Cent. Laborers' Pension Fund v. McAfee, Inc.

2. McAfee and Intel-Business Relationship and Early Merger Discussions

Before the merger, McAfee had a nearly decade-long relationship with Intel as a supplier of security software and a partner in research and development and marketing initiatives. In 2009, the companies agreed to collaborate in developing enhanced security technology using the expertise of both companies through a joint research-and-development project called "Patmos." Intel's Software and Services Group, led by the group's general manager and senior vice-president Renee James (James), was around this time also considering potential acquisitions as part of Intel's security strategy, including the possibility of acquiring an existing platform security company such as McAfee.

In March 2010, Intel requested a meeting with McAfee. DeWalt and Gerhard Watzinger, a McAfee executive vice-president, speculated that Intel

In May and June 2010, James proposed to Intel's board of directors that Intel engage in acquisition discussions with McAfee. Intel's internal valuation

The McAfee board met in formal sessions nine times following receipt of the June 11 proposal. At the first special meeting on June 12, 2010, DeWalt reviewed McAfee's relationship with Intel and updated the board on the partnering discussions that had taken place since late February 2010. DeWalt told the board that he believed Intel could be convinced to increase its price per share following initial due diligence. The board at that time retained transactional counsel, Wilson Sonsini, and considered several investment banks to serve as McAfee's financial advisor, ultimately selecting Morgan Stanley. The terms of engagement tied Morgan Stanley's compensation to the acquisition price and provided a higher fee for each per-share increase in sale price, with a multi-million dollar bonus for a price equal to or greater than $50 per share and a bonus of several times that amount for a sale at $55 per share or more.

McAfee's board reconvened several days later for an update on the due diligence sessions and McAfee's internal forecast. Morgan Stanley offered its preliminary analysis of the July 11 proposal in view of McAfee's financial performance, possible standalone scenarios, other potential bidders, and Morgan Stanley's valuation of McAfee at between $55.09 per share (base case) to $60.20 per share (high case). Following these discussions, the board decided to reject the June 11 proposal and directed DeWalt to communicate to Intel that $45 per share was inadequate. The focus of the board was to obtain an offer at a price that was "something above $50." According to defendant Lorrie Norrington, the board "had the specific conversation that 45 was too low and that ... it has to start with a five in order for the board to consider the offer."

DeWalt and Morgan Stanley separately communicated McAfee's rejection of the $45 offer. DeWalt testified that there was "an impasse" because "Intel

McAfee's board met again on July 8, at which time DeWalt reported a pause in the merger discussions as Intel wished to wait until the full financial statements from McAfee's second quarter became available. Morgan Stanley confirmed DeWalt's information and reported that they had reiterated that Intel would need to increase its $45-per-share offer before McAfee would engage in more complete due diligence. Morgan Stanley also reported that one other potential acquirer identified by the board had indicated that it was not interested in pursuing an acquisition. DeWalt apparently did not inform the board about James's inquiry if $50 would "get the deal done" if she went back to Intel's board.

The proxy statement dated September 21, 2010, described in relevant part the McAfee-Intel joint partnership (Patmos) in 2009 and the meeting between James and DeWalt on June 10, 2010. It described McAfee's process, price negotiations, and communications with Intel between the June 11 proposal at $45 per share and receipt of the revised offer on July 20 at $48 per share, as well as Morgan Stanley's fairness opinion and the board's deliberations and consideration of alternative prospects before approving the agreement on August 18. It did not mention project Inca or pre-due diligence discussions or

It alleged that in order to protect the deal with Intel, defendants entered into a merger agreement that was "steeped in preclusive deal protection provisions designed to guarantee that Intel did not lose its preferred position." These included a " 'No Shop' " provision that required McAfee to discontinue any discussions with other potential acquirers, a " 'Matching Rights' " provision that gave Intel five days to match any competing acquisition proposals that McAfee might receive, and a " 'Termination Fee' " provision in which McAfee would pay Intel $230 million if it accepted a higher offer despite the no shop provision.

The complaint also alleged that defendants withheld material information in proxy statements, depriving McAfee's shareholders of information about the flawed sales process, conflicts of interest that burdened the board and its advisors, McAfee's intrinsic value and prospects going forward, material benefits that defendants and McAfee management would secure only if the acquisition succeeded, and the flawed financial analysis supporting Morgan Stanley's fairness opinion.

