Arnold v. Society for Savings Bancorp, Inc.

In this appeal from a judgment of the Court of Chancery in favor of defendants we consider the contention of plaintiff below-appellant Robert H. Arnold (“plaintiff’) that the trial court erred in granting defendants’ summary judgment motion and denying his own. This suit arose out of a merger (the “Merger”) of BBC Connecticut Holding Corporation (“BBC”), a wholly-owned Connecticut subsidiary of Bank of Boston Corporation (“BoB”), a Massachusetts corporation, into Society for Savings (“Society”), a wholly-owned Connecticut subsidiary of Society for Savings Bancorp, Incorporated (“Bancorp”), a Delaware corporation. In accordance with the Merger, Bancorp ultimately merged with BoB. Plaintiff was at all relevant times a Bancorp stockholder. Plaintiff named as defendants Bancorp, BoB, BBC, and twelve of fourteen members of Baneorp’s board of directors (collectively “defendants”). 1

Plaintiffs central claim is that the trial court erred in holding that certain alleged omissions and misrepresentations in the Merger proxy statement were immaterial and need not have been disclosed. Plaintiff also claims that the Court of Chancery erroneously held that the duties enunciated in Revlon 2 and its progeny were not implicated. Also at issue on this appeal is whether or not the individual defendants can be held liable if a disclosure violation is found in view of the exemption from liability provision in Ban-corp’s certificate of incorporation, adopted pursuant to 8 Del.C. § 102(b)(7) (“Section 102(b)(7)”). For the reasons set forth below, we hold that the Court of Chancery erred in failing to find that plaintiffs claim that the partial disclosures in the Merger proxy statement made it materially misleading with respect to one particular fact. In all other respects we find that the trial court committed no reversible error.

We further hold that, in all events, the limitation provision in Bancorp’s certificate of incorporation shields the individual defendants from personal liability for the disclosure violation found to exist in this ease. Finally, we hold that plaintiffs claim that Revlon was implicated under the circumstances of this ease is without merit. Therefore, we REVERSE in part and AFFIRM in part the judgment of the Court of Chancery, and REMAND the case to the Court of Chancery for proceedings consistent with this opinion.

I. NATURE AND STAGE OF PROCEEDINGS

On March 8, 1993, plaintiff sought a preliminary injunction to enjoin consummation of the Merger, scheduled to occur on July 9, 1993. Under the terms of the Merger, Ban-corp stockholders would receive 0.80 shares of BoB in exchange for each Bancorp share based on the trading price of BoB shares at closing (subject to an adjustable $20 per share cap). Plaintiff alleged that defendants breached their fiduciary duties of care and candor in the proxy statement dated February 1, 1993 (the “proxy statement”) which was sent to stockholders seeking approval of the Merger. 3

The Court of Chancery denied plaintiffs motion for preliminary injunction, concluding that plaintiff had failed to show a reasonable probability of success on the merits. 4 The trial court did not find any need for corrective disclosures in Arnold I. Defendants had filed motions to dismiss and for summary *1274 judgment before the ruling on the preliminary injunction. The trial court deferred ruling on these motions at that time. The Merger was effected on July 9, 1993. On that date, plaintiff filed a cross-motion for partial summary judgment. In an opinion and order dated December 15, 1993 (the “Opinion”), the Court of Chancery granted defendants’ motion for summary judgment and denied plaintiffs cross motion, holding that defendants did not violate their duty of disclosure. 5 The Court found that the alleged omissions and misrepresentations were immaterial as a matter of law. The Court also rejected plaintiffs “Revlon, claim.” The judgment of dismissal based on the Opinion is the subject of this appeal.

II. FACTS

The following operative facts govern this litigation. In 1991 Bancorp was suffering from severe financial distress, including an imminent threat of regulatory takeover, due mostly to Society’s poor performance. In fact, Bancorp was being kept afloat mainly by the high profitability of Fidelity Acceptance Corporation (“FAC”), a Society subsidiary. Early that year, Bancorp began investigating whether it could “unlock” FAC’s value from Bancorp’s other poorly-performing assets.

