Martin Marietta Materials v Vulcan Materials PDF

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Martin Marietta Materials v. Vulcan Material Delaware SC? 2012 Facts: There are a lot of facts here - Basic Background info: So, Martin and Vulcan are the biggest companies in the construction aggregates industry within the US. They’ve been entertaining the idea of a business combination for years, but never seriously it appears until early April 2010 when actual formal discussions began. Martin’s CEO, Nye, was scared of a takeover by Vulcan and required absolute confidentiality in order to enter into these discussions. Based on that, the parties entered into an NDA and JDA agreeing that the discussions would remain absolutely confidential and that any information exchanged would be used only to facilitate the transaction, with Nye intended to be a friendly deal. - NDA: by martin’s counsel o Paragraph 2 Prohibited the use and disclosure of “evaluation material”, except where expressly allowed  “evaluation material” is: “any nonpublic information furnished or communicated by the disclosing party”  As well as: “all analyses, compilations, forecasts, studies, reports, interpretations, financial statements, summaries, notes, data, records or other documents and materials prepared by the receiving party … that contain, reflect, are based upon or are generated from any such nonpublic information” o Allowed “solely for the purpose of evaluating a Transaction.”  “transaction”: possible business combination transaction between Martin and Vulcan or one of their respective subsidiaries.” o Disclosure of negotiations and certain information allowed where “legally required” as per ¶ 3  Legally required: means external demand is made, like as a discovery request o ¶4: If requested or required to disclose evaluation material or any other facts, must seek a protective order or other appropriate remedy and/or get waiver of compliance with the provisions by the other party; Must only disclose the portion of the evaluation material which such counsel advises is legally required to be disclosed. - JDA: “Joint Defense Agreement” o Created for the discussion of antitrust concerns by outside counsel o Prohibits and limits the use and disclosure of information that the JDA describes as “confidential materials”  ¶ 2: Prohibits the disclosure of confidential materials without the consent of all parties who may be entitled to claim any privilege or confidential status with respect to such materials  ¶ 4: confidential materials will be used, consistent with the maintenance of the privileged and confidential status of those materials, solely for the purposes of pursuing and completing the transaction - Martin’s Violation

o After NDA & JDA were signed, discussions including, conversations about synergies and antitrust concerns, occurred containing even more confidential, non-public information o That information made Martin realize they could as a result of their recent stock price increase they could offer Vulcan’s SHH’s a premium in a stock-forstock exchange and justify it economically. o Soon after March 8, 2011 the discussions seemed to go south  So Martin used Vulcan’s confidential, nonpublic information to consider a hostile deal: launched its unsolicited exchange offer later followed by a proxy contest and filed Proxy statement in connection  Filed S-4 form with SEC (specifics on pg. 322), as is required with an exchange offer, that details past negotiations as is required by antitrust law  In doing so: disclosed Vulcan’s nonpublic information to third party advisors and the public later WITHOUT Vulcan’s prior consent or adhering to notice and vetting process mandated by the NDA ¶ 4. Procedural History: - Martin sought declaratory judgement that the NDA did not bar them from launching its exchange offer and proxy contest - Vulcan counterclaimed that these actions did violate the NDA & JDA and sought injunction to keep Martin from going through with these actions - Court of Chancery sided with Vulcan and granted a 4-month injunction on Martin, and Martin appealed. o Additionally, found the S-4 to be filed in an argumentative manner in order to make Vulcan’s management look bad o Also found that Martin disclosed evaluation material and other negotiation information in “push pieces to investors” on and off the record to the media and investor conference calls Claims: Martin claims error bc they’re use is not prohibited by the agreements (this court rejects all of them) (1)Trial court erred in going beyond the plain language of the NDA, which unambiguously permitted the use of evaluation material to conduct its hostile exchange offer and proxy contest (2)The NDA did not prohibit Martin from disclosing evaluation material and information about the merger discussions without prior notice and vetting because such disclosures were legally required to conduct its hostile takeover bid (3)Martin did not breach the JDA because: a. The JDA unambiguously makes itself subservient to the NDA, therefore compliance with the NDA is compliance with the JDA b. Martin did not breach the JDA’s use restriction because it was used to facilitate a transaction c. The transaction “being discussed” was not only a merger (4)the court improperly balanced the equities and granted injunction relief without proof of actual injury. Holding: Court of Chancery Upheld

Reasoning: 1. Martin’s violation of the JDA a. The only “transaction” being discussed was a merger i. Ample evidence to support this: 1. Nye telling Vulcan that Martin was not for sale 2. Nye telling Vulcan that Martin was interested in discussing the prospect of a merger, not an acquisition, whether by Vulcan or otherwise 3. Bye telling Vulcan that the transaction was a “modified merger of equals” b. The only transaction being discussed was a “friendly” or “negotiated” one: which excludes Martin’s “hostile bid/business combination effectuated by pressure” c. Paragraph 12 of the JDA does not read to make it subservient to the NDA. i. Uses the theory of Independent legal significance ii. This would actually be the inverse of what the paragraph actually says. It would limit the rights and obligations to what the NDA says, and basically destroy any meaning/purpose of the JDA. 2. Martin’s violation of the NDA. a. Reads the NDA to mean: Unambiguously permit a party to the NDA to disclose legally required evaluation material only if an external demand for such information has been made an only if the non-disclosing party is then given prior notice of any intended disclosure and an opportunity to vet the information sought to be disclosed b. paragraph 3 does not refer to evaluation material when it carves out the exception for legally required information i. the drafter referred to evaluation material several times and if they wanted to include it in Section 3, they would have period therefore its absence does not allow us to read it into the exception. c. Paragraph two does expressly prohibit the disclosure of evaluation material d. paragraph four explicitly and separately permits disclosure of evaluation material with separate standards that must be adhered to i. Must exist first an external demand, then Martin should have given notice to Vulcan, and tried to withhold unnecessary information through a vetting process 1. But none of this happened e. therefore, Martin's attempt to read evaluation material into paragraph three is prohibited because it is against the drafter’s intent when drafting the NDA 3. The remedy a. Paragraph nine of the NDA stipulates that money damages would not be a sufficient remedy for any breach by either party in that the non-breaching party shall be entitled to equitable relief including injunctions [the JDA also has a similar provision] i. Delaware courts have long held that contractual stipulations as to irreparable harm alone suffice to establish that element for the purpose of issuing injunctive relief 1. Martin has not provided anything to suggest otherwise b. Martin argues at the harmless speculative and made without any support i. Vulcan CEO testimony supplies ample record evidence that the harm was not speculative

c. Martin attacks the scope of the remedy claiming that it is unreasonable because it would delay Martins proxy contests by one year rather than four months due to the expiration date and New Jersey law requiring annual director elections i. when weighed against Vulcans need to vindicate reasonable contractual expectations , the delay imposed on Martin as a result of its own conduct is reasonable...