The complaint in sum asserted that (1) defendants were motivated by lucrative personal gains, (2) the acquisition price of $48 per share was unfair and undervalued below McAfee management's own estimates, (3) the proxy statements to McAfee's public shareholders omitted material information about the merger process and the basis for Morgan Stanley's fairness analysis, and (4) defendants consequently breached their fiduciary obligation to obtain the highest value reasonably available for McAfee's shareholders.

The trial court overruled demurrers to the consolidated amended complaint on June 29, 2011.

2. Trial Setting

In January 2012, the trial court granted plaintiff's motion to intervene, certified the class, and appointed plaintiff as class representative. Several months later, defendants moved to amend certain pretrial and trial-setting orders to specify that the case would be tried to the court in a bench trial. Defendants argued that plaintiff was not entitled to a jury trial because under Delaware law, breach of fiduciary duty claims are equitable in nature and are subject to the exclusive jurisdiction of the Delaware Court of Chancery, with no right to a trial by jury in that court. Plaintiff opposed the motion and

Plaintiff in response raised no evidentiary objections but purported to dispute many of defendants' 185 material facts and raised 153 additional disputed material facts in support of its opposition. Plaintiff argued that triable issues of material fact precluded summary judgment, particularly concerning (1) strategic, informational, and timing disadvantages that McAfee faced in its haste to evaluate an offer that " 'surprised' " and " 'shocked' " the board members (despite McAfee's collaboration with Intel management on project Inca to identify and value strategic synergies), (2) DeWalt's "outright" rejection of James's $50-per-share overture, which allegedly caused Intel to "freeze" discussions at a critical juncture, (3) DeWalt's alleged concealment of the $50-per-share overture and the project Inca discussions from the board, and (4) the board's acceptance of Morgan Stanley's fairness analysis despite obvious reliance on " 'street' " valuations that undervalued the company because they "had no idea about the billions of dollars of additional value uncovered during the Project Inca discussions."

The trial court granted judgment in favor of defendants on November 2, 2012. The court noted there was no dispute that the McAfee charter contained an exculpatory provision pursuant to section 102, subdivision (b)(7) of the Delaware General Corporation Law ( 8 Del. Code, § 102(b)(7) ) shielding the

Having found no triable issues of material fact related to the fiduciary duty claims, the court concluded there was no basis for relief for any alleged disclosure violations and that McAfee and Intel could not be liable for aiding and abetting. The trial court entered judgment for defendants on February 13, 2013. Plaintiff timely appealed.

II. DISCUSSION

Plaintiff asserts that in deciding the motion for summary judgment, the trial court disregarded its fundamental task to construe the evidence and draw all

b. Duty of Care

"A director's duty to exercise an informed business judgment implicates the duty of care. Director liability for breaching the duty of care 'is

We conclude that plaintiff's quest to establish entire fairness as the applicable standard of review and to defeat summary judgment as to the independent directors requires a showing of one or more triable issues of material fact pertaining to the non-exculpated loyalty or good faith claims against those directors. A failure to present evidence of a triable issue of material fact as to the non-exculpated breach of the fiduciary duty claims properly results in the affirmance of judgment in their favor. (See, e.g., Lyondell , supra , 970 A.2d at pp. 237-239 ; In re S. Peru Copper Corp. S'holder Derivative Litig . (Del. Ch. 2011) 52 A.3d 761 , 785 [dismissing certain director defendants at summary judgment "because the plaintiff had failed to present evidence supporting a non-exculpated breach of their fiduciary duty of loyalty ...."].)

d. The Record Does Not Support Review for Entire Fairness

Plaintiff argues that DeWalt's interest in the merger and alleged manipulation of the independent directors necessitates the application of entire fairness review. Plaintiff focuses on DeWalt's alleged concealment of James's $50-per-share overture and of the pre-due diligence, project Inca exchanges between McAfee and Intel leading up to the June 11 proposal. Plaintiff contends that the independent directors failed to take steps to protect against conflicts in the process, especially pertaining to DeWalt after the June 11 proposal stated Intel's intent to retain McAfee's management team. Plaintiff relies primarily on three cases to support this argument:

Bomarko involved the merger of International Telecharge, Inc. (ITI), into a corporation that was wholly-owned by ITI's chairman and CEO, Ronald Haan. ( Bomarko , supra , 794 A.2d at pp. 1164-1165.) ITI was facing default