On April 30, 1991, Bancorp publicly announced that it had retained Goldman, Sachs & Company (“Goldman”) to identify transactions that would enhance stockholder value. After having canvassed the market for potential acquirors, Goldman informed the Ban-corp board of directors (the “board”) that there was a paucity of interest in Bancorp. Bancorp then considered selling itself in four parts — Society’s deposits, Society’s investment and loan assets, FAC, and a “stub” entity. 6 Under this scenario, the sale of each part was contingent upon sale of the others. As part of this effort, Goldman solicited bids for FAC and for Society’s deposits, informing bidders in late 1991 and early 1992 that Bancorp was still available for sale in its entirety. Offers for Bancorp were not forthcoming.

Although FAC was not offered for sale separately, Goldman received nine bids solely for FAC. Eventually, Norwest Corporation (“Norwest”) emerged as the highest bidder, with a bid for FAC forecasted to be approximately $275 million as of December 31,1992. 7

Norwest’s bid for FAC also was conditioned on the securing of all requisite regulatory approvals, among other provisos. Regulatory approval, however, turned out to be problematic. The board engaged several financial advisors to evaluate potential profit-maximizing alternatives, including Goldman, Salomon Brothers Incorporated (“Salomon”), and Merrill, Lynch, Fenner, Smith & Pierce, Incorporated (“Merrill Lynch”), all of whom confirmed the unlikelihood of FAC’s sale being effected without selling simultaneously the remaining components of Bancorp.

On May 28, 1992, Goldman presented the following mutually-dependent proposal (the “May Proposal”) to the board: BoB would purchase Society’s deposits; Norwest would purchase FAC; Goldman itself would purchase much of Society’s loan portfolio; and Society’s unsalable assets would be relegated to the stub. Goldman advised the board that no such transaction had ever been executed successfully. Also, all three potential purchasers insisted that their purchases be secured by the stub and that sufficient cash be reserved to indemnify them against any asset losses. Given that Society’s liabilities exceeded its assets, the reserve cash would have been transferred to the stub from FAC’s sale proceeds.

Goldman estimated that stockholders could receive a net value of $15.94 per share, subject to market fluctuations. That value could be increased should a positive value of $3.32 per share for the stub assets materialize. In *1275 that scenario, Goldman estimated a total value of $229.4 million or $19.26 per share. The stub value was very uncertain, however. In fact, Director David T. Chase (“Chase”) opined to the board that the stub more likely had a negative value of $3 per share. If that were the case the net value receivable by Bancorp stockholders would amount to approximately $13 per share. 8

Lawrence Connell (“Connell”), Bancorp’s recently-hired Chief Executive Officer, President and board member, recommended that the board pursue the May Proposal, notwithstanding potential associated risks. After deliberations, however, the board rejected the May Proposal, five in favor and eight opposed (5-8), 9 as too risky and speculative. The board thereafter terminated Goldman and issued a press release indicating that Bancorp intended to focus on strengthening itself as an independent entity. Connell was to concentrate on managing Bancorp. 10

Shortly thereafter, representatives of BoB and Connell discussed a possible acquisition of Bancorp, examining the possibility throughout the summer of 1992. Connell enlisted Goldman’s assistance as well as help from Bancorp senior personnel in the negotiations. In June or July, 1992, Connell casually mentioned BoB’s interest to the Chairman. Connell did not formally disclose these developments to any board members until BoB sent a written expression of interest on August 24, 1992, which Connell relayed in substance to some board members.

On August 27, 1992, Connell informed the entire board that BoB had conducted due diligence in July and August and was interested in merging with Bancorp. The board discussed the terms of BoB’s offer — each Bancorp share would be exchanged for 0.78 BoB share, with BoB to receive no-shop and lock-up rights. BoB conditioned the offer on quick approval by the board. The board negotiated with BoB over the next three days and, when the board reconvened on August 31, approved the Merger. The final terms were as follows: the exchange ratio was increased in favor of Bancorp stockholders from 0.78 to 0.80, BoB was granted a share cap of $20 and a modified lock-up agreement, and Bancorp obtained a “fiduciary out” provision as part of the no-shop clause. The initial vote was eight in favor, one opposed, with five abstentions (8-1-5). After BoB satisfied the concerns of certain board members, 11 twelve directors voted in favor and two (the Chairman and Weiner-man) abstained (12-0-2). 12 Under the terms of the Merger, Bancorp stockholders would receive $17.30 per share as of August 28, 1992.

