€stockholderððs€meeting.׃h×Ý ƒ6%ÃÝòòÚ  Ú17Ú  ÚóóÝ  Ý×  ×€€In€support€ofÐ ° Ðtheir€contention€that€the€transaction€was€improper,€plaintiffs€cite€òòSchreiber€v.€Carneyóó,€447€A.2dÐ ˆØ Ð17€(Del.€Ch.€1982)€and€òòHewlett€v.€Hewlett„Packard€Co.óó,€C.A.€No.€19513„NC,€2002€WL€549137Ð `° Ð(Del.€Ch.€Apr.€8,€2002).€€However,€for€the€same€reasons€explained€in€the€Chancery€CourtððsÐ 8 ˆ Ðdecision€in€òòIn€re€IXC€Communications,€Inc.€Shareholders€Litigationóó,€C.A.€No.€17324,€1999€WLÐ  ` Ð1009174€(Del.€Ch.€Oct.€27,€1999)€(permitting€acquiring€corporationððs€purchase€of€a€minority€ofÐ è 8  Ðtargetððs€shares,€with€votes,€in€a€ð ðside€dealðð),€the€Deephaven€sale€was€not€improper€underÐ À  ÐòòSchreiberóó.׃j,×Ý ƒ6%ÃÝòòÚ  Ú18Ú  ÚóóÝ  Ý×  ×€€Despite€the€ð ðdiscordant€ringðð€of€the€term€ð ðvote„buying,ðð€Maryland€stockholdersÐ ˜è  Ðhave€the€right€ð ðto€cast€[their]€votes,€or€to€grant€a€proxy€or€otherwise€transfer€[their]€right€to€vote,Ð pÀ Ðin€any€way€[they]€decide[]€and€for€any€reason€or€no€reason.ðð€€Hanks,€òòsupraóó,€ðð€7.15,€at€253.€Ð H˜ ÐLightstone€purchased€from€Deephaven€only€3.9%€of€PRIððs€Series€A€stock,€and€thus€the€acquiringÐ  p Ðcompany€did€not€ð ðlock€upðð€the€vote,€and€the€transaction€did€not€disenfranchise€plaintiffs.Ð ° Ðò òb.€€Count€2:€ð ðFailure€to€Offer€Fair€Price.ððó óÐ ˆØ Ðà  àThe€second€count€proceeds€on€a€theory€that€the€defendant„directors€failed€to€offer€a€fairÐ `° Ðprice€to€Series€A€stockholders€because€(1)€the€committee€and€board€arrived€at€a€merger€allocationÐ 8 ˆ Ðbased€in€part€on€internal€corporate€politics€rather€than€a€purely€economic€analysis;€(2)€conflictsÐ  ` Ðamong€board€members€rendered€them€incapable€of€independently€exercising€their€judgment;€(3)Ð è 8  Ðthe€directors€failed€to€obtain€the€highest€value€reasonably€available€for€Series€A€shares;€(4)€theÐ À  Ðmerger€price€includes€a€ð ðwrongful€diversion€of€consideration;ðð€and€(5)€the€merger€price€is€basedÐ ˜è  Ðon€ð ðan€analysis€of€fair€value€that€does€not€comply€with€applicable€law.ðð€€The€facts€underlyingÐ pÀ Ðthese€characterizations€fail€to€state€a€claim€for€relief.€€òòWittmanóó,€120€Md.€App.€at€377„78.Ð H˜ ÐÓö÷ÓÓÓà  àThe€proxy€disclosed€at€least€six€times€that€Houlihan€Lokeyððs€fairness€opinion€did€notÐ  p Ðinclude€an€opinion€as€to€any€particular€allocation€of€the€aggregate€consideration€among€theÐ øH Ðvarious€stock€classes€or€series.€€September€30€Proxy€at€6,€23,€44„45,€46„47,€49,€and€C„3.€Ð Ð  ÐNevertheless,€the€proxy€included€an€allocation€arrangement.