The Delaware Supreme Court emphasized that the feasibility study was of material significance to UOP and its shareholders. ( Weinberger , supra , 457 A.2d at p. 709.) "Since the study was prepared by two UOP directors,

Here, the June 11 proposal dispels any inference that DeWalt concealed his future employment prospects from the independent directors. Plaintiff's reference to Krasner v. Moffett (Del. 2003) 826 A.2d 277 , 283, footnote 18 (finding that an "expected ... benefit" to directors' business and consulting relationships was sufficient to state a claim that the directors suffered a disabling conflict of interest) is unhelpful insofar as it addresses the sufficiency of breach of fiduciary duty claims at the pleading stage only. Mills and Bomarko provide apt illustrations of interested corporate fiduciaries. The target company's chairman and CEO in Mills orchestrated a management-sponsored buyout of the company in which the management would receive up to 20 percent ownership in the newly formed company. ( Mills , supra , 559 A.2d at pp. 1264, 1265.) In Bomarko , the company chairman and CEO steered the company into a merger with his own, wholly-owned corporation after interfering with the company's efforts to find alternative financing and avoid bankruptcy. ( Bomarko , supra , 794 A.2d at p. 1181.) The record before us bears no resemblance.

More comparable are the facts in In re Toys "R" Us, Inc. (Del. Ch. 2005) 877 A.2d 975 , 1003, in which the plaintiffs challenged the motives of the CEO of the target company in a bid for sale due to his expected gain of "over $60 million from the sale" ( ibid . ) and his knowledge that the bidder's initial bid was conditioned on the retention of key but unidentified members of management. The court rejected this argument, explaining that the condition for retention of management was removed in later bids, and the CEO's equity in the company created "more incentive than almost anyone to make sure that the board did the best risk-adjusted job it could of getting the best price." ( Id . at p. 1004.) Similarly here, DeWalt and the independent directors were aware

On the other hand, the evidence shows that the independent directors expected DeWalt to engage in discussions with potential partners and acquirers and viewed the related exchanges of information to be appropriate. Chairman Robel testified that in the spring of 2010, DeWalt told him that Intel had "expressed a greater interest in McAfee" and was "looking at additional information," and that DeWalt had meetings with James over "some period of weeks." According to Robel, "it wouldn't have been unusual" in that context for DeWalt to have "provided all sorts of analysis around our business, their business, and the opportunities between the two." When Robel learned that Intel "was asking more questions about the business," he believed it might have been a "fishing expedition" because a combination with Intel was "pretty out of the box and is subsequently viewed by people as being pretty out of the box."

The expressions of surprise at Intel's June 11 proposal appear to be closely tied to this generally-held view that Intel was an unlikely acquirer. For example, defendant Pangia testified that DeWalt "kept the board abreast of discussions that ... evolved initially from what we thought would be a joint

The evidence related to the marketplace outlook and second quarter results further does not support an inference that an offer higher than $48 per share would have been forthcoming. Plaintiff points out that despite falling below market expectations, McAfee's revenue results still represented the "17th consecutive quarter of double-digit, year-over-year revenue growth." This fact must be viewed in the context in which merger negotiations were taking place. James testified that McAfee's "stock was going down" and that around the time of Intel's June 11 proposal, "[t]he business went off a cliff," dropping another $3 by the time McAfee's board had accepted the second offer. According to James, McAfee had missed its second quarter and showed "very weak forward guidance." James communicated internally to Intel's board committee that she had waited for written confirmation of McAfee's second quarter results, which "were in line with what we expected," before making the revised offer. DeWalt described the results as "mixed" with McAfee having "missed pretty substantially" analyst expectations in a few key categories but having beat expectations in others. Chairman Robel testified that "it was not a good quarter" and "there was a lot more cloud around the company's ability to grow in the future." And Dr. Shaw testified that Intel's board at that time was watching McAfee's market performance "very closely ... and it actually wasn't doing well."

2. The Enhanced Scrutiny Analysis

Having concluded that plaintiff did not meet its burden to establish entire fairness review, we turn to consider whether the trial court erred in finding no triable issues of material fact as to either the independent directors

Plaintiff also contends that there are triable issues as to whether the independent directors acted in bad faith by consciously disregarding their obligation to disclose all material information in the proxy statement. Plaintiff argues that if the independent directors were informed of discussions between Intel and McAfee leading up to the June 11 proposal, then they were required to disclose those discussions in the proxy statement, and their knowing disregard of that obligation violated their duties of loyalty and good faith.