On February 1, 1993, Bancorp issued the proxy statement, which discussed: the May Proposal;' the May 28, 1992, board decision rejecting the May Proposal; the negotiations between Connell and BoB during the summer of 1992; the substance of the August 27 and 31 board meetings (including the final terms approved by the board and the two vote tallies); and the Chairman’s and Wein-erman’s abstentions including their reasons therefor. The proxy statement did not disclose the contingent $275 million bid by Nor-west for FAC or Goldman’s qualified estimate of $19.26 for Bancorp shares, both of which were generated in connection with the failed May Proposal. On March 4, 1993, Bancorp’s stockholders approved the Merger *1276 with 7,750,253 shares in favor, 13 1,389,272 in opposition, 264,146 abstaining, and 2,552,297 not voting. The Merger was consummated on July 9, 1993.

111. SCOPE OF APPELLATE REVIEW

Here, the ease was decided by the Court of Chancery on cross-motions for summary judgment. A trial court’s decision granting summary judgment is subject to de novo review. Stroud v. Grace, Del.Supr., 606 A.2d 75, 81 (1992). Our appellate review implicates a determination of whether the record shows that there is no genuine, material issue of fact and the moving party is entitled to judgment as a matter of law. Ch.Civ.R. 56(c); Fleer Corp. v. Topps Chewing Gum, Inc., Del.Supr., 539 A.2d 1060, 1061-62 (1988) (interpreting Ch.Civ.R. 56(c)); Bershad v. Curtiss-Wright Corp., Del.Supr., 535 A.2d 840, 844 (1987).

In making this determination, if the trial court’s factual conclusions “are sufficiently supported by the record and are the product of an orderly and logical deductive process ... we accept them, even though independently we might have reached opposite conclusions.” Levitt v. Bouvier, Del.Supr., 287 A.2d 671, 673 (1972). Nevertheless, in an appropriate case, this Court may review de novo mixed questions of law and fact, such as determinations of materiality, Zirn v. VLI Corp., Del.Supr., 621 A.2d 773, 777 (1993), and in certain cases make its own findings of fact upon the record below, Shell Petroleum, Inc. v. Smith, Del.Supr., 606 A.2d 112, 114 (1992). The Court will affirm the trial court’s legal rulings unless they represent an “err[or] in formulating or applying legal principles.” Gilbert v. El Paso Co., Del.Supr., 575 A.2d 1131, 1142 (1990).

IV. DISCLOSURE CLAIMS

Plaintiff claims that defendants violated their fiduciary duty of disclosure in four ways. Plaintiffs two material omissions claims are that defendants, though making partial disclosures as to each, omitted (i) Norwest’s $275 million bid for FAC and (ii) Goldman’s valuation of Bancorp shares at $19.26. The misrepresentation claims relate to (i) the negotiation, approval, and attempted renegotiation of the Merger and (ii) the validity and reliability of management’s projections. Additionally, plaintiff argues that BoB is liable as an aider and abettor because it played a significant and substantial role in preparing the allegedly deficient proxy statement.

Defendants respond that each of these categories of facts is immaterial and need not have been disclosed. They further contend that disclosure could actually have misled Bancorp stockholders absent extensive qualifiers in the proxy statement. The Court of Chancery found that the alleged omissions and misrepresentations were immaterial as a matter of law and granted summary judgment to defendants. Opinion at 10-20. As to BoB’s liability as an alleged aider and abettor, defendants argue that because the Court of Chancery did not reach this claim, this Court should remand the issue if they are found to have committed disclosure violations.