€€Pages€18€through€28€of€the€proxyÐ ¨ø Ðdescribe€the€Special€Committeeððs€ongoing€dialogue€among€its€advisors,€Lightstone,€theÐ €Ð Ðstockholders,€and€the€board€regarding€an€acceptable€allocation.€€The€most€poignant€of€theseÐ X ¨ Ðdiscussions€appears€on€page€24,€where€Houlihan€Lokey€reported€to€the€Special€Committee€andÐ 0"€  Ðthe€board€that€ð ðsubstantially€all€of€the€series€A€and€series€B€preferred€stockholders€.€.€.€expressed€aÐ $X" Ðdesire€for€liquidity€at€a€reasonable€allocation,ðð€and€the€Special€Committee€reported€to€the€boardÐ à%0!$ Ðthat€it€factored€the€preferred€directorsðð€allocation€preferences€into€its€recommendation€because,Ð ¸'#& ÐÓV Óà  àgiven€the€size€of€Mr.€Amsterððs€holdings€and€the€likely€influence€that€a€ð ðnoðð€vote€by€the€Ð )à$( Ðà  àpreferred€board€representatives€would€have€over€the€other€preferred€stockholders,€it€Ð |*Ì%) Ðà  àbelieved€that€the€support€of€the€preferred€board€representatives€was€crucial€to€having€the€Ð h+¸&* Ðà  àtransaction€approved€by€the€Companyððs€preferred€stockholders.Ð ° ÐÌÓúþÓThe€proxy€thus€fully€disclosed€what€did,€and€did€not€form€the€basis€for€the€allocation,€and,Ð ˆØ Ðassuming€plaintiffsðð€alleged€a€breach€of€duty,€under€òòWittmanóó€the€subsequent€informed€stockholderÐ `° Ðvote€ratified€this€methodology.׃k×Ý ƒ6%ÃÝòòÚ  Ú19Ú  ÚóóÝ  Ý×  ×Ð 8 ˆ Ðà  àThe€first€sentence€of€the€Third€Amended€Complaintððs€paragraph€108€merely€recapitulatesÐ  ` Ðin€slightly€modified€language€allegations€contained€in€paragraphs€101€and€103,€which€the€CourtÐ è 8  Ðhas€already€disposed€of€in€analyzing€count€1.€€The€second€sentence€alleges€that€ð ða€majority€of€theÐ À  ÐIndividual€Defendantsðð€suffered€from€disabling€conflicts€of€interest.€€Relying€on€Delaware€law,Ð ˜è  Ðplaintiffsðð€opposition€memorandum€erroneously€stated€that€ð ðwhile€alleged€breaches€of€the€duty€ofÐ pÀ Ðcare€may€be€extinguished€by€a€fully„informed€vote,€breaches€of€the€duty€of€loyalty€cannot.ðð€€OnÐ H˜ Ðthe€contrary,€Marylandððs€Court€of€Special€Appeals€has€held€that€stockholders€can€ratify€allegedÐ  p Ðbreaches€of€the€duty€of€loyalty.€€òòWittmanóó,€120€Md.€App.€at€378.€€Therefore,€the€facts€supportingÐ øH Ðthe€plaintiffsðð€conflict€of€interest€claims€cannot€state€a€claim€if€they€appear€in€the€proxy€becauseÐ Ð  Ðthey€were€ratified.׃l×Ý ƒ6%ÃÝòòÚ  Ú20Ú  ÚóóÝ  Ý×  ×Ð ¨ø Ðà  àThe€facts€which€the€Court€has€not€located€in€the€proxy€disclosures,€which€must€beÐ ° Ðevaluated€on€the€merits,€are€as€follows:Ð ˆØ ÐÓ€  (Eìy3 ÓÝ"‚ 3£"ÝÝ  Ýà  àÝ‚ 3£SÝÔ2EìÔððÔ3  Ôà0 ` àÝ  ÝAmster€nominated€Skoien€to€PRIððs€board.