Page 1

Consolidated C.A. No. 20269.

        Jay W. Eisenhofer, Geoffrey C. Jarvis and P. Brad deLeeuw, of GRANT & EISENHOFER P.A., Wilmington, Delaware; Michael Hanrahan, Thomas A. Mullen, Paul A. Fioravanti, Jr. and Tanya P. Jefferis, of PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; OF COUNSEL: Marc A. Topaz, of SCHIFFRIN & BARROWAY, LLP, of Bala Cynwyd, Pennsylvania; Richard B. Brualdi and Kevin T. O'Brien, of THE BRUALDI LAW FIRM, New York, New York, Attorneys for Plaintiffs.

        R. Franklin Balotti, Lisa A. Schmidt and Srinivas M. Raju, of RICHARDS, LAYTON & FINGER, Wilmington, Delaware; OF COUNSEL: Robert J. Kopecky and Timothy A. Duffy, of KIRKLAND & ELLIS LLP, Chicago, Illinois; Greg A. Danilow and Stephen A. Radin, of WEIL GOTSCHAL & MANGES LLP, New York, New York, Attorneys for Defendants Percy N. Barnevik, John H. Bryan, Armando M. Codina, George M. C. Fisher, Nobuyuki Idei, Karen Katen, Alan G. Lafley, Phillip A. Laskaway, E. Stanley O'Neal, Eckhard Pfeiffer, John S. Smith, Jr., G. Richard Wagoner, Jr., Lloyd D. Ward, and General Motors Corporation.

        Edward P. Welch, Edward B. Micheletti, Seth M. Beausang, James A. Whitney and T. Victor Clark, of SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington, Delaware, Attorneys for Defendant The News Corporation Limited.

        CHANDLER, Chancellor.

        Plaintiffs instituted this lawsuit against defendant General Motors Corporation ("GM") and defendant The News Corporation Limited ("News" or "News Corp."),¹ challenging a series of transactions by which News acquired a significant interest in Hughes Electronics Corporation ("Hughes").² Hughes was previously a wholly-owned subsidiary of GM. The individuals who were directors of GM at the relevant times have also been named as defendants (the "Individual" or "Director" defendants).³ Plaintiffs were at all relevant times holders of GM's Class H Common Stock ("GMH"), which was a "tracking stock" representing the financial performance of Hughes while Hughes was wholly-owned by GM. For the reasons set forth in more detail later, I grant the motion to dismiss brought by GM and the Individual defendants. The complaint fails to state a claim upon which relief can be granted as to GM and the Individual defendants. I also grant News' motion to dismiss for the same reason.

Page 2

        The operative complaint in this action is the Revised Amended Consolidated Class Action Complaint ("Complaint"), filed on May 7, 2004. It is a "door-stop" weight 97-page tome that purports to state seven claims. The Complaint contains some facts, but also offers a rich stew of conclusory allegations and legal arguments. Counts I, II, III, and IV are against GM and the Individual defendants for breaches of the duty of loyalty. Counts V and VI are against GM and the Individual defendants for breach of GM's Restated Certificate of Incorporation. Count VII is against News for aiding and abetting the Individual defendants' breaches of fiduciary duty. It is necessary that I briefly outline the Complaint's key elements and factual allegations.

        A. Director Defendants Were Not Disinterested and Independent

        Plaintiffs allege that the Director defendants are not disinterested and independent in connection with the transactions at issue in this case because their loyalties were to GM in order to preserve their directorships there, with the accompanying compensation and perquisites, and that the Director defendants were thus in conflict with the soon to be spun-off GMH shareholders.⁴ Plaintiffs argue that the non-employee GM directors are excessively compensated for their

Page 3

services as directors, and that similar excess is present in the compensation of the Hughes directors.⁵ Plaintiffs further attempt to impugn the independence of the directors by outlining professional connections that certain of the directors have that may relate to GM or Hughes.⁶ Nevertheless, there are no allegations in the Complaint that any of the compensation paid to the non-employee GM directors is material to them,⁷ with the exception that allegations of materiality are addressed toward defendant Smith, who was formerly the Chief Executive Officer of GM.⁸

Page 4

        B. GM's Pension Crisis

        Plaintiffs further allege that GM and its directors were not independent because GM had a "pension crisis."⁹ This conflict extended to the Investment Funds Committee of GM's Board of Directors,¹⁰ which is a named fiduciary under the Employee Retirement Income Security Act of 1974 ("ERISA") for certain of GM's pension plans.¹¹ Plaintiffs allege that because GM's pension funds were underfunded by $19.3 billion by the end of 2002, and GM's debt rating had been downgraded by Standard and Poor's to BBB, the directors on the Investment Funds Committee faced a direct conflict of interest between their fiduciary responsibilities over the pension plans and their fiduciary duties as directors of GM owed to the GMH shareholders.¹²

        C. The Transactions

        The split-off of Hughes was accomplished via a series of transactions detailed below, and announced to the public for the first time on April 9, 2003.¹³ Five days before the announcement, GM, as the 100% shareholder, caused Hughes to amend its certificate of incorporation to increase the number of authorized

Page 5

shares of Hughes common stock and Hughes Class B common stock from 1 million shares to 2.5 billion shares.¹⁴ An "excess shares" provision was added to the certificate of incorporation and Hughes' board was staggered, among other amendments.¹⁵

        Just before the split-off of Hughes was accomplished, Hughes paid a special dividend to its sole shareholder, GM, of $275 million in cash.¹⁶ The split-off occurred by GM's redemption of each GMH share in exchange for one share of Hughes' common stock, shares which Hughes had previously issued to GM.¹⁷ GM sold its economic interest in Hughes to News Corp. in the form of Hughes Class B common stock.¹⁸ GM received a combination of cash ($3.1 billion) and stock (28.6 million News Corp. Preferred American Depository Shares ("News ADSs")) from News.¹⁹ The News ADSs were valued at approximately $1.0 billion, bringing the total compensation from News to GM to $4.1 billion.²⁰ Including the

Page 6

$275 million dividend, GM received a total of $4.375 billion in compensation for divesting itself of Hughes, with $3.375 billion of that amount in cash.²¹

        Immediately following the above-described transactions, News acquired an additional interest in Hughes via the merger of a subsidiary of News into Hughes (the "Merger"), leaving News with approximately a 34% interest in Hughes.²² The former GMH shareholders therefore received a combination of Hughes common stock and News ADSs in exchange for their GMH shares.²³ News later transferred its interest in Hughes to another subsidiary of News Corp., Fox Entertainment.²⁴

        D. Rights and Terms of (and Policies Regarding) the GMH Shares

        The rights and terms of the GMH shares were defined in Article FOURTH of GM's Restated Certificate of Incorporation.²⁵ Dividends paid to the GMH shareholders were paid out of the "Available Separate Consolidated Net Income of Hughes," as opposed to the dividends to GM's common shareholders, which were paid out of other available funds not including the "Available Separate Consolidated Net Income of Hughes."²⁶ When the GM shareholders voted, the

Page 7

GMH shareholders voted with the other GM common shareholders (the "GM $1 2/3" holders), but each GMH share was treated as 0.2 GM $1 2/3 shares.²⁷ Similarly, in the unlikely event that GM were to be liquidated, the GMH shareholders would receive distributions from the same pool as the GM $1 2/3 shareholders, but with each GMH share again representing 0.2 GM $1 2/3 shares.²⁸ The GMH shares, therefore, did not have a direct interest in Hughes' assets (or GM's) except through a liquidation of GM. In the event of a liquidation of Hughes, GMH shareholders would not receive the proceeds of that liquidation, but would receive GM $1 2/3 stock, as detailed below.