The genesis of Delaware law regarding disclosure obligations can be traced to the seminal ease of Lynch v. Vickers Energy Corp., Del.Supr., 383 A.2d 278 (1978), where, in the context of a self-tender, this Court held that a majority stockholder “owed a fiduciary duty ... which required ‘complete candor’ in disclosing fully ‘all the facts and circumstances surrounding the’ tender offer.” 383 A.2d at 279 (quoting Lynch v. Vickers Energy Corp., Del.Ch., 351 A.2d 570, 573 (1976)); accord Shell Petroleum, Inc. v. Smith, Del.Supr., 606 A.2d 112, 114-15 (1992) (majority stockholder bears burden of showing full disclosure of all facts within its knowledge that are material to stockholder action). A number of subsequent decisions have recognized the existence of fiduciary disclosure obligations. E.g., In re Tri-Star Pictures, Inc., Del.Supr., 634 A.2d 319, 331-32, 334 (1993); Cede & Co. v. Technicolor, *1277 Inc., Del.Supr., 634 A.2d 345, 372-73 (1993); Zirn v. VLI Corp., Del.Supr., 621 A.2d 773, 778 (1993); Stroud v. Grace, Del.Supr., 606 A.2d 75, 84-88 (1992); Bershad v. Curtiss-Wright Corp., Del.Supr., 535 A.2d 840, 846 (1987); Rosenblatt v. Getty Oil Co., Del.Supr., 493 A.2d 929, 936, 944-45 (1985); Smith v. Van Gorkom, Del.Supr., 488 A.2d 858, 889-93 (1985); Weinberger v. UOP, Inc., Del.Supr., 457 A.2d 701, 710-12 (1983).

In Stroud, the Court explicated that the disclosure obligation “represents nothing more than the well-recognized proposition that directors of Delaware corporations are under a fiduciary duty to disclose fully and fairly all material information within the board’s control when it seeks shareholder action.” 606 A.2d at 84; accord Cede, 634 A,2d at 372-73; Shell Petroleum, 606 A.2d at 113 n. 3. The obligation attaches to proxy statements and any other disclosures in contemplation of stockholder action. Stroud, 606 A.2d at 85; Blasius Indus. v. Atlas Corp., Del.Ch., 564 A.2d 651, 659 n. 2 (1988). The essential inquiry is whether the alleged omission or misrepresentation is material. E.g., Stroud, 606 A.2d at 84.

Materiality is defined as follows: An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. ... It does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused a reasonable investor to change his vote. What the standard does contemplate is a showing of a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder. Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.

TSC Indus. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976) (emphasis added); Rosenblatt v. Getty Oil Co., Del.Supr., 493 A.2d 929, 944 (1985) (adopting Northway standard as law of, Delaware); see also Zirn v. VLI Corp., Del.Supr., 621 A.2d 773, 778-79 (1993). Courts should not assess the qualitative importance of a particular disclosure item, Lynch, 383 A.2d at 281-82, because the standard requires “full” disclosure of all material facts, Van Gorkom, 488 A.2d at 890 (noting that Lynch’s requirement to disclose “germane” facts means those that are “material”). Further, materiality is to be assessed from the viewpoint of the “reasonable” stockholder, not from a director’s subjective perspective. Zirn, 621 A.2d at 779.

V. DISCLOSURE ISSUES IN THIS CASE

The Court of Chancery decided that the contingent FAC bid of $275 million was immaterial as a matter of law “under all the circumstances” because “the sale of FAC was an event that could occur only under certain circumstances (e.g., with regulatoiy approval, and/or concurrent with the sale of Bancorp).” Opinion at 13-14. Plaintiff challenges this holding on two independent grounds: (i) that the FAC bid was material as a matter of law and had to be disclosed in all events; and (ii) that in view of the partial disclosures in the proxy statement the FAC bid became material and the failure to disclose it was misleading. The Vice Chancellor decided this case on the first ground, but failed to address the second ground.

In our view, however, the case turns on the partial disclosure issue. We hold that the partial disclosures in the proxy statement were misleading in their description of the background information, and that the misleading partial disclosures made the FAC bid material under all the circumstances. Assuming hypothetically that there had been no partial disclosures as set forth and discussed below, the FAC bid may or may not have been material. We need not address that issue because of our holding that the FAC bid was material in view of the partial disclosures. Therefore, we reverse on that ground alone.