݃ 3£SŒÝŒÐ`°` (#` (# ÐŒÝ  ÝÝ"‚ 3£"ÝÝ  Ýà  àÝ‚ 3£?ÝÔ2EìÔððÔ3  Ôà0 ` àÝ  ÝSkoien€served€as€an€aide€to€director€Thompson€when€Thompson€was€governor€ofÐ 8 ˆ ÐIllinois€(from€1977€through€1991),€ð ðthus€Skoien€and€Thompson€have€enjoyed€aÐ  ` Ðrelationship€spanning€over€24€years.ðð݃ 3£?xÝŒÐè 8 ` (#` (# ÐŒÝ  ÝÝ"‚ 3£"ÝÝ  Ýà  àÝ‚ 3£ìÝÔ2EìÔððÔ3  Ôà0 ` àÝ  ÝThompson€is€also€a€director€in€Prime€Group€Realty€Trust,€an€entity€which€isÐ À  Ðaffiliated€with€ð ðthe€Reschke€family.ðð݃ 3£ì%݌Иè ` (#` (# ÐŒÝ  ÝÝ"‚ 3£"ÝÝ  Ýà  àÝ‚ 3£9ÝÔ2EìÔððÔ3  Ôà0 ` àÝ  ÝThompson,€as€governor,€appointed€Skoien€and€Sharp€to€state€governmentÐ pÀ Ðpositions,€and€has€had€long„standing€relationships€spanning€over€twenty€years€withÐ H˜ Ðboth€individuals.݃ 3£9r݌Рp` (#` (# ÐŒÝ  ÝÝ"‚ 3£"ÝÝ  Ýà  àÝ‚ 3£ÍÝÔ2EìÔððÔ3  Ôà0 ` àÝ  ÝSharp€served€as€the€director€of€Illinoisððs€lottery€in€Thompsonððs€administration.݃ 3£ÍÝŒÐøH` (#` (# ÐŒÝ  ÝÝ"‚ 3£"ÝÝ  Ýà  àÝ‚ 3£åÝÔ2EìÔððÔ3  Ôà0 ` àÝ  ÝDirector€Randall€was€a€PRI€director€for€more€than€ten€years.݃ 3£åÝŒÐÐ ` (#` (# ÐŒÝ  ÝAs€to€all€of€these€facts€the€Court€can€say€with€certainty€that,€as€a€matter€of€law,€they€do€not€giveÐ ¨ø Ðrise€to€a€reasonable€expectation€that€these€directorsðð€independent€judgment€was€compromised.€Ð €Ð ÐòòSeeóó€òòShapiroóó,€136€Md.€App.€at€24;€òòcf.óó€òòOrmanóó,€794€A.2d€at€27€(ð ðThe€naked€assertion€of€a€previousÐ X ¨ Ðbusiness€relationship€is€not€enough€to€overcome€the€presumption€of€a€directorððs€independence.ðð).Ð 0"€  Ðà  àThe€plaintiffs€allege,€in€paragraph€109,€that€they€ð ðlost€their€Series€A€shares€without€theÐ $X" Ðdefendants€discharging€their€duty€to€obtain€the€highest€value€reasonably€available€for€thoseÐ à%0!$ Ðshares.ðð€€The€short€answer€to€this€allegation€is€that€the€directors€had€no€such€duty.€€The€languageÐ ¸'#& Ðof€this€allegation€demonstrates€a€misunderstanding€of€the€duties€imposed€by€ðð€2„405.1(a).€€AsÐ )à$( Ðobserved€in€Hanks,€òòsupraóó,€ðð€6.6[b],€at€164.1,€the€directorððs€duties€ð ðare€directed€solely€at€theÐ h+¸&* Ðmanner,€or€process,€by€which€a€director€makes€decisions€rather€than€at€the€results€of€thoseÐ ° Ðdecisions.ðð€€In€òòWittmanóó,€the€Court€of€Special€Appeals€quoted€with€approval€from€the€trial€judgeððsÐ ˆØ Ðdecision:Ð `° ÐÓÜÓà  à[The€stockholder]€argues€that€[the€corporation]€could€have€gotten€a€better€deal.€€But€that€Ð 8 ˆ Ðà  àis€really€not€a€cause€of€action.€€Maybe€they€could€have.