        GM's Restated Certificate of Incorporation provided certain protections for the GMH shareholders in the event that GM should "sell, liquidate, or otherwise dispose of 80% or more of the business of Hughes...."²⁹ If one of those triggering events were to take place, each GMH share would be converted into GM $1 2/3 stock at a value equal to 120% of the value of the GMH stock on the date one of those transactions occurred.³⁰ Such a result could be avoided if the GM

Page 8

shareholders (both the GM $1 2/3 and the GMH) approved the transaction separately as individual classes.³¹

        Recognizing that the interests of the GM $1 2/3 and GMH shareholders may not always coincide, GM created a board committee called the Capital Stock Committee to determine the terms of any material transaction between GM and Hughes and ensure fairness to all shareholders.³² The Capital Stock Committee was chaired by Pfeiffer, with Barnevik and Bryan as members of the committee.³³ The GM board also adopted a Board Policy Statement Regarding Certain Capital Stock Matters ("Policy Statement") setting forth procedures to be followed in the event of a material transaction between GM and Hughes.³⁴

        This Policy Statement required that in the event of a transfer of material assets from Hughes to GM, GM's board would be required to declare and pay a corresponding dividend to the GMH shareholders.³⁵ The corresponding dividend

Page 9

would not be required if one of two exceptions were met: (1) Hughes receives "fair compensation" for the transfer; or (2) the transfer is approved by a majority of the GM $1 2/3 and GMH shareholders, voting as separate classes.³⁶ GM chose the second option for approving the special dividend by receiving consent for the dividend from the GM $1 2/3 and GMH shareholders.³⁷

        E. Allegations of Unfair Price and Process

        Plaintiffs make several allegations in an attempt to impugn the fairness of the consideration received by the GMH shareholders in the Hughes transactions as well as the process by which those transactions were negotiated and structured. At the time the Merger was announced on April 9, 2003, the approximately $14 per share consideration represented a twenty-two percent premium over the then-market price of a GMH share.³⁸ Plaintiffs allege that this premium was not as large as GM represented it to be because the merger announcement was strategically timed before two announcements that would substantially raise the market price for GMH shares.³⁹ Those two announcements were the announcement on April 11, 2003, that PanAm Sat Corporation ("PanAm Sat"), an eighty-one percent subsidiary of Hughes, announced higher than expected earnings, and the April 14,

Page 10

2003 announcement of Hughes' 2003 first quarter financial results, which were also favorable.⁴⁰ Plaintiffs also note Hughes' announced and projected financial results for the second and third quarters of 2003, as well as the price of PanAm Sat's public shares for the remainder of 2003.⁴¹

        Plaintiffs allege that the process by which the Hughes transactions were negotiated was flawed because the GM Directors delegated to management of GM and the management and board of directors of Hughes the responsibility to negotiate both with News and between themselves.⁴² The GMH shareholders were represented by Hughes' management and board.⁴³ Plaintiffs next speculate that an extra dollar per share was added to the special dividend paid by Hughes to GM as a result of News' agreement to reduce the amount of Hughes stock it would acquire from 36 percent to 34 percent, and that this reduction resulted in a material reduction of compensation to be paid to the GMH shareholders.⁴⁴

Page 11

        F. Fairness Opinions

        No fewer than four fairness opinions were obtained by GM and Hughes in connection with the Hughes transactions. These opinions were rendered by Merrill Lynch, Bear Stearns, Credit Suisse First Boston ("CSFB") and Goldman Sachs.⁴⁵ Reading the Complaint in the manner most favorable to the plaintiffs, it appears that Merrill Lynch and Bear Stearns gave an opinion to GM that the transactions were fair to GM.⁴⁶ Similarly, it seems that CSFB and Goldman Sachs opined that the transactions were fair to Hughes.⁴⁷ Plaintiffs complain that no financial advisor was retained to determine the fairness of the transactions specifically to the GMH shareholders.⁴⁸

        Before attacking the fairness opinions substantively, plaintiffs allege that the financial advisors were conflicted because: (1) a large portion of their compensation for the fairness opinion was contingent upon the transactions being consummated, and (2) each of the four advisors has had and continues to have a

Page 12

business relationship with GM, Hughes, and/or News.⁴⁹ Plaintiffs also allege that the fairness opinions were inadequate because the four advisors collaborated with each other instead of working independently, purportedly in order to develop the opinion desired by GM.⁵⁰ The fairness opinions were also allegedly inadequate because Hughes' stake in its eighty-one percent subsidiary, PanAm Sat, was dramatically undervalued, and because the updated fairness opinions of August 5, 2003 did not provide a complete and accurate description of the updated analyses performed by the advisors in reaching the updated opinions.⁵¹

        G. Manipulation of the GMH Vote

        As mentioned above, the GM $1 2/3 and GMH shareholders voted to approve the Hughes transactions. Almost 20 percent of the outstanding GMH shares were held by pension funds associated with GM after a June 2000 contribution.⁵² Later, on March 12, 2003, GM contributed another 149.2 million newly-issued GMH shares to its pension plans.⁵³ The Complaint then insinuates that GM had an ulterior motive in issuing these shares to its pension plans instead

Page 13

of selling the shares publicly and then contributing the cash to the plans.⁵⁴ The GM pension plans and other employee benefit plans held approximately 35 percent of the outstanding GMH stock at the time of the shareholder vote on the Hughes transactions.⁵⁵ The Complaint further states that GM's retained economic interest in Hughes decreased from 30.7 percent to 19.8 percent and that the pension plans' voting power was roughly doubled, and that after the Hughes transactions were consummated, the pension plans held approximately 19.8 percent of the outstanding Hughes common stock and 5.2 percent of the News ADSs.⁵⁶

        Plaintiffs then complain of certain accounting improprieties in valuing the GMH shares contributed to the pension plans which had the effect of increasing the pension plans' holdings to a greater extent and also, among other reasons, ostensibly gave the plans an incentive to vote for the Hughes transactions that was not shared by other GMH shareholders.⁵⁷ According to the Consent Solicitation, the pension and benefit plans' GMH shares were voted by the plans' trustee, the

Page 14

United States Trust Company ("U.S. Trust").⁵⁸ As trustee of the plans, U.S. Trust had a fiduciary duty under ERISA to act on behalf of the plans' beneficiaries, even if the interests of the plans' beneficiaries diverged from those of the other GMH shareholders.⁵⁹

        In preparing and mailing the Consent Solicitation, GM did so before receipt of a letter ruling by the Internal Revenue Service, purportedly in order to obtain shareholder approval before the inadequacy of the consideration to be received by the GMH shareholders became clear, even though the transaction would not close for some time due to required regulatory approvals.⁶⁰ Advance copies of the Consent Solicitation were sent by GM to certain GMH shareholders before the official mailing to all GM $1 2/3 (and presumably GMH) shareholders.⁶¹ The Consent Solicitation was sent to GMH shareholders of record as of August 1, 2003.⁶² That decision was allegedly communicated to ADP on or about July 25, 2003.⁶³ In addition, plaintiffs construe the Consent Solicitation to indicate that the GM board of directors did not meet between June 5, 2003 and August 5, 2003.⁶⁴

Page 15

GM also communicated with GM and Hughes employees on more than one occasion with respect to the upcoming vote.⁶⁵

        The Complaint also alleges that the Consent Solicitation is materially misleading and incomplete with respect to the following four broad categories:⁶⁶ (1) the "value enhancement" to the GMH shareholders of Hughes as a stand-alone company that was used as a justification for the $275 million dividend;⁶⁷ (2) the bases for the updated fairness opinions were not fully and fairly disclosed; (3) the effect of shareholder ratification of the transactions; and (4) GM's contribution of GMH stock to its pension and benefit plans.