We turn now to the partial disclosure-materiality issue. In the instant ease, the proxy statement at page 21 reads, in pertinent part:

*1278 Background of and Reasons for the Affiliation; Recommendation of the Ban-corp Board of Directors

Background. In April of 1991, Bancorp engaged the investment banking firm of Goldman Sachs to aid it in evaluating various possible financial or strategic alternatives intended to maximize stockholder value, which engagement was publicly announced on April 30, 1991. At the time of Goldman Sachs’ engagement, the Bancorp Board recognized that the strategic alternatives to be considered might include, but not be limited to, the sale of Bancorp or the sale of Society. During the spring of 1991, Society was in the midst of an examination being conducted by the FDIC and was experiencing asset deterioration. It was also a time when there had been, and continued to be, consolidation in the United States banking and financial services industry.

During the late spring and the summer of 1991, the management of Bancorp, with the assistance of Goldman Sachs, analyzed transactions involving the sale of Bancorp as a whole or the sale of Society or FAC. During the summer and early fall of 1991, management and Goldman Sachs also studied the possibility of a transaction structured as a deposit assumption by a bank or thrift and an asset sale to one or more third parties. During the summer of 1991, Goldman Sachs, on behalf of Bancorp, solicited indications of interest to acquire Bancorp or Society. By the fall of 1991, these efforts had produced no attractive opportunities for the sale of Bancorp or the sale of Society, at which point there began a more intensive evaluation of a three-part strategy in which Society’s loan and investment assets, its ownership interest in FAC and its retail branch bank system would be sold in separate transactions. After Baneorp’s management and Goldman Sachs had investigated such transactions for several months, which investigation included contacting certain entities previously contacted as well as other parties and evaluating certain potential indications of interest, the Bancorp Board of Directors, at a meeting held on May 28, 1992, considered whether to pursue a series of transactions in which (a) FAC would be sold to a third party, (b) substantially all of Society’s assets would be sold to an affiliate of Goldman Sachs, (c) the remainder of Society’s assets (other than cash and its branches) would be placed in a “stub bank” or similar entity and distributed to Bancorp’s stockholders and (d) Bancorp (which would then consist of Society’s deposits and certain other liabilities, its branches and the cash received from the sale of FAC and the sale of assets) would be merged with a subsidiary of Bank of Boston. In such merger, the holders of Bancorp Common Stock would have received shares of Bank of Boston Common Stock. The transactions discussed at the May 28, 1992 Bancorp Board meeting were tentative and the Board was advised that, in light of uncertainties involving the value of certain assets, the value ultimately distributable to stockholders could only be estimated. The Bancorp Board was also informed that a number of steps would have to be completed before the transactions could proceed. These steps included the completion of the sale of FAC in an auction process, the completion by the Goldman Sachs affiliate of its due diligence on Society’s assets and the negotiation and execution of definitive agreements with all interested parties.

In light of a number of factors, including (a) the lack of certainty of the value to be received in the sale of FAC and Society’s assets and consequently the value to be received by Bancorp’s stockholders, (b) the substantial costs of proceeding to the stage where more certain values would be ascertainable,-(c) the significant risks of failure to close associated with three separate transactions all conditioned upon each other, and the substantial expenses and costs to be incurred in the event of a failure to close and (d) recent improvements in Society’s condition and results and Bancorp’s prospects, the Board of Directors of Bancorp determined at the conclusion of the May 28,1992 meeting that it was in the best interests of *1279 Bancorp not to pursue the proposed transactions further and to terminate Goldman Sachs’ efforts in connection with exploring strategic alternatives.

(Emphasis added). Plaintiffs partial disclosure arguments stem from the portions of the proxy statement highlighted above.

A. Norwest’s $275 Million Contingent Bid for FAC

Materiality requires a careful balancing of the potential benefits of disclosure against the possibility of resultant harm. Even assuming that there was no material issue of fact that the FAC bid was contingent on the sale of other parts of Bancorp, and that regulatory approval for a stand-alone sale of FAC pursuant to the May proposal would not have been forthcoming, 14 the disclosures in the proxy statement were incomplete and therefore misleading under all the circumstances.