€€Maybe€they€couldnððt€have.€€But€Ð $ t Ðà  àthat€doesnððt€constitute€a€cause€of€action.€€Thatððs€something€stockholders€can€decide.€€Ð  ` Ðà  àWhat€would€get€the€court€to€intervene€would€be€evidence€of€facts€of€the€board€and/or€Ð ü L  Ðà  àmanagement€violating€its€duty€of€loyalty€and€duty€of€care.Ð è 8  ÐÌòòÓŸ)ÓWittmanóó,€120€Md.€App.€at€378.€€Here,€the€processes€by€which€the€directors€arrived€at€the€mergerÐ À  Ðconsideration€and€allocation€were€disclosed€in€the€proxy€materials,€were€ratified€by€the€informedÐ ˜è  Ðstockholders,€and€therefore€are€not€actionable.€€òòId.óó€at€377„78.Ð pÀ Ðà  àParagraph€109€included€redundant€allegations€of€a€ð ðwrongful€diversion€of€consideration,ððÐ H˜ Ðwhich€the€Court€has€already€dealt€with,€and€an€allegation€that€ð ðthe€merger€price€is€the€result€of€.€.€.Ð  p Ðan€analysis€of€fair€value€that€does€not€comply€with€applicable€law.ðð€€Again,€where€economicÐ øH Ðvaluation€analyses€were€performed,€those€analyses€were€sufficiently€disclosed€in€the€proxyÐ Ð  Ðmaterials,€and€the€stockholdersðð€subsequent€ratification€extinguished€any€liability€arising€fromÐ ¨ø Ðthese€facts.€€òòId.óóÐ €Ð Ðò òc.€€Count€3:€ð ðDuty€of€Loyalty€Resulting€in€Unfair€Process.ððó óÐ X ¨ Ðà  àCount€3€purports€to€allege€that€the€directors€breached€their€duty€of€loyalty€based€on€(1)Ð 0"€  Ðthe€mere€occurrence€of€the€Deephaven„Lightstone€stock€sale;€(2)€the€alleged€conflicts€between€theÐ $X" ÐSpecial€Committee€and€Series€B„owning€directors;€(3)€G.€Reschkeððs€change„in„control€payments;Ð à%0!$ Ð(4)€ð ðthe€complete€failure€of€the€Special€Committee€to€attempt€to€negotiate€on€price€or€theÐ ¸'#& Ðallocations€demanded€by€Amster;ðð€and€(5)€Houlihan€Lokeyððs€ð ðsuccess€fee.ðð€€As€explained€above,Ð )à$( Ðthe€Deephaven„Lightstone€transaction€was€not€improper,€and€the€board€informed€the€stockholdersÐ h+¸&* Ðof€the€boardððs€stock€holdings€and€any€change„in„control€payments,€so€none€of€those€facts€can€giveÐ ° Ðrise€to€a€cause€of€action€under€òòWittmanóó.Ð ˆØ Ðà  àThe€plaintiffs€allege€a€ð ðcomplete€failure€of€the€Special€Committee€to€attempt€to€negotiate,ððÐ `° Ðbut€the€plaintiffs€fail€to€allege€well„pleaded€facts€supporting€that€conclusory€characterization.€€TheÐ 8 ˆ ÐThird€Amended€Complaint€closely€tracks€the€chronology€included€in€the€proxy€statement,€and€thatÐ  ` Ðchronology€details€the€ongoing€dialogue€among€the€Special€Committee,€its€advisors,€and€variousÐ è 8  Ðinterested€parties.