Under Delaware law, "the obligation to disclose all material facts fairly when seeking shareholder action is merely a specific application of the duties of care and loyalty." ( In re Transkaryotic Therapies, Inc . (Del. Ch. 2008) 954 A.2d 346 , 357 ( Transkaryotic ); accord Malpiede v. Townson (Del. 2001) 780 A.2d 1075 , 1086.) As such, recovery for monetary damages based on disclosure claims may be barred by application of a section 102(b)(7) exculpatory provision. ( Arnold v. Society for Sav. Bancorp, Inc . (Del. 1994) 650 A.2d 1270 , 1287 ( Arnold ); Transkaryotic, supra , at p. 360 ["where a breach of the disclosure duty does not implicate bad faith or self-interest, both legal and equitable monetary remedies ... are barred on account of [ section 102(b)(7) ]"].) Furthermore, due to the nature of a disclosure violation-i.e., depriving shareholders of complete and accurate information in casting their votes, a breach of the disclosure duty leads to irreparable harm, limiting a court's ability to remedy the harm once the merger has closed. ( Transkaryotic, supra , at p. 361.)

We find plaintiff's contention that the failure to disclose the pre-June 2010 discussions and document exchanges between McAfee and Intel was "knowing" or "intentional" to be wholly conclusory. The Delaware Supreme Court's decision in Arnold is instructive. There, the plaintiff sought to prove that alleged disclosure violations qualified as exceptions to the section 102(b)(7) exculpatory provision by arguing, in relevant part, that the defendants' knowing or deliberate failure to make proper and complete disclosures implicated the duty of loyalty and the proscription against knowing, intentional violations of the law. ( Arnold, supra , 650 A.2d at pp. 1287-1288.) The court rejected this argument as unsupported by the record, noting that the individual defendants did not violate the duty of loyalty under the facts of the case and the record did not support an intentional disclosure violation. ( Id . at p. 1288.) The court added, in dictum,

Plaintiff cites Chen, supra , 87 A.3d 648 , for the proposition that the knowing failure to disclose material information in a proxy statement can constitute a non-exculpated breach of fiduciary duty. Chen is inapposite. The court in that case rejected the defendants' invocation of the section 102(b)(7) exculpatory provision with respect to various disclosure claims, because it could not determine on summary judgment whether the disclosure violations resulted from a breach of the duty of loyalty or the duty of care. ( Chen, supra , at pp. 691-692.) Here, we find that absent some evidence supporting its claim of a non-exculpated fiduciary duty, plaintiff has failed to create a triable issue of material fact regarding the independent directors' alleged disclosure violations.

Accordingly, summary judgment is appropriate because any disclosure violation would implicate only the duty of care and would not lead to the imposition of monetary damages under McAfee's section 102(b)(7) exculpatory provision. (See Transkaryotic, supra , 954 A.2d at pp. 362-363.) Alternatively, as plaintiff acknowledges, the court "cannot grant monetary or injunctive relief for disclosure violations in connection with a proxy solicitation in favor of a merger ... after that merger

Plaintiff contends that DeWalt knowingly concealed James's overture from the board and, what is more, continued the deception when a couple of weeks later, Intel revised its offer to $48-per-share and communicated that it would go no higher. Defendants deny that DeWalt concealed a $50-per-share "offer" from the board, as James had made it clear that she did not have authorization at that level. Defendants point to James's testimony that DeWalt responded "no, 52 to 54" as evidence that DeWalt handled James's "fishing expedition" negotiating tactic by appropriately trying to get more money for McAfee's stockholders and not by selling them out. They argue that plaintiff's inability

Yet in this case there is no evidence that the omission of James's overture to DeWalt from the proxy statement was the product of reasoned business judgment, because DeWalt never disclosed the interaction to the board or its advisors. This stands in contrast with circumstances that Delaware courts have found to fall appropriately within the range of reasonableness required under enhanced scrutiny. For example, in Dollar Thrifty , the plaintiffs alleged that the Dollar Thrifty board failed to reach out to a potential suitor (Avis) before finalizing the merger transaction with Hertz, and specifically alleged that Dollar Thrifty's CEO lied about his reasons for turning down a dinner invitation from the Avis CEO even though he had "suspicions" that perhaps