        The Complaint is rounded out by allegations that the defendants did not act in good faith. Essentially, plaintiffs merely rehash each allegation in the Complaint and say that such actions evidence a lack of good faith without adding additional facts or substance. The specific allegations are that the defendants did not act in good faith because they: (1) manipulated the GMH shareholder vote; (2) did not comply with the requirements of GM's certificate of incorporation in obtaining shareholder approval of the transactions; (3) caused Hughes to pay GM the special dividend; (4) made inadequate disclosures about the proposed

Page 16

transactions; 5) relied upon conflicted financial advisors for fairness opinions; 6) engaged in a flawed negotiating process; 7) eliminated appraisal rights the GMH shareholders might have otherwise had in the transactions; and 8) took these actions to benefit GM and its pension and benefit plans by adopting a "we don't care" attitude toward the public GMH shareholders.⁶⁸

        H. Claims Alleged in the Complaint

        As previously stated, the Complaint purports to state seven claims. All of the claims except for Count VII are alleged against GM and the Individual Defendants. Count I is for breach of the duty of loyalty and unjust enrichment in the payment of the special dividend. Count II is for breach of the duty of loyalty in failing to deal fairly with the GMH shareholders and compensate them fairly in the transactions. Count III is for breach of the duty of loyalty in manipulating the shareholder vote. Count IV is for breach of the duty of disclosure. Count V is for breach of GM's Restated Certificate of Incorporation, Article Seventh. Count VI is for breach of GM's Restated Certificate of Incorporation, Article Fourth. Count VII is alleged against News for aiding and abetting a breach of fiduciary duty.

Page 17

        A. Standard on a Motion to Dismiss

        When considering a motion to dismiss under Rule 12(b)(6), I am required to assume the truthfulness of all well-pleaded allegations of the Complaint. In addition, I am required to extend to plaintiffs the benefit of all reasonable inferences that can be drawn from the Complaint. "Conclusory statements, [however], without supporting factual averments will not be accepted as true for purposes of a motion to dismiss."⁶⁹ Under this analysis, I cannot order a dismissal unless it is reasonably certain that the plaintiffs could not prevail under any set of facts that can be inferred from the Complaint. Consistent with these requirements, I accept as true all of the plaintiffs' properly pled allegations and have made every reasonable inference in their favor.⁷⁰

        B. Does the GM Defendants' Motion to Dismiss Improperly Rely on Matters Outside the Pleadings?

        As a threshold matter, I must address plaintiffs' contention that I may not consider matters outside the pleadings and that to the extent defendants base their motion on such matters to establish facts, dismissal is precluded.⁷¹ From the outset, plaintiffs understood the possibility that a fully informed, shareholder vote

Page 18

may, as a matter of law, preclude recovery on Counts I and II of their seven-count Complaint. Many of their allegations, therefore, attack the adequacy of the disclosures made to GM's shareholders and rest squarely on the contents of the Consent Solicitation. Therefore, the Court may consider the contents of a disclosure document and look for itself to see what the documents actually says and discloses. There would be no other way for a court to determine whether plaintiffs state a claim that the document was materially misleading or omitted a material fact.⁷²

        Plaintiffs attempt to distinguish this rationale by arguing a wholly unpersuasive point that they do not challenge the Courts' ability to consider the Consent Solicitation, but rather contend that the Court cannot look behind the words and assume the matters asserted in the solicitation are true. The Court finds this distinction unpersuasive because the defendants have not attempted to submit the Consent Solicitation to prove the truth of the matter asserted.⁷³ Rather, defendants have referred to the omitted sections of the Consent Solicitation when doing so fairly represents the selective portions the plaintiffs have submitted into

Page 19

the record. Surely plaintiffs do not contend that the Court is not entitled to consider the full context of a document once the plaintiffs have relied on particular segments in their Complaint? The Court, therefore, considers the Consent Solicitation to the extent the plaintiffs have incorporated the document into their complaint, and the portions necessary for the Court to discern a complete and accurate context of what was disclosed. In this regard, the Court's consideration of the Consent Solicitation is consistent with Delaware law.⁷⁴

        Plaintiffs also take issue with the Court's ability to consider publicly available facts that show that both classes of GM stockholders voted to approve the Hughes transactions. Because there are no allegations in the Complaint that challenge whether the conditions necessary to consummate the transaction were actually met (i.e., a majority vote of holders of each class of GM stock), those facts are not subject to reasonable dispute, and it is appropriate to take judicial notice of the voting percentages of each class of GM stock.⁷⁵

        Finally, there is no basis to deny defendants' motion simply because of their reference to GM's Form 8-K. The defendants have cited this publicly available document to demonstrate when the IRS had issued the private letter ruling that

Page 20

confirmed that the redemption of GMH stock, and the subsequent distribution of Hughes stock, would be a tax-free exchange. Plaintiffs do not challenge the veracity of the letter and defendants' motion does not rely on the substance of the letter. The Court will therefore consider the date of the letter for what it is worth.

        C. Does the Complaint Contain Well-Pled Facts That Show There Was No Majority of Independent and Disinterested Directors

        Counts I and II of the Complaint allege that no majority of disinterested and independent directors approved a transaction that: (1) secured liquidity for GM's Pension and Benefit plans through a special $275 million dividend; and (2) unfairly allocated the transaction consideration in a manner that favored GM and the GM $1 2/3 holders interests over the interests of the GMH holders. The Complaint alleges that the directors breached their fiduciary duty of loyalty to the GMH holders because of their own pecuniary interests in director compensation or as beneficiaries of the GM plans,⁷⁶ or through professional relationships,⁷⁷ or because six members of the GM board were also members of the Investment Funds Committee.⁷⁸

Page 21

        Notwithstanding the plaintiffs' kitchen sink approach to pleading, their allegations were distilled in paragraph 160 of the Complaint where it is stated that:

        [T]he individual defendants were not disinterested and independent with respect to the challenged transaction [because] they would continue as directors of GM and, as a result of that relationship, their interests favored GM and its continuing shareholders and not the GMH shareholders, who would become subject to the dominion of News Corp. . . .⁷⁹

        From this, the Court surmises that the plaintiffs' theory concerning the GM directors' alleged breach is two-fold. Either the GM defendants' are conflicted due to their own self-interests, which make them beholden to the remaining GM shareholders and GM's management for their livelihood as "professional directors,"⁸⁰ or absent any self-interests, the split-off necessarily favored GM, and the GM $1 2/3 holders at the expense of the GMH holders. I address the issues concerning the directors' self-interests below; structural challenges to the directors' interests are addressed in Section D: The Effect of Shareholder Ratification.

        1. Allegations of Pecuniary or Professional Self-Interests

        As to the allegations of pecuniary or professional interests, I conclude that the Complaint fails to make well-pled allegations sufficient to rebut the presumption that the GM directors acted loyally. First, it is well settled that

Page 22

plaintiffs' allegations of pecuniary self-interest must allow the Court to infer that the interest was of "a sufficiently material importance, in the context of the director's economic circumstances, as to have made it improbable that the director could perform her fiduciary duties without being influenced by her overriding personal interest."⁸¹

        The Complaint begins with a list of directors who served on GM's board at the time the Hughes transaction was approved. Then, the Complaint merely outlines the respective salaries of each director and the annual retainers paid for service on particular committees. Absent from the Complaint, however, are any allegations that the compensation of any of these non-employee directors was in anyway contingent on the decision to approve the Hughes transaction. Similarly, nothing is alleged that suggests that the amount the directors had vested in the pension plans was material to each director. In short, there are no allegations (other than the conclusory allegations concerning Wagoner) that relate a given director's salary and benefits to that director's own economic circumstance. Without allegations to somehow link the accretion of a material benefit to the

Page 23

decision to approve the Hughes transactions, the allegations of pecuniary self-interest are merely conclusory and not well pled.⁸²

        The Complaint is equally devoid of allegations that would allow the Court to infer that the professional relationships of four of the outside directors created a debilitating conflict for the majority. Delaware law has held that a director may have a disabling conflict if a particular relationship would cause that director to make a corporate decision that materially benefits the director at the expense of the corporation or shareholders.⁸³ Still, if the Court draws an inference in favor of a plaintiff, and that inference suggests that one director is conflicted by reason of some outside business relationship, the plaintiff is not relieved of his burden of pleading domination over the remaining directors.