One must parse the proxy statement disclosures in light of the essential facts regarding the FAC bid to determine if the disclosures which were made were adequate or incomplete. Set forth below is a parsing of the proxy statement juxtaposed with the findings of the Vice Chancellor concerning the contingent FAC bids. 15 According to the proxy statement:

(1) In 1991 Goldman, on behalf of Bancorp, “solicited indications of interest to acquire Bancorp or Society.”

(2) By the fall of that year “these efforts had produced no attractive opportunities for the sale of Bancorp or the sale of Society.”

(3) At that point “there began a more intensive evaluation of a three-part strategy in which Society’s loan and investment assets, its ownership interest in FAC and its retail branch bank system would be sold in separate transactions.”

(4) Bancorp and Goldman investigated “such transactions for several months.”

(5) This “investigation included contacting certain entities ... and evaluating certain potential indications of interest.”

[The Vice Chancellor found, with regard to this “investigation” and these “potential indications of interest,” that:

[Sjeveral companies submitted bids for FAC, one of which was valued at approximately $275 million. The bids were indeed submitted and were genuine offers to purchase FAC. However, these circumstances do not mean that FAC could be or was intended to be sold, in a stand-alone transaction, to the highest bidder. On the contrary ... the FAC bids were solicited as one part of the proposed Goldman transaction ... [I]f any part of [the May Proposal] was contingent or speculative in any way, the sale of FAC must have been contingent, too ... [T]he sale of FAC was not an event that could occur under any scenario ... the sale of FAC ... could occur only under certain circumstances (e.g., with regulatory approval, and/or concurrent with the sale of Bancorp).

Opinion at 13-14.]

(6) Thereafter the Bancorp board met on May 28, 1992, and “considered whether to pursue a series of transactions in which (a) FAC would be sold to a third party, (b) substantially all of Society’s assets would be sold to ... Goldman ... (c) [the stub assets would be] distributed to Bancorp’s stockholders and (d) Bancorp ... would be merged with a subsidiary of Bank of Boston.”

(7) The transactions discussed at this meeting “were tentative and the board was advised that, in light of uncertainties involving the value of certain assets, the *1280 value ultimately distributable to stockholders could only be estimated.”

(8) The board was also informed at the May 28, 1992 meeting “that a number of steps would have to be completed before the transactions could proceed.”

[The Vice Chancellor further found that “as contemplated by Goldman Sachs, the solicitor of the FAC bids, the sale of FAC was but one component in a complicated transaction.” Opinion at 14.]

(9) “These steps included the completion of the sale of FAC in an auction process.” [In an earlier part of the Opinion the Vice Chancellor had found:

In order to quantify its strategy, Goldman Sachs sought to value the FAC component of the Proposed Transaction. It accomplished this by conducting an auction of FAC.

Nine companies submitted “serious” preliminary bids for FAC; Norwest submitted a high bid of $275 million. Goldman Sachs invited the five highest bidders to conduct due diligence of FAC, and after Norwest’s completion of due diligence, it confirmed its offer to buy FAC for $275 million. In May 1992, contracts for the sale of FAC were drafted; the only steps remaining were for Bancorp and its shareholders to approve the Proposed Goldman Transaction and the parties to the sale to sign the agreements.

Opinion at 2.]

(10) “In light of a number of factors, including (a) the lack of certainty of the value to be received in the sale of FAC and Society’s assets and consequently the value to be received by Bancorp’s stockholders” and costs, risks of failure to close and recent improvements in Society’s condition and Baneorp’s prospects, the board determined not to pursue the proposed transactions farther.

[The Vice Chancellor further found: [T]he bids submitted for FAC were highly speculative and contingent. As a result, they in no way established a value of Bancorp.... [TJhey were bids for FAC, not Bancorp. No reasonable shareholder could extrapolate the value of a parent company from the value of one of its subsidiaries. The shareholder would have no way of knowing if other subsidiaries ... had a negative value and the extent of the negative value, if any.

Opinion at 15.]