€€Notwithstanding€plaintiffsðð€characterizations€of€those€events,€the€ThirdÐ À  ÐAmended€Complaint€fails€to€allege€supporting€facts€giving€rise€to€a€cause€of€action.Ð ˜è  Ðà  àFor€example,€paragraph€21€merely€alleges€that€the€allocations€approved€by€the€SpecialÐ pÀ ÐCommittee€and€board€coincided€with€the€allocations€proposed€by€director€Amster,€but€paragraphÐ H˜ Ð21€does€not€allege€that€Amster€òòð ðdictatedððóó€the€Special€Committeeððs€or€the€boardððs€decisions.€€NorÐ  p Ðare€there€any€well„pleaded€factual€allegations€of€Amsterððs€ð ðstrong„armingðð€other€directors€inÐ øH Ðparagraphs€34,€36,€40,€52,€101,€and€108.€€In€reality,€as€described€in€the€proxy€materialsÐ Ð  Ðincorporated€within€plaintiffsðð€complaint,€Amster€played€a€significant€role€throughout€the€processÐ ¨ø Ðin€his€capacity€as€an€interested€holder€of€preferred€stock.€€September€30€proxy€at€18,€21,€22,€23,Ð €Ð Ð24,€25,€26,€and€27.€€The€proxy€disclosed€the€Special€Committeeððs€belief€that€(1)€the€proposedÐ X ¨ Ðmerger€presented€the€best€route€to€the€liquidity€desired€by€nearly€all€of€PRIððs€stockholders,€andÐ 0"€  Ð(2)€without€Amsterððs€support,€the€merger€probably€would€not€happen.€€Director€Amsterððs€actions,Ð $X" Ðas€well€as€those€of€the€Special€Committee,€were€made€plain€to€the€stockholders,€who€in€turnÐ à%0!$ Ðratified€those€actions€and€extinguished€any€possible€director€liability.€€òòWittmanóó,€120€Md.€App.€atÐ ¸'#& Ð377„78.Ð )à$( ÐÓ€  (Eìyy Óà  àFinally,€the€Court€need€only€briefly€address€plaintiffsðð€allegation€regarding€HoulihanÐ h+¸&* ÐLokeyððs€fee.€€Paragraph€24€alleges€that€PRI€was€to€pay€Houlihan€Lokey€$900,000€for€its€services,Ð ° Ðand€if€a€merger€were€consummated,€Houlihan€would€also€receive€approximately€$2€million€as€aÐ ˆØ Ðð ðsuccess€fee,ðð€to€be€paid€by€the€acquisition€company.€€Plaintiffs€do€not€allege€that€these€termsÐ `° Ðwere€not€disclosed€to€the€stockholders,€and€because€they€were€disclosed,€the€informedÐ 8 ˆ Ðstockholder€vote€ratified€these€acts€under€òòWittmanóó.€€In€any€event,€without€more€these€fees€do€notÐ  ` Ðgive€rise€to€a€cause€of€action.€€òòWittmanóó,€120€Md.€App.€at€378.Ð è 8  Ðò òd.€€Count€4:€ð ðBreach€of€Duty€of€Disclosureððó óÐ À  Ðà  àPlaintiffs€present€four€nondisclosure€allegations:€(1)€ð ðDeephaven€was€paid€$22€per€shareÐ ˜è  Ðwhile€the€rest€of€the€Series€A€stockholders€received€$18.40€per€share;€(2)€the€Deephaven€stockÐ pÀ Ðsale€was€not€disclosed;€(3)€Amsterððs€role€in€allocation€negotiations€was€never€disclosed;€and€(4)Ð H˜ Ðthe€board€did€not€disclose€that€HLHZððs€analysis€ð ðhad€virtually€no€relevance€in€the€deliberations€ofÐ  p Ðthe€Special€Committee€or€the€Board.