Page 24

        The Complaint alleges, for example, that Ward's position as CEO of the U.S. Olympic Committee made him beholden to GM's management because Ward would not oppose a transaction that was strongly supported by one of the U.S.O.C.'s major sponsors.⁸⁴ According to the Complaint, GM contributed a total of $23.25 million in cash and vehicles to the U.S.O.C. for the 2002 Salt Lake City Olympic Games.⁸⁵ Missing, however, is any allegation that this contribution conferred a material benefit on Ward at the expense of the Corporation or its Shareholders. In addition, there is no well-pled allegation that the donation itself was significant in relationship to the other donations the U.S.O.C. received from other sponsors, or that a similar contribution could not have been obtained from another automobile sponsor. In fact, GM's contribution to the U.S.O.C. occurred at least a year before the split-off was approved and as of June 2003, Ward no longer served on GM's board.⁸⁶ Simply stated, there is absolutely nothing in this Complaint that would suggest that this professional relationship provided GM with any leverage over Ward so that Ward's decision to approve the split-off was tainted by his desire to receive a material benefit that only GM could bestow.

Page 25

        The allegations concerning defendants Pfeiffer, Bryan and O'Neal are equally unremarkable and cannot rebut the business judgment rule. Pfeiffer was a board member of both Hughes and GM at the time the split-off was approved. Bryan served on the boards of both GM and Goldman Sachsone of Hughes' financial advisors in this transaction. O'Neal served on both GM's board and was CEO of Merrill Lynch & Co.one of GM's financial advisors.

        Allegations concerning Pfeiffer's dual board membership are of little help to the plaintiffs' claims. As a director of Hughes (GM's wholly owned subsidiary), Pfeiffer is charged to act in the best interests of GM and GM's shareholders.⁸⁷ Clearly, being a director of Hughes did nothing to misalign the fiduciary duties Pfeiffer already owed to the GMH holders. As to Bryan and O'Neal, there is no allegation in the Complaint that either Bryan or O'Neal could have controlled or dominated the GM board even if a material conflict existed. Without such an allegation, plaintiffs cannot impugn the entire GM board with any putative conflicts Bryan and O'Neal may have had.⁸⁸

Page 26

        2. Conflicts of the Investment Fund Committee

        Plaintiffs have alleged that six members of GM's board were not disinterested because they served on the Investment Fund Committee of the Boarda named fiduciary to GM's pension plans.⁸⁹ In particular, the Complaint alleges that the payment of the $275 million dividend, as a means of reducing the various pension plans' underfunding, gave these directors a personal interest in the Hughes transactions.⁹⁰

        These contentions fail to show a conflict of sufficiently material importance, in the context of the directors' economic circumstances, as to have made it improbable that the director could perform her fiduciary duties without being influenced by her overriding personal interest. First, if the proceeds from the Hughes transactions were used to fund the pension plans, then irrespective of the Special Dividend, the Investment Fund Committee, along with every other GM director, had every incentive to get the maximum value for the Hughes shares. Second, to the extent part of that consideration was allocated differently among the GM classes of Stock (i.e., through the Special Dividend) it is often the case that directors must make difficult decisions that affect the allocation of value between

Page 27

various classes of stock. This fact alone does not necessarily implicate the director's good faith or loyalty.⁹¹ Finally, as stated above, an allegation of a director's personal interest must show materiality as to that director. The Complaint alleges that by the end of 2002, the underfunding of GM's pensions approximated $19.3 billion.⁹² In relation to this amount, the Special Dividend represented less than two percent of the total underfundingthis amount is not material and does not suggest it was probable that an overriding personal interest was influencing the investment fund committee directors.

        The failure to set forth any well-pled allegation that would allow the Court to infer that a majority of the GM directors were self-interested is an independent reason to conclude that the Complaint has not rebutted the presumptions of the business judgment rule.

        D. The Effect of Shareholder Ratification

        Aside from the plaintiffs' direct attacks on the GM directors, plaintiffs also allege that the process of splitting off Hughes was inherently conflicted.⁹³ In Solomon v. Armstrong,⁹⁴ this very same issue was addressed and resolved. There, the Court held that both the form and substance of the transaction compelled the

Page 28

Court to reject the notion that the Court should conceptualize the split-off transaction as akin to a minority freeze-out.⁹⁵ The same considerations that were present in Solomon are also present here.⁹⁶ Therefore, the split-off of Hughes, alone, will not trigger an entire fairness review; plaintiffs' reliance on Kahn v. Tremont⁹⁷ is inapposite here⁹⁸ and because I find that the Hughes split-off does not implicate entire fairness review, I conclude that shareholder ratification will have the effect of maintaining the business judgment rule's presumptions.⁹⁹

Page 29

        1. Plaintiffs' Vote Manipulation Claims

        Plaintiffs' first attack on the sufficiency of the shareholder ratification is that GM "rigged" and "manipulated" the vote.¹⁰⁰ This allegation, according to the plaintiffs, is sufficient to rebut the business judgment rule as to Counts I and II, and is sufficient to state a separate claim under Count III. Plaintiffs' manipulation claim is predicated upon: (1) GM's contribution of 149 million shares of GMH stock to the pension plans; (2) timing the announcement a few days before Hughes had reported favorable results for the first quarter of 2003; (3) using an allegedly improper record date; and (4) making special solicitations to persons likely to support the transaction.¹⁰¹ These allegations fall short of their intended mark.

        To state a claim of vote manipulation, plaintiffs must allege well-pled facts that would allow the Court to infer that the primary purpose of the fiduciary's conduct was to thwart the exercise of a shareholder vote.¹⁰² Pejorative rhetoric and conclusory allegations are insufficient to state a claim; and without a threshold showing, the defendant directors' actions are entitled to the protection of the business judgment rule.¹⁰³ If on the other hand plaintiffs meet their burden,

Page 30

defendants would have the opportunity to show a compelling justification, but it is unlikely, if not impossible, for a defendant to meet this burden on a motion to dismiss.

        a. GM's Contribution of 149 Million Shares of GMH stock to the Pension Plans

        Plaintiffs allege that an "extensive factual [record] support[s] that the issuance of the shares to the pension plans was intended to thwart a fair shareholder vote."¹⁰⁴ The plaintiffs also contend that the Court should infer that the GM directors' primary purpose was to impede the shareholder franchise because the directors "knew" that the GM pension plans would vote their shares in favor of the Hughes transactions.¹⁰⁵ To make this existential leap, plaintiffs ask the Court to consider three facts. First, the GM directors contributed the GMH shares to the pension plans at a "steep discount from the[ir] market value."¹⁰⁶ Second, the pension plans would be able to sell the shares after the transaction because the stock restrictions would cease after the deal.¹⁰⁷ And third, GM would satisfy a

Page 31

portion of its underfunding by contributing to the pension plans over $3 billion of the transaction's proceeds.¹⁰⁸

        These conclusory statements fail to state a claim. U.S. Trust serves as the GM pension plans' trustees. This trust has the unilateral authority to vote all shares contributed to the pension plans. The Complaint makes no allegation that GM exerted power, or for that matter even possessed the power, to direct how U.S. Trust would vote the GMH shares. The Complaint also fails to allege that the Hughes transactions were a condition precedent to GM contributing funds to the pension plans, and by the Complaint's own assertion, GM had other means available to resolve the pension plans' underfunding.¹⁰⁹ At best, these allegations allow the Court to infer that the pension plans had their own, unique, economic incentive to vote for a transaction that would maximize the value of their GMH holdings, a self-interest that does not necessarily equate to approving the Hughes transactions. Moreover, this interest is totally aligned with the non-affiliated shares and, without an allegation of inequitable conduct, a shareholder is entitled to vote its shares in its own economic interests.¹¹⁰