Defendants correctly point out that aiding and abetting liability requires an underlying breach of duty. (See Manzo v . Rite Aid Corp ., 2002 WL 31926606 , at *6, 2002 Del. Ch. LEXIS 147, at *21.) Thus in Transkaryotic , the plaintiffs alleged that the acquiring company, Shire, " 'knowingly assisted' " the individual defendants in breaching duties of loyalty and disclosure. ( Transkaryotic , supra , 954 A.2d at p. 370.) The Court of Chancery

The California Supreme Court reiterated these principles in a decision addressing in relevant part the right to a jury trial on a cause of action for wrongful termination in violation of public policy. ( Shaw v . Superior Court (2017) 2 Cal.5th 983 , 216 Cal.Rptr.3d 643 , 393 P.3d 98 ( Shaw ).) Shaw summarized the constitutional right to a jury trial in California as follows. " Article I, section 16 of the California Constitution declares broadly that '[t]rial by jury is an inviolate right and shall be secured to all ....' Notwithstanding the breadth of this declaration, past California cases make clear 'that the state constitutional right to a jury trial "is the right as it existed at common law in 1850, when the [California] Constitution was first adopted." ' " ( Id . at pp. 994-995, 216 Cal.Rptr.3d 643 , 393 P.3d 98 , fn. omitted.) Thus, " ' " '[i]f the action has to deal with ordinary common-law rights cognizable in courts of law, it is to that extent an action at law. In determining whether the action was one triable by a jury at common law, the court is not bound by the form of the action but rather by the nature of the rights involved and the facts of the particular case-the gist of the action. A jury trial must be granted where the gist of the action is legal, where the action is in reality cognizable at law.' " [Citation.] On the other hand, if the action is essentially one in equity and the relief sought "depends upon the application of equitable doctrines," the parties are not entitled to a jury trial. [Citations.] Although we have said that "the legal or equitable nature of a cause of action ordinarily is determined by the mode of relief to be afforded" [citation], the prayer for relief in a particular case is not conclusive [citations]. Thus, "The fact that damages is one of a full range of possible remedies does not guarantee ... the right to a jury ...." ' " ( Id . at p. 995, 216 Cal.Rptr.3d 643 , 393 P.3d 98 .)

As set forth in the Restatement (Second) Conflict of Laws section 122, "A court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case." (Rest.2d Conf. of Laws,

In arguing that Delaware law determines the nature of the action, defendants misapprehend the reach of the internal affairs doctrine, which pertains to the substantive law governing the outcome of the litigation-specifically to provide " 'the relevant corporate governance general standard of care' " based on the state of a businesses' incorporation. ( State Farm Mutual Automobile Ins. Co. v. Superior Court (2003) 114 Cal.App.4th 434 , 442, 8 Cal.Rptr.3d 56 .) As the court explained, " 'The internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation's internal affairs-matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders ....' " ( Ibid . ) While Delaware law in this case supplies the " 'relevant corporate governance general standard of care' " ( ibid . ), we find no basis on which to extend the internal affairs doctrine to matters properly governed by local forum rules, including form of the action (equitable or legal) and mode of trial (jury or bench).

The question thus narrowed is whether plaintiff's shareholder class action for breach of fiduciary duty, brought under Delaware law, is legal or equitable in nature under California law. Plaintiff emphasizes that the relief sought in this case is legal because the complaint sought money damages for defendants' breach of fiduciary duty and withholding of material information. Specifically, plaintiff sought: (1) "damages to the class in an amount to be proven at trial, caused by defendants' breaches of fiduciary duties in connection with the Acquisition," (2) rescission of "the Merger Agreement or any of the terms thereof, and the Acquisition," and (3) "such other and further equitable relief as this Court may deem just and proper."

We note that the prayer for relief, though not conclusive, is weighted toward equitable remedies. Notably, the pleading for damages is tied to the conduct of McAfee's former directors "in connection with the Acquisition,"

Plaintiff's effort to distinguish Interactive Multimedia as a dispute between minority and majority shareholders, rather than between shareholders and the board of directors, is unavailing. The fiduciary duty action implicated directors of the former corporation as well as the majority shareholder, and the court's ruling applied to both. ( Interactive Multimedia , supra , 62 Cal.App.4th at p. 1555, 73 Cal.Rptr.2d 462 .)