ððÐ øH Ðà  àThe€plaintiffsðð€first€alleged€nondisclosure€simply€misstates€the€plaintiffsðð€own€allegations.€Ð Ð  ÐPlaintiffs€suggest€in€paragraphs€73,€74€and€75,€82,€and€116,€that€as€a€result€of€the€merger,Ð ¨ø ÐDeephaven€would€receive€$22€per€Series€A€share,€while€all€other€Series€A€stockholders€wouldÐ €Ð Ðreceive€only€$18.40.€€That€characterization€of€the€Deephaven„Lightstone€sale€conflicts€with€theÐ X ¨ Ðplaintiffsðð€own€statement€of€the€facts.€€Upon€execution€of€the€November€18€Deephaven„Ð 0"€  ÐLightstone€contract,€Deephaven€became€entitled€to€$22€for€each€share€sold€under€that€transaction;Ð $X" Ðupon€completion€of€the€merger,€Deephaven€became€entitled€to€$18.40€per€Series€A€share€that€itÐ à%0!$ Ðthen€held,€just€like€every€other€Series€A€stockholder.€€These€were€two€distinct€transactions.€Ð ¸'#& ÐPlaintiffsðð€characterizations€to€the€contrary€do€not€qualify€as€well„pleaded€allegations€of€fact,€andÐ )à$( Ðdo€not€state€a€claim€upon€which€relief€can€be€granted.Ð h+¸&* Ðà  àThe€second€nondisclosure€allegation€fails€because€plaintiffsðð€never€allege€that€informationÐ ° Ðregarding€the€stock€sale€was€known€to€or€within€the€directorsðð€control.€€òòLoudonóó,€700€A.2d€at€143.€Ð ˆØ ÐThe€plaintiffsðð€implicitly€concede€this€point€by€alleging€that€the€directors€breached€their€duties€byÐ `° Ðnot€knowing€about€the€Deephaven€sale.€€òòSeeóó€Third€Amended€Complaint€ðððð€68,€100.€€As€for€theÐ 8 ˆ Ðviability€of€that€claimed€duty,€see€footnote€16,€above.Ð  ` Ðà  àIn€count€3,€analyzed€above,€plaintiffs€argued€that€the€board€violated€its€duties€by€allowingÐ è 8  Ðdirector€Amster€to€control€the€merger€negotiations,€and€the€Courtððs€analysis€showed€thatÐ À  Ðplaintiffsðð€conclusory€characterizations€did€not€amount€to€well„pleaded€facts€stating€a€cause€ofÐ ˜è  Ðaction.€€Essentially,€the€plaintiffs€failed€to€plead€facts€(as€opposed€to€characterizations)€showingÐ pÀ Ðwhat€role€Amster€played€in€addition€to,€or€apart€from,€what€is€described€in€the€proxy€incorporatedÐ H˜ Ðinto€plaintiffsðð€complaint.€€Here,€count€4€alleges€that€the€board€breached€its€disclosure€duty€byÐ  p Ðfailing€to€disclose€that€Amsterððs€role€in€the€negotiations€was€as€described€in€plaintiffsðð€paragraphÐ øH Ð112.€€However,€as€explained€in€the€Courtððs€analysis€on€count€3,€the€Third€Amended€ComplaintÐ Ð  Ðfails€to€present€well„pleaded€allegations€showing€Amsterððs€role€(or€the€Special€Committeeððs)€toÐ ¨ø Ðhave€been€anything€other€than€that€described€in€the€proxy€on€which€the€Complaint€relies.