Page 32

        Even if I were to accept that the GM directors "knew" the pension plans would vote for the transaction, this does not, by itself, satisfy the Blasius standard. By its terms, Blasius set forth a conjunctive test: a plaintiff must show both a primary purpose and the thwarting of the franchise. The Complaint, however, fails to allege that there was any shareholder that the GM directors sought to oppose, or that the percentage of shares held by the pension plans was material in affecting the outcome of the vote. From all indications, it is clear that a majority of the non-affiliated shares approved this transaction.¹¹¹ In this context (i.e., no management motivation), plaintiffs' allegations that the shareholder franchise was thwarted (or that there was a reason to thwart the vote) are particularly hollow.

        b. The Timing of Announcement

        The next allegation is that the defendants manipulated the vote by strategically timing the announcement of the Hughes transactions and by rushing the vote. According to the Complaint, the GM directors announced the transaction a few days before the release of PanAm Sat's (Hughes' eighty-one percent subsidiary) favorable financial results for that quarter. According to the

Page 33

Complaint, the timing of the announcement allowed the directors to tout a 22 percent premium over market pricea premium that would have "evaporated" had the announcements been reversed.¹¹² The context in which these announcements were made, however, does not support the inference that the directors' primary purpose of announcing the transaction when they did was to thwart the franchise. The Consent Solicitation was mailed five months after the PanAm Sat results were publicly announcedmore than enough time for the public to absorb the information. Moreover, the solicitation, advised the shareholders that GM did not advocate the transaction based on any premium and that the current market prices only reflected a 1.4 percent premium. The Complaint does not allege that the PanAm Sat results were not fully disclosed by the time the Consent Solicitation was mailed or that the defendants had ignored a viable reason to delay the announcement. Without such allegations, there is no nexus between the timing of the announcement and the effect, if any, that the announcement had on the vote. In other words, the conclusory allegations of the Complaint offer to the Court no plausible inferences of vote manipulation.

        The attendant claim to the timing of PanAm Sat's announcement is plaintiffs' contention that GM rushed and, thereby, manipulated the vote by timing

Page 34

the vote to occur before Hughes released its third-quarter earnings.¹¹³ Plaintiffs cite two facts that support this ostensible manipulation claim. The first is that after the third-quarter announcement, Hughes stock rose "well above $15 per share."¹¹⁴ The second is that the Defendant directors caused the solicitations to be mailed before they were contractually required.¹¹⁵ Plaintiffs, therefore, rest their rushing-the-vote claim on the directors' ability to foresee that a material increase in stock price was likely and a that five day difference between the date the directors chose to mail the solicitation and the date they had to mail the solicitation, made a difference in the vote outcome.

        The recited facts, however, cannot support a reasonable inference of conduct that violates the Blasius standard. According to the Complaint, the process of securing the vote began in early August.¹¹⁶ There is no allegation that the Defendant directors could have known, with any degree of certainty, the results for the third-quarter at that time. Moreover, the plaintiffs want this Court to infer that the five-day head start somehow provided the defendants the edge they needed to close the transaction before the release of the third-quarter results. I cannot, however, reasonably make this inference in light of the fact that there is no

Page 35

allegation that suggests the directors knew or had any control over when the requisite percentage of votes would be reached. Indeed, the transaction could have easily continued into November, a month after the Hughes third-quarter results.¹¹⁷ Therefore, plaintiffs' theory is plausible only if I assume that the directors not only had the ability to predict the increase in stock price, but also the voting responses of a disaggregated public. Although the procedural posture of this case requires that I make all reasonable inferences in favor of plaintiffs, it would be unreasonable (in my opinion) to weave these allegations into a viable Blasius claim.

        c. Allegations of the Improper Record Date

        Moving to the next allegation of manipulation, the plaintiffs contend that "upon information and belief" the record date "was not properly set."¹¹⁸ This bald allegation seemingly arises from two facts contained in the Consent Solicitation: that the record date was August 1, 2003, and that it appears that the GM board did not meet between June 5 and August 5, 2003.¹¹⁹ This allegation does not come close to stating a vote manipulation claim. There is no allegation that the actual setting of the record date had affected, in any way, the vote, or that the

Page 36

nondisclosure of when the record date was set had any influence. Recognizing this deficiency, plaintiffs shifted gears and have suggested that the vote was void ab initio under 8 Del. C. § 213(c).¹²⁰ This claim must also fail. The suggestion that it "appears" that the GM board did not meet between June 5 and August 5 cannot, by itself, support an inference of vote manipulation. The GM directors can avail themselves of several modes of setting a record datea board meeting is only one of those possibilities.¹²¹ Without a non-conclusory allegation that the board improperly set the record date, and that the allegedly flawed process somehow met their threshold burden under Blasius, plaintiffs' allegations are rank speculation and will not suffice to state a claim.

        d. Allegations Concerning Special Solicitations to Persons Likely to Support the Hughes Transactions

        The final vote manipulation claim focuses on GM's decision to send certain shareholders and employees an advance copy of the Consent Solicitation.¹²² Again, plaintiffs fail to connect a naked assertion with any facts that would support the inference that GM's primary purpose in disseminating advance copies of the solicitation was to thwart the franchise. The Complaint, for example, is devoid of any allegation that these advance copies contained information not contained in the

Page 37

solicitations that were already publicly available from the SEC or that the receipt of the advanced copies had any effect on the non-affiliated shareholders.

        Ultimately, Count III must fail because the Complaint, despite its prolix attempts, has failed to state a claim that the GM defendants acted with the primary purpose of thwarting the shareholders' vote. This conclusion is predicated on the fact that Count III fails to put forth well-pled allegations that would allow the Court to infer that the will of the shareholders was somehow frustrated.

        2. Plaintiffs' Disclosure Claims

        Plaintiffs' final attack on the sufficiency of the vote focuses on the adequacy of disclosures contained in the Consent Solicitation. As with the vote manipulation claim, plaintiffs contend that they have stated a separate claim in Count IV which precludes a ratification defense as to Counts I and II. To begin, there is a dispute as to who possesses the burden on this motion. Quite simply, both parties do. To state a separate claim for failing to disclose material information, plaintiffs must bear that burden.¹²³ Still, the complexity of the issues here adds a familiar twist: defendants assert that ratification acts as a complete defense to Counts I and II. In

Page 38

this regard, the law is equally clearit is the defendants' burden.¹²⁴ Because plaintiffs have failed to state a claim that the defendant directors breached their duty of disclosure, I conclude that plaintiffs have not met their burden as applied to Count IV and defendants have necessarily satisfied their burden as to their ratification defense.¹²⁵

        Plaintiffs' challenges to the Consent Solicitation are based on seven grounds:¹²⁶ (1) the incomplete and misleading disclosure concerning the value enhancement effect of the special dividend;¹²⁷ (2) the accuracy of the financial advisors' analysis;¹²⁸ (3) the lack of financial forecasts and projections prepared by Hughes management;¹²⁹ (4) the inadequacy of the PanAm Sat valuation;¹³⁰ (5) the

Page 39

misstatement of the legal effect of ratification;¹³¹ (6) the incomplete and misleading disclosure concerning GM's contribution of GMH stock to the pension plans;¹³² and (7) the failure to disclose material provisions of GM's Restated Certificate of Incorporation.¹³³

        Whether shareholders are fully informed necessarily asks the question of whether the directors have complied with their fiduciary duty to "disclose all material information."¹³⁴ Information is material when there is a "substantial likelihood that a reasonable stockholder would consider it important in deciding how to vote,"¹³⁵ and that "under all circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable stockholders."¹³⁶ It is not enough that the information might render a communication to shareholders "somewhat more informative." Rather, the determination of the materiality of an alleged omission or misstatement "requires a careful balancing of the potential benefits of disclosure against the resultant harm."¹³⁷ Delaware law does not require "directors to bury the shareholders in an avalanche of trivial information.