The problem with the Vice Chancellor’s conclusion that the FAC bid was not material is that the partial and elliptical disclosures in the proxy materials were misleading without a disclosure of the $275 million bid and an explanation of its contingent nature. The Vice Chancellor’s own findings reveal the incompleteness of the disclosures in the proxy statement and how the contingent FAC bids could have been described without inundating the stockholders with information and without “an overemphasis • of the FAC bids.” Opinion at 14.

We hold only that, once defendants traveled down the road of partial disclosure of the history leading up to the Merger and used the vague language described, they had an obligation to provide the stockholders with an accurate, full, and fair characterization of those historic events. Cf. Lynch, 383 A.2d at 281 (holding that defendants violated their disclosure obligations when they partially disclosed a reliable, “floor” asset valuation but did not disclose an equally reliable “ceiling” value). 16 We agree with the Vice Chancellor that, as an abstraction, Delaware law does not require disclosure of inherently unreliable or speculative information which would tend to confuse stockholders or inundate them with an overload of information. This principle is consistent with Bershad v. Curtiss-Wright Corp., Del.Supr., 535 A.2d 840, 847 (1987) (“Efforts by public corporations to arrange mergers are immaterial under the Rosenblatt v. Getty standard, as a matter of law, until the firms have agreed on *1281 the price and structure and the transaction.”). 17 But, under the circumstances of this ease — which involve a partial and incomplete disclosure of historical information — we disagree with the Vice Chancellor’s holding that the existence of the $275 million bid for FAC was not material. 18

To be sure, the bid for FAC was contingent since it was only one part of an interdependent series of transactions and apparently required regulatory approval. 19 It does not follow from this fact, however, that a reasonable stockholder, having been partially informed of the history in the language of the proxy statement, would not have found it significant that one subsidiary of Bancorp had been the subject of a genuine auction bid of $275 million under contingent and explainable circumstances when the Merger transaction itself was valued at $200 million, some 37 percent less than Norwest’s contingent bid for FAC. We find that there is a substantial likelihood that the disclosure of this information would have significantly altered the “total mix” of information in the view of a reasonable stockholder. The voting choice of a stockholder included the decision of whether it was better to remain a stockholder in a continuing Bancorp with FAC as an asset (though there are other components with negative value and it may not be viable to sell FAC alone) or to be transformed into a stockholder in a new entity with Bancorp’s asset/liability mix plus other assets and liabilities combined as part of the surviving entity. 20 Without this information, the reason *1282 able stockholder could infer from language in the proxy statement that there only was an “evaluation,” an “investigation,” “certain potential indications of interest,” and that there were no “genuine” bids for actual dollar amounts in an “auction.” Thus, the Court of Chancery erred as to the partial disclosure claim, in granting defendants’ motion for summary judgment, and denying plaintiffs cross-motion for partial summary judgment. 21

We have concluded that the partial disclosure issue should be decided on the summary judgment record. For purposes of our decision, predicated as it is on the partial disclosure ground, the record is complete and this Court is in as good a position as the Court of Chancery to decide this mixed question of law and fact.

We decide only the case before us. See QVC, 687 A.2d at 51. Therefore, it is important to understand what we are not deciding. First, we are not deciding that the FAC bid was material as a matter of law. Second, since we have predicated our decision narrowly on the partial disclosure ground and assumed the facts in the light most favorable to the defendants on the regulatory approval question, 22 the material issue of fact analysis on that question is moot.

B. Goldman’s Valuation of Bancorp at $19.26 Per Share

Plaintiff argues that Goldman’s valuation of Bancorp at $19.26 per share in the Executive Summary of the May Proposal was material in light of the value of those shares under the Merger — $17.30 as of August 28, 1992. 23 Defendants counter that Goldman never fixed Bancorp’s share value at $19.26 because the May Proposal explicitly, inextricably bound that figure to a number of speculative contingencies, such as the uncertain value of the stub. The Court of Chancery held that exclusion of the $19.26 figure was proper because it was not material. We agree.