€€TheÐ €Ð Ðboard€fulfilled€its€disclosure€obligations,€and€plaintiffs€have€not€pleaded€facts€showing€omission€orÐ X ¨ Ðmisrepresentation.Ð 0"€  Ðà  àSimilarly,€the€plaintiffsðð€final€nondisclosure€allegation€recapitulates€a€claim€alreadyÐ $X" Ðresolved€in€count€2.€€Plaintiffs€argued€in€count€2€that€the€board€breached€its€duties€by€approvingÐ à%0!$ Ðan€allocation€based€in€part€on€whether€it€would€garner€enough€votes€for€the€merger,€rather€thanÐ ¸'#& Ðon€the€basis€of€a€purely€economic€analysis.€€The€Courtððs€resolution€of€that€count€explained€thatÐ )à$( Ðthe€nondisclosure€alleged€here€(i.e.,€that€no€advisor€expressed€a€financial€opinion€on€the€relativeÐ h+¸&* Ðfairness€of€the€allocation€arrangement),€actually€was€fully€disclosed€in€the€proxy€materialsÐ ° Ðincorporated€into€the€complaint.€€Accordingly,€this€part€of€count€4€fails€to€state€a€nondisclosureÐ ˆØ Ðclaim.Ð `° Ðò òe.€€Count€5:€Aiding€and€Abetting€by€Lightstone€and€Acquisitionó óÐ 8 ˆ Ðà  àPleading€this€aiding€and€abetting€theory€as€a€separate€count€may€be€improper€in€form.€€òòSeeóóÐ  ` ÐòòManikhióó,€360€Md.€at€360€n.6.€€At€any€rate,€count€five€fails€because€the€underlying€counts€fail.€€òòSeeóóÐ è 8  ÐòòAlleco,€Inc.€v.€Harry€&€Jeannette€Weinberg€Found.,€Inc.óó,€340€Md.€176,€200„201€(1995).Ð À  ÐÝ‚ QÿÝÔ€XíXXXíÔÔ€XíXXXíÔÔÔÔcÿÿÔÔb  Ôò òÝ  ÝIII.€€ConclusionÝ‚ QÿOƒÝÔ€XíXXXíÔÔ€XíXXXíÔÔÔÔcÿÿÔÔb  Ôó óÝ  ÝÐ ˜è  Ðà  àFor€the€reasons€set€forth€in€detail€above,€defendantsðð€motions€to€dismiss€the€ThirdÐ pÀ ÐAmended€Complaint€will€be€granted.Ð H˜ ÐÓ®'Óà  àà ` àà ¸ àà  àà h àà À àà  àà p à_____________________________Ð  p Ðòòà  àóóà ` àà ¸ àà  àà h àà À àà  àà p àALBERT€J.€MATRICCIANI,€JR.Ð  \ Ðà  àà ` àà ¸ àà  àà h àà À àà  àà p àJudgeÐ øH ÐÌà  àà ` àà ¸ àà  àà h àà À àà  àà p àòòApril€1,€2004óóÐ Ð  ÐÌcc:Ð ¨ø ÐÌMichael€A.€Stodghill,€Esq.à  àà h àà À àCharles€P.€Scheeler,€Esq.Ð €Ð ÐRubin€&€Rubin,€Charteredà  àà h àà À àPiper€Rudnick,€LLPÐ l¼ ÐOne€Church€St.,€ste.€201à  àà h àà À à6225€Smith€Ave.Ð X ¨ ÐRockville,€MD€20850à ¸ àà  àà h àà À àBaltimore,€MD€21209Ð D!” ÐÌEmily€Komlossy,€Esq.à  àà h àà À àAndrew€J.€Graham,€Esq.Ð #l! ÐGoodkind,€Labaton,€Rudoff€&à h àà À àKramon€&€Graham,€P.A.Ð $X" ÐSucharow,€LLPà ¸ àà  àà h àà À à1€South€St.,€ste.€2600Ð ô$D # Ð2455€E.€Sunrise€Blvd,€ste.€813à h àà À àBaltimore,€MD€21202Ð à%0!$ ÐFt.€Lauderdale,€FL€33304