Page 40

Otherwise, shareholder solicitations would become so detailed and voluminous that they will no longer serve their purpose."¹³⁸

        e. The Incomplete and Misleading Disclosure Concerning the Value Enhancement Effect of the Special Dividend

        Plaintiffs first disclosure claim attacks the adequacy of the explanation provided to the shareholders for the $275 million special dividend because it "[f]ailed to disclose any analysis of, much less quantify, the value enhancement . . . that allegedly justified . . . the difference in value"¹³⁹ between Hughes as a GM subsidiary and as a stand-alone company. On pages 97 through 98, however, the Consent Solicitation begins its detailed disclosure of how the amount of the dividend was decided.

        In calculating the dividend, the Consent Solicitation discloses that GM's management believed a $400 to $500 million (or 3 to 5 percent of the current market price of Hughes) dividend was appropriate. GM's basis for this assumption was disclosed: (1) The 1996 EDS special dividend served as an appropriate benchmark; (2) the estimation that a one-to-one exchange of Hughes stock for GMH stock increased value to GMH holders because the derivative nature (i.e. the tracking) of the GMH stock was removed; and (3) the belief that Hughes, as a

Page 41

stand-alone company, would enjoy strategic benefits not currently available.¹⁴⁰ Hughes' management responded to GM's valuation and believed that a lower dividend was justified. The rationale disclosed was that the split-off offered GM unique benefits and that the current constraints on Hughes' financial capacity precluded the amount GM sought. The solicitation then discloses that both GM and Hughes considered the fact that they would need the concurrence of News Corp. in approving any dividend. Finally, the Consent Solicitation concedes that although the split-off to Hughes "was considered to constitute a transfer of value," to the GMH holders,¹⁴¹ that value was difficult to measure.¹⁴² Further negotiations then culminated in setting the special dividend at $275 million.

        Importantly, the disclosures did not stop there. The reliability of this admittedly imperfect negotiation process was buttressed when the Consent Solicitation disclosed both GM's and Hughes' financial advisors' opinion letters and analyses summaries.¹⁴³ These disclosures identified a range of reasonable "differential consideration" paid in similar transactions and concluded, separate

Page 42

from GM's and Hughes' own assertions, that a shift from GMH tracking stock to Hughes asset-based stock generated value for the Hughes holders.¹⁴⁴

        Thus, the Consent Solicitation informs the shareholders of the assumptions each management team brought to the table and the active process the two teams used to arrive at the size of the special dividend. It also disclosed that both GM and Hughes believed that, despite the need for a dividend, the value was going to be "difficult to measure."¹⁴⁵ In addition, the shareholders were not asked to rest on managements' assumptions alone; they were provided a range of values from similar transactions, and it is made clear that the financial advisors believed that the special dividend fit within those ranges. It is not clear why I should infer that the shareholders needed more information.

        Still, plaintiffs contend that an informed decision concerning the value enhancement aspect of the exchange was obfuscated because: (1) it was not disclosed that the special dividend would be used to fund GM's pension plans, (2) it was misleading to state that the GMH stock was exchanged on a one-for-one basis with an "independent" Hughes Stock when GMH stock was already an asset-based

Page 43

based stock, and (3) the EDS comparison was not an apples-to-apples comparison. In all respects, these allegations fail.

        The Consent Solicitation clearly indicated that 149 million GMH shares were contributed to GM's pension plans. Any reasonable investor would know that any value derived from the transaction flowed to all holders of the GMH stock, including GM and the pension plans. Therefore, the solicitation is not deficient in this regard.

        The details concerning the structure of the split-off are equally plain. Beginning on the first page of the solicitation, it is explained that the GMH shareholders would have their stock redeemed and exchanged for Hughes shares on a one-to-one basis, that is, each GMH holder received one Hughes share for each GMH share. There is no allegation that this did not occur. Rather, plaintiffs contend that the exchange was momentary and transitory because, immediately after the exchange, seventeen percent of the Hughes stock was swapped for News ADSs and, therefore, the portion of the Hughes stock that was exchanged for News ADSs could not represent any enhanced value.¹⁴⁶ Clearly, the first step in splitting off Hughes required GM and Hughes to put a price tag on the entity as a stand-alone company. Then the two teams needed to negotiate what this value was in

Page 44

comparison to what the GMH holders already had. This produced the one-to-one exchange less the special dividend and the procedures and valuations used to arrive at this value were disclosed. It was only after this value was determined that News Corp. and GM could fix the subsequent exchange ratio. Thus, the solicitation is accurate when it stated that the GMH holders would exchange their GMH stock, one-for-one, for Hughes stock and that the subsequent merger would result in the new Hughes shareholders receiving News ADSs in exchange for seventeen percent of their Hughes stock. Therefore, on this point, plaintiffs' claim is not a disclosure claim, but rather, a matter of dissatisfaction with the News ADSs exchange ratio.

        Plaintiffs' next contention deserves little attention. The fact that News Corp would ultimately own 34 percent of Hughes did not change the fact that Hughes was no longer GM's subsidiary. The first page of the Consent Solicitation states: "As a result of the Hughes split-off and GM/News stock sale, Hughes will become an independent public company, separate from and no longer owned by GM." Indeed, the title of the document in bold and large font states: "The Separation of Hughes from GM and the Acquisition by News Corporation of 34% of Hughes."¹⁴⁷

Page 45

        Finally, the disclosures concerning the EDS transaction were not misleading. The solicitation simply disclosed that the EDS split-off produced a differential between the value of the tracking stock and the value of the stand-alone stock. This amount was determined to be worth approximately "3% to 5% of the market value of the outstanding"¹⁴⁸ tracking stock and served as GM's starting point in formulating the Hughes dividend. It is clear from the context of the entire solicitation that the reference to the EDS transaction was but one of several factors disclosed which justified the payment of the special dividend. In light of these other factors, including the summary of the financial analyses, and the relative weight the solicitation placed on the comparison, the GMH shareholders were not duped into blindly relying on comparisons between the EDS and Hughes split-offs; disclosures of all possible divergences between the two transactions would not have altered the total mix of information already available.

        f. The Accuracy of the Financial Advisors' Analysis

        Plaintiffs contend that the solicitation is, at worst, false or, at best, materially misleading and incomplete.¹⁴⁹ According to the plaintiffs, the solicitation contains "only summaries of the analyses the financial advisors performed in connection

Page 46

with their April 9, 2003 opinions"¹⁵⁰ and fails to disclose the four updated analyses the financial advisors performed in the August 5, 2003 fairness opinions. Because the April 9 opinions became stale, and because the GM board disclosed that they had relied on the updated opinions, the updated information took on vital importance.¹⁵¹

        The solicitation discloses over 35 pages of text and figures that describe the financial analyses employed, and the opinions that accompany those analyses.¹⁵² From that it is clear the financial advisors made detailed presentations of their April 9, 2003 analyses to the board.¹⁵³ Then, the solicitation describes what the various bankers did to update their opinions¹⁵⁴ including an updated presentation to the board.¹⁵⁵ In light of all that was disclosed, plaintiffs seem to argue for the inclusion of the raw data behind the advisors' updated summaries. Moreover, since the updated opinions were, in part, based upon amendments to the merger agreement and stock purchase agreements, plaintiffs would see that a list of the actual amendments considered were also included.¹⁵⁶