Goldman’s share valuation was too unreliable to be material. A board of directors must balance potential benefit versus harm when deciding whether or not to disclose an investment advisor’s earnings per share valuation. In re Vitalink Communications Corp. Shareholders’ Litig., Del.Ch., C.A. No. 12085, slip op. at 28, Chandler, V.C., 1991 WL 288816 (Nov. 8,1991) reprinted in 17 Del.J.Corp.L. 1311,1335 (1992). In opining that an offer is fair, where an investment advisor promulgates a “best case” projection predicated on an interplay of several, uncertain variables, the forecasted value need not be disclosed because it is too speculative and thus immaterial. Weinberger v. Rio Grande Indus., Del.Ch., 519 A.2d 116, 129-30 (1986) (earnings projection immaterial even though it depicted outlook more optimistic than that underlying the offer). Disclosing an overly optimistic per share figure may be harmful because it might induce *1283 stockholders to hold out for an elusive, higher bid. This risk cannot be reduced significantly by attempting to qualify the figure. Vitalink, slip op. at 29, 17 Del.J.Corp.L. at 1335-86. In fact, disclosure of an unreliable share valuation can, under some circumstances, constitute material misrepresentation. Smith v. Van Gorkom, Del.Supr., 488 A.2d 858, 891 (1985).

In the instant case, plaintiff argues that the $19.26 figure found in the “Estimated Values” section of the Executive Summary, which Goldman used to describe the May Proposal to the board, was fixed. The record refutes plaintiffs claim. First, footnote (c) in the “Estimated Values” section qualifies the “Stub Security” value. It states that the “stub requires some cash to satisfy indemnity. Amount of cash is subject to negotiations with various buyers.” Second, in the section in the Executive Summary titled “Issues to Consider Regarding Valuation Changes,” two concerns are indicative of the uncertainty attached to the $19.26 valuation: (i) if there is a “[mjaterial deterioration of loan portfolio’s credit quality, existence of environmental issues, [or] inability to obtain clear title,” there would be no positive effect and the following negative effect — “Assets will be transferred to stub reducing cash value to stockholders. Deterioration may impair deal economics”; and (ii) if the “[l]oan does not meet secondary market documentation standards,” there again would be no positive effect and the following negative effect — “Legal restrictions in loan documents or servicing agreements may prohibit sale or transfer of loans. Failure to meet standards will increase assets in the stub entity, reducing cash value to shareholders.”

Additionally, defendants submitted several affidavits and deposition testimony confirming the unreliability of the stub’s estimated value, which in turn made the $19.26 figure unreliable. Connell in his affidavit stated in relevant part:

[T]here was a fourth element to the May Proposal. Society had and still has substantial assets which are essentially unsalable, generally comprised of foreclosed commercial real estate which, in many cases, have a negative value due to environmental or-other problems The necessity for this stub entity created further complexity and made it difficult, if not impossible, to value accurately the entire transaction. Although Goldman indicated that the value of the stub might be as high as $3.32 per share ... Goldman made it clear to Board that that value was based on the book value of the stub assets, which is not reflective of the amount of their market or liquidation value. Stated differently, no buyer would purchase such assets at book value at that time.

In pertinent part, Berlinski in his affidavit stated:

The Board ... determined not to proceed further with [the May Proposal] since it viewed it as too speculative, complex and difficult to value.... [T]he values it would achieve were uncertain, in part due to the inability to assess the likely trading value of the stock in the “stub entity” that would hold the Bank’s unsalable assets, such as its foreclosed real estate. We told the Board that the $3.32 per share value we attributed to the stub was simply its estimated book value and that stock in the stub was likely to trade for considerably less.

In the relevant portion of Stone’s affidavit, he stated:

[W]hile I believed [in May 1992 that] it was worth at least pursuing the [May Proposal] further, I certainly did not believe, and to the best of my knowledge, no one else on the Board believed that that proposal — even if it could be successfully concluded — would be worth as much as $19.26. This was in part because the existence of the “stub security” (representing ownership of generally unsalable assets) made it difficult if not impossible to know what the actual value of the proposal would be and the need to set aside cash in the stub to indemnify purchasers of Society’s assets created further uncertainty as to that value. Although Goldman indicated in its presentation to the Board that the stub could have a book value of $3.32 per share, Goldman made it clear to the Board both in its written presentation and orally that this value was speculative and by no means *1284 represented the value at which the stub security would trade in the market.