Plaintiff also seeks to refute or limit the principle articulated in Interactive Multimedia by arguing that the relationship between shareholders and the directors of a corporation is not one of trust but of agency. Plaintiff relies on the following passage from Bainbridge v . Stoner (1940) 16 Cal.2d 423 , 428, 106 P.2d 423 ( Bainbridge ): "strictly speaking, the relationship [between a

Similarly in In re Cantrell (9th Cir. 2003) 329 F.3d 1119 , 1126, the Ninth Circuit rejected the argument under California law that corporate "officers are trustees of a statutory trust with respect to corporate assets." The court addressed Interactive Multimedia in a footnote by noting that the Court of Appeal had "failed to mention the California Supreme Court's holding in Bainbridge " and likely had not "intended to contradict the state's highest court without expressly doing so." ( In re Cantrell, supra , at p. 1126, fn. 4.) While it is true that Interactive Multimedia did not mention Bainbridge , it did rely on another, more recent California Supreme Court case. Specifically, the analysis of the fiduciary duty action in Interactive Multimedia came directly from Jones v. H.F. Ahmanson & Co., supra , 1 Cal.3d at page 109, 81 Cal.Rptr. 592 , 460 P.2d 464 , and its

The nine other members of the board-defendants Charles Robel, Carl Bass, Thomas Darcy, Leslie Denend, Jeffrey Miller, Lorrie Norrington, Denis O'Leary, Robert Pangia, and Anthony Zingale-were outside, nonmanagement, nonemployee directors with combined executive and board experience in the technology, investment banking, and accounting fields, including dozens of merger and acquisition transactions. None of the independent directors joined Intel as directors or employees after the merger.

McAfee maintained close working relationships and alliances with numerous technology companies. As part of its regular diligence, the board of directors discussed McAfee's strategic relationships with other technology companies along a "full spectrum of options" from technology partnerships to mergers and acquisitions. It was DeWalt's role to update the board on these ongoing discussions, which he did as part of a "regular review process that

James later testified that the McAfee presentation "surprised" her because she anticipated a meeting about the joint development effort. DeWalt testified that the group led by James met "to ask questions about our business in the spirit of partnership, but certainly the questions that were being asked were probably more leading than just a partnership discussion."

After the March 2010 meeting, McAfee and Intel management continued their partnership discussions. Intel began vetting investment banks for advisory services in connection with a potential "deal" in the security sector. At one point Intel offered the advisory position to Morgan Stanley. Morgan Stanley declined, noting internally that it anticipated a more lucrative "revenue opportunity" providing sell-side advice to McAfee.

Meanwhile, DeWalt and James stayed in regular contact, which DeWalt understood as "partner oriented" and indicative of Intel's interest in security and in McAfee. A close collaboration began between McAfee and Intel management in a project that was dubbed "Inca." On April 4, 2010, representatives of both sides met at Intel's headquarters. The objective of the Inca meeting was to provide Intel with "necessary McAfee and technology background to build synergy matrix and [financial] model" and to "[i]dentify top opportunities for combined assets." The discussion centered on a list of eight joint business opportunities, including Patmos, that each represented a "$1B+ opportunity." Inca discussions continued throughout April and May 2010. McAfee added a segment-by-segment analysis of business opportunities to Intel's technology asset list, highlighting McAfee's "value-add" in terms of the eight "Billion Dollar" ideas. In early

3. June 11 Proposal at $45 per share

James met with DeWalt on June 10, 2010 and verbally conveyed Intel's interest in making an offer at the price of $45 per share. DeWalt recalled it as the "first meeting ... where there was a strong indication of interest and that there might be an offer to follow." DeWalt's response to James was "if it didn't start with a five, it was a non starter." James later testified that "Dave [DeWalt] let me know 45 didn't work. ... Dave's words were: It needs to start with a 5."

The next day, James sent DeWalt a written request for exclusive negotiating rights and nonbinding proposal to acquire McAfee in a cash offer at $45 per share (June 11 proposal) subject to the completion of due diligence and board and regulatory approvals. The proposed price represented a 43 percent premium over McAfee's stock price, which had fallen since late 2009 and was trading in the low 30s. The June 11 proposal stated that Intel intended to operate McAfee as a standalone subsidiary and to retain "the current management team." DeWalt notified McAfee board chairman Robel, who called a special meeting for the next day.