Page 47

        A disclosure that does not include all financial data needed to make an independent determination of fair value is not, however, per se misleading or omitting a material fact.¹⁵⁷ The fact that the financial advisors may have considered certain non-disclosed information does not alter this analysis. The summary of factors the advisors considered in their updated review was disclosed, along with the opinion that no material changes occurred between the April and August analyses.¹⁵⁸ Without allegations that there was any material change in the conditions underlying the decision the board made in April, I cannot conclude that the information disclosed was materially incompletethere is simply no reason to think that the board had access to any information not already disclosed or that there was sufficient ground for the board to inquire into the updated opinions.¹⁵⁹

Page 48

        Like so many of the plaintiffs' claims, the allegations here move away from honest disputes concerning the adequacy of the disclosures, but instead challenge the consideration Hughes received in the deal. For example, plaintiffs allege that the PanAm Sat valuation was misleading and grossly incomplete because the financial advisors updated their April opinions without adjusting the "grossly inadequate $1.8 billion value ascribed to Hughes' interests in PanAm Sat."¹⁶⁰ This allegation seems, in large part, to be predicated upon a $1.40 per share increase in PanAm Sat's stock price between the date of the announcement and the updated fairness opinions.¹⁶¹

        The Consent Solicitation discloses that the financial advisors relied on three separate methodologies to value PanAm Sat: (1) PanAm Sat's share price; (2) discounted cash flow analyses; and (3) comparable company analyses.¹⁶² It was also disclosed that the advisors believed no material changes had occurred between the April and August opinions. In this context, the rise in the stock price is of little consequence. First, PanAm Sat's current stock price was information publicly availablea fact making it unlikely that additional disclosures would have altered

Page 49

the total mix of information already available. Second, I cannot infer that this market change was such as to impose upon the directors a duty of additional inquiry that would compel them to look beyond what the financial advisors had already provided. Clearly then, the duty of disclosure did not extend beyond the information the board had (or should have had) in its possession.¹⁶³ In light of these factors, the portion of the Consent Solicitation concerning the PanAm Sat valuation is neither misleading nor grossly inadequate. Plaintiffs simply think the bankers got it wrongthis alone does not state a disclosure claim.¹⁶⁴

        Plaintiffs take issue with GM's disclosed belief concerning the effect shareholder ratification would have on the deal.¹⁶⁵ The specific point of contention is that it was misleading to state that a majority vote of the shareholders would extinguish any claims relating to fairness.¹⁶⁶ A reading of what was disclosed shows that GM set forth, in general terms, and subject to qualifying language, a brief summary of the effects of shareholder ratification and their belief of how it should apply to the proposed transaction. Plaintiffs' theory of disclosure would

Page 50

require the directors to presuppose they were breaching their fiduciary duties, and then disclose the effect of such conduct. Delaware law, however, does not require directors to assume they are acting improperly and then advise shareholders of the consequences of the hypothetically wrongful conduct.¹⁶⁷ In light of Delaware precedent, I cannot conclude that this disclosure was misleading or incomplete.¹⁶⁸

        i. The Incomplete and Misleading Disclosure Concerning GM's Contribution of GMH Stock to the Pension Plans

        Plaintiffs complain that the disclosures concerning the contribution to the pension plans was materially misleading and incomplete because it failed to disclose: (1) how the contribution would facilitate a tax-free split-off; (2) that the pension plan interests and the public GMH holder interests diverged and that the contribution made approval of the transaction more likely; (3) that GM would benefit from an increase in value resulting from the proposed transaction; and (4) that GM's pension expense would be reduced if the value of the contributed shares increased.

        In sum, these allegations fail to meet the materiality test in light of what was actually disclosed in the Consent Solicitation. The material tax consequences of

Page 51

the transaction are disclosed on pages 163 to 169 of the solicitation. In that disclosure, it is clear that the shareholders are told the general tax consequences of the deal, that those consequences may not apply to each shareholder under all circumstances, and that the shareholder's own tax advisor should be consulted. It is also clear that the most important detail, in terms of tax, was disclosedi.e., the transaction was tax-free. The Complaint fails to allege that this information was false or that the transaction was not tax-free. Absent these allegations, I cannot infer that additional disclosures that detail the particular nuances of the Internal Revenue Code would have assumed actual significance in the deliberations of a reasonable stockholder.

        The remaining disclosure allegations are nonsensical. The solicitation discloses the amount of stock contributed to the pension plans, the relative valuation of the stock by the pension plans, the terms under which the stock was held, and the fact that the contribution was designed to reduce GM's pension expense and further benefit GM's balance sheet.¹⁶⁹ From this information, any reasonable shareholder would be able to determine what the pension plans' interests were, and could compare those interests to their own. Moreover, it was plain that the pension plans received 149 million GMH shares in addition to the

Page 52

GHM shares they already held. Finally, it is disclosed that these shares represent approximately one-third of the outstanding GMH shares.¹⁷⁰ Any reasonable shareholder could see that this holding would make any vote subject to the GMH shareholders more or less likely to be ratified depending on how the pension plans voted and that any accretion in value that was attributable to the proposed transaction would, in part, benefit the pension plans directly and GM indirectly.¹⁷¹ This observation is so obvious that any additional point not already mentioned could not possibly be material.

        j. The Failure to Disclose Material Provisions of GM's Restated Certificate of Incorporation

        Plaintiffs contend that the split-off was subject to GM's Article Seventh of its certificate of incorporation (requiring a two-thirds supermajority vote) and that it was a material omission not to advise the shareholders of this provision. Because I ultimately conclude that Count V fails to state a claim, I cannot find that this allegation is sufficient to state a disclosure claim.

        Ultimately, I have reviewed the Consent Solicitation's disclosures and the allegations plaintiffs have made concerning material misstatements or omissions.

Page 53

In total, I conclude that plaintiffs have not made well-pled allegations that would allow the Court to infer that the Consent Solicitation was materially deficient in any respect. I therefore conclude that Count IV of the Complaint fails to state a claim.

        Reaching this conclusion, I must now address plaintiffs' contention that the effect of shareholder ratification does not extend to extinguish their unjust enrichment claim or the impropriety of the contribution to the pension plans (i.e., the contribution was not part of the transaction voted on and approved by the shareholders).

        As to the unjust enrichment claim, plaintiffs have failed to allege facts that show the claims arising from the payment of the special dividend were independent of the fiduciary duty claims. The Court finds plaintiffs' reliance on Hill Stores Co. v. Bozic¹⁷² unpersuasive. Hills Stores held that plaintiffs' claim would survive a motion for summary judgment under two independent theories of reliefeither that the recipients of certain severance payments obtained those payments in breach of their fiduciary duties, or in violation of their employment agreements. Thus, even if the defendants successfully showed that no breach of fiduciary duty had occurred, the plaintiffs could still recover. Importantly, Vice

Page 54

Chancellor Strine found that recovery would be proper absent a breach of fiduciary duty because the clear and unambiguous language of the employment agreements precluded the excess payments that were at issue. Thus, the Court in Hill Stores found that the existing and enforceable employment contracts would permit recovery if indeed the director-employees were paid in excess of the amount due under their contracts. Here, plaintiffs have not set forth any allegation which would allow this Court to infer that plaintiffs could recover under any independent contract theory (e.g., breach of GM's certificate of incorporation). Thus, plaintiffs' challenge to the special dividend cannot, unlike the severance payments in Hills Store, be viewed mutually exclusive from their alleged breach of fiduciary duty claims.

        The claims concerning the contribution suffer from a similar defect. The Complaint contains no allegations that the actual contribution of the GMH shares to the pension plans was wrongful; rather, its effect was to "rig" the vote. This is quite different from the argument that the contribution was in violation of a statute (e.g., 8 Del. C. § 160(c)). For that reason, I can find no claim concerning the contribution independent from those alleged in Count III of the Complaint.¹⁷³

Page 55

        Based on this analysis, I conclude that a valid shareholder vote has occurred and that the effect of that vote is to maintain the presumptions of the business judgment rule. Under this unfortunately lengthy analysis, I have also concluded that the complaint fails to allege conduct that would suggest the directors' decision to split-off Hughes was grossly negligent. As such, the complaint fails to state a claim for breach of the duty of care. Shareholder ratification is also sufficient to bar any claim for breach of the duty of care and serves as an independent basis to grant defendants' motion. Finally, GM's exculpatory charter provision is a third and independent basis to dismiss any duty of care claim. Plaintiffs' good faith claims are merely a rehash of their duty of loyalty claims. For all the reasons stated herein, plaintiffs fail to state a claim that the Defendant directors' actions were predicated on bad faith. Therefore, because the Complaint contains no allegations that would allow the Court to infer that the Hughes split-off was an irrational business decision or a transaction that amounted to waste, Counts I through IV are hereby dismissed in their entirety.

Page 56

        E. Does Article Seventh Require a Supermajority Vote As Applied to the Hughes Transactions

        Plaintiffs have failed to state a claim that the Hughes transactions violated Article Seventh of GM's Restated Certificate of Incorporation. Count VI of the Complaint alleges that the Hughes transactions required a vote of two-thirds of the outstanding stock of all classes of General Motors,¹⁷⁴ but in breach of Article Seventh, GM only sought a majority vote of all classes voting together and a majority vote of each class voting separately.¹⁷⁵

        A corporate charter is a contract between a corporation and its shareholders,¹⁷⁶ and the Court will therefore apply standard rules of contract interpretation to determine the parties' intentions. Article Seventh is a permissive (as opposed to a mandatory) charter provision, which expressly authorizes GM's board of directors to take a variety of actions with the assent of two-thirds of all classes of GM stockholders. From the plain language of the provision, it is clear that the permissive powers conferred by Article Seventh are "[i]n furtherance, and not in limitation of the powers conferred by law." Both parties have urged the Court to look behind the contractual language for the meaning of this Article. This task is unnecessary as I conclude that Article Seventh, by its own unambiguous

Page 57

terms, is not in conflict with Delaware law. Delaware law clearly provides that a corporation may dispose of property, amounting to less than all or substantially all its assets, without a shareholder vote.¹⁷⁷ Because Article Seventh is to be read in furtherance and not in limitation of Delaware law, the article did not mandate a shareholder vote, much less a super-majority voting requirement.

        F. Did the Hughes Transactions Violate Article Fourth

        Plaintiffs have failed to state a claim that the Hughes transactions violated Article Fourth of GM's Restated Certificate of Incorporation. That article ensures that all GM $1 2/3 holders and all GMH holders will be, subject to the provisions set forth in Article Fourth, treated identically in all respects and enjoy equal rights and privileges.¹⁷⁸ Plaintiffs contend that the payment of the special dividend to some GMH holders and not others was in clear violation of this provision.

        This claim fails because the contractual rights vested in corporate stockholders by a certificate of incorporation are subject to amendment by vote of those stockholders.¹⁷⁹ Thus, even if the special dividend ran afoul of the protections provided under Article Fourth, those protections were eliminated when

Page 58

the shareholders themselves voted to amend GM certificate and allowed the dividend to be paid.¹⁸⁰ Accordingly, Count VI is dismissed.

        News has moved to dismiss the Complaint on three grounds: first, that service of process was not properly made upon News;¹⁸¹ second, that this Court lacks jurisdiction over News;¹⁸² and third, that the Complaint fails to state a claim upon which relief can be granted.¹⁸³

        A. News' 12(b)(4) Argument

        News argues that the Complaint should be dismissed as to News because News was not properly served with process in accordance with the requirements of Delaware law. After defendants filed their opening brief in support of their motion to dismiss, plaintiffs apparently became apprehensive that their personal service upon News' Australian offices would be held to be insufficient. Therefore, they served the Delaware Secretary of State with process on behalf of News Corp. on October 6, 2004, and they thereafter mailed a summons and Complaint to News'

Page 59

Australian offices by registered mail, return receipt requested, in accordance with the requirements of 10 Del. C. § 3104(d).¹⁸⁴ Because there is no reason why this albeit belated service should be invalidated by the prior personal service by process server, I therefore conclude that service of process was properly made in accordance with an applicable statute, and also with Court of Chancery Rule 4(d)(4).¹⁸⁵ News' motion to dismiss on the grounds of insufficiency of process is denied.

        B. News' 12(b)(2) Argument

        Because News has challenged whether personal jurisdiction over it is proper, plaintiffs bear the burden of making a showing that jurisdiction is proper.¹⁸⁶ The Court will then engage in a two-step analysis, first determining whether an applicable statute permits the exercise of jurisdiction, and then whether exercising

Page 60

jurisdiction over a particular defendant violates the due process clause of the Fourteenth Amendment of the United States Constitution.¹⁸⁷ Plaintiffs argue that this Court has personal jurisdiction over News pursuant to 10 Del. C. § 3104 and 10 Del. C. § 365 based on Delaware as the situs of Hughes' stock. Because plaintiffs did not comply with the service requirements set forth in § 365, personal jurisdiction thereunder is not proper, and as a result, personal jurisdiction over News will only be found if permitted by § 3104 and the requirements of due process.¹⁸⁸

        Section 3104(c) sets forth a series of acts, which if taken either personally or by an agent, constitute legal presence in the state of Delaware, such that the actor or principal consents to submit to the jurisdiction of the Delaware courts.¹⁸⁹ Plaintiffs argue that jurisdiction is proper under three of the six paragraphs found in § 3104(c). Because jurisdiction is proper under § 3104(c)(1), I need not address plaintiffs' arguments as to (c)(3) or (4).

Page 61

        Section 3104(c)(1) allows personal jurisdiction when the defendant "[t]ransacts any business or performs any character of work or service in the State." The provisions of § 3104(c) are to be broadly construed such that jurisdiction is permitted to the fullest extent of the due process clause of the Fourteenth Amendment.¹⁹⁰ In determining the scope of § 3104(c), and which acts suffice to create jurisdiction in Delaware, it is important to understand that paragraph (c)(1) grants "specific," "transactional," or "single-act" jurisdiction, as opposed to the "general" jurisdiction created by paragraph (c)(4).¹⁹¹ When establishing jurisdiction under paragraph (c)(1), the plaintiff must show that the cause of action arises from the defendants' specific activities within Delaware.¹⁹²

        One of the difficulties of plaintiffs' argument with respect to § 3104(c)(1) is that the actions of various entities in which News has a controlling interest, including News Publishing Australia Limited ("NPAL"), GMH Merger Sub, and Fox Entertainment Group, Inc. ("Fox"), all three of which are Delaware corporations, are attributed to News. The Complaint is not clear as to whether

Page 62

News itself or one of its subsidiaries engaged in certain conduct.¹⁹³ Delaware law is clear that if the only link between the parent corporation and the alleged wrong is the parent's ownership of stock in the subsidiary, that is insufficient to establish personal jurisdiction under § 3104(c)(1).¹⁹⁴ If the parent corporation of the Delaware subsidiary, however, actively engages in the negotiations and consummation of the transaction, it has transacted business within the meaning of § 3104(c)(1), and may be haled into a Delaware court to defend a cause of action that arises from that transaction.¹⁹⁵

        NPAL was incorporated in Delaware in 1984.¹⁹⁶ As such, it is clear that NPAL was not created for the purpose of consummating the Hughes transactions. It then necessarily follows