In an e-mail to Intel's CEO and board subcommittee dated June 11, 2010, James reported "preliminary progress" with McAfee and stated that DeWalt had requested a nonbinding letter of intention to enter into due diligence despite "a price gap to their potential expectations ...." In a follow-up exchange with Andy Bryant (of Intel), James stated that DeWalt's "expected price" was "50." Bryant responded that a deal was possible "if that is where he is starting." James also recounted the meeting to her Intel colleague Donald Harbert, whose notes indicate that James believed the "gap is $5.00" between Intel's indication of interest at $45 and McAfee's expectations for an opening bid. Harbert's notes indicate that McAfee's stock price was "down" and Intel should make an offer "now before the stock goes up." The notes also reference a retention plan for the "top 41" and that DeWalt would "only want to stay 2 years."

4. McAfee's Response to the June 11 Proposal

The McAfee board was informed of ongoing joint partnership discussions between Intel and McAfee in the spring of 2010. Several board members

Yet several directors described Intel's June 11 proposal as unexpected and a surprise, based on views that Intel was not a likely acquirer and that DeWalt's briefings about discussions with Intel had remained focused on the joint venture. Defendant Robel explained that he thought Intel's increased interest in security and questions about McAfee's business might have been a "fishing expedition" because a combination with Intel was "pretty out of

James spoke with DeWalt over the July 4th weekend and asked "will 50 get the deal done, if we go back to the board?" DeWalt, according to James, "said, no, 52 to 54. He stuck to it." James explained that she did not speak with DeWalt for "a couple weeks after" and decided to wait until the second quarter results, noting that McAfee was "in a falling market, their stock was going down, and we knew their quarter wasn't good. So we said: You know what? We see real weaknesses in their business. And we were concerned that we needed to wait and get more data."

Correspondence continued between James and DeWalt immediately following

Intel revised its acquisition offer to $48 per share in a letter dated July 19 and delivered to DeWalt on July 20. The offer represented a 58 percent premium over McAfee's stock closing price on July 19 and demanded a 30-day exclusivity agreement.

McAfee's board convened special meetings on July 21 and July 22 to discuss the revised offer. DeWalt reported that based on his discussions with James, Intel "was not willing to further increase its offer" price. Morgan Stanley reported that it had received similar information from Intel's financial advisor and that it believed Intel would withdraw its offer if McAfee sought alternative bids or failed to agree to a 30-day exclusivity period. Morgan Stanley presented a valuation summary and the board discussed the conditions of the offer, market trends for mergers and acquisitions, the interest and ability of other potential acquirers to complete an acquisition, and whether to seek a further increase in the offer price. DeWalt reviewed the second quarter financial results and reasons that revenues had fallen below expectations, as well as several successes that McAfee had achieved that quarter. At the end of the meeting on July 22, McAfee's board authorized negotiations based on the $48-per-share offer but directed counsel to seek a shorter term of exclusivity.

The McAfee board held three special meetings in August to consider aspects of the proposed transaction. DeWalt's compensation and employment agreement with Intel also was negotiated and reviewed by the board's compensation committee. At the meeting on August 18, Morgan Stanley delivered a formal fairness opinion concluding that the acquisition price of $48 per share was "fair from a financial point of view" to the shareholders. The board approved the merger on August 18, 2010. On August 19, Intel and McAfee jointly announced an agreement for Intel to acquire all of McAfee's common stock for $48 per share in cash. The merger agreement included a "fiduciary out" clause that permitted

A. SUMMARY JUDGMENT AND STANDARD OF REVIEW

A motion for summary judgment provides "a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute." ( Aguilar v. Atlantic Richfield Co . (2001) 25 Cal.4th 826 , 843, 107 Cal.Rptr.2d 841 , 24 P.3d 493 ( Aguilar ).) The trial court must grant a motion for summary judgment "if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ( § 437c, subd. (c) ; Schachter v. Citigroup, Inc . (2009) 47 Cal.4th 610 , 618, 101 Cal.Rptr.3d 2 , 218 P.3d 262 ( Schachter ).) To demonstrate the existence of a triable issue of material fact, the party opposing the motion must present evidence that "would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." ( Aguilar , supra , at p. 850, 107 Cal.Rptr.2d 841 , 24 P.3d 493 .) In making its determination, "the court may not weigh the plaintiff's evidence or inferences against the defendants' as though it were sitting as the trier of fact, [but] it must nevertheless determine what any evidence or inference could show or imply to a reasonable trier of fact ." ( Id . at p. 856, 107 Cal.Rptr.2d 841 , 24 P.3d 493 .) The evidence must be viewed in the light most favorable to the nonmoving party. ( Schachter , supra , at p. 618, 101 Cal.Rptr.3d 2 , 218 P.3d 262 ; Aguilar , supra , at p. 843, 107 Cal.Rptr.2d 841 , 24 P.3d 493 .)

On appeal from a summary judgment, we "examine the record de novo, liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party." ( Miller v. Department of Corrections (2005) 36 Cal.4th 446 , 460, 30 Cal.Rptr.3d 797 , 115 P.3d 77 .) Defendants as the moving party have the initial burden of showing that one or more elements of the cause of action cannot be established, justifying judgment

A fundamental principle of Delaware law is that the "ultimate responsibility for managing the business and affairs of a corporation falls on its board of directors." ( Revlon, Inc. v. MacAndrews & Forbes Holdings (Del. 1986) 506 A.2d 173 , 179 ( Revlon ).) Corporate directors have "an unyielding fiduciary duty to protect the interests of the corporation and to act in the best interests of its shareholders." ( Cede & Co. v. Technicolor, Inc . (Del. 1993) 634 A.2d 345 , 360 ( Cede ).) In a proposed merger or change of control transaction, "the board has an obligation to determine whether the offer is in the best interests of the corporation and its shareholders." ( Unocal Corp. v. Mesa Petroleum Co . (Del. 1985) 493 A.2d 946 , 954 ( Unocal ).) Unless the board determines it is in the corporation's best interest to avoid a change in control, "obtaining the highest price for the benefit of the stockholders should [be] the central theme guiding director action." ( Revlon, supra , at p. 182.)

"When shareholders challenge actions by a board of directors, generally one of three standards of judicial review is applied: the traditional business judgment rule, an intermediate standard of enhanced judicial scrutiny, or the entire fairness analysis." ( Emerald Partners v. Berlin (Del. 2001) 787 A.2d 85 , 89 ( Emerald Partners ).) Ordinarily, the propriety of director conduct is measured by the business judgment rule. ( Unocal, supra , 493 A.2d at p. 954.) "The business judgment rule is a 'presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.' " ( Ibid . ) It "posits a powerful presumption in favor of actions taken by the directors in that a decision made by a loyal and informed board will not be overturned by the courts unless it cannot be 'attributed to any rational business purpose.' " ( Cede, supra , 634 A.2d at p. 361.)

In certain circumstances, however, including a sale of control, courts apply "enhanced scrutiny" to the decisions and actions of the directors to ensure that the directors' conduct is "reasonable." ( Paramount Communications v. QVC Network (Del. 1993) 637 A.2d 34 , 42 ( Paramount ).) "The duty to seek the best available price applies ... when a company embarks on a transaction-on its own initiative or in response to an unsolicited offer-that will result in a change of control." ( Lyondell Chemical Co. v. Ryan (Del. 2009) 970 A.2d 235 , 242 ( Lyondell ).) The directors' obligation in this context is "to secure the transaction offering the best value reasonably available for the stockholders" and to "exercise their fiduciary duties to further that end." ( Paramount , supra , at p. 44 ; Revlon, supra , 506 A.2d at p. 182.)

21

Our review of the grant of summary judgment in this case is closely bound to the applicable standard of review of the challenged transaction under Delaware law. (See Mills , supra , 559 A.2d at p. 1279 [" '[b]ecause the effect of the proper invocation of the business judgment rule is so powerful and the standard of entire fairness so exacting, the determination of the appropriate standard of judicial review frequently is determinative ....' "].) Plaintiff invokes the entire fairness standard, contending that DeWalt's self-interest and the flawed merger process deprived McAfee shareholders of "a 'neutral decision-making body' " due to "the manipulation of the disinterested majority by an interested director." ( Cinerama, supra , 663 A.2d at p. 1170, fn. 25 ; Mills, supra , at p. 1279.)

Defendants respond that plaintiff has not satisfied the prerequisites for entire fairness because there is no evidence that a majority of the directors acted out of self-interest ( Paramount, supra , 637 A.2d at p. 42, fn. 9 ) or were dominated by a minority of interested directors ( Cinerama, supra , 663 A.2d at p. 1170, fn. 25 ).

As summarized above, the operative standard of review "depends initially on whether the board members (i) were disinterested and independent (the business judgment rule), (ii) faced potential conflicts of interest because of the decisional dynamics present in particular recurring and recognizable situations (enhanced scrutiny), or (iii) confronted actual conflicts of interest such that the directors making the decision did not comprise a disinterested and independent board majority (entire fairness)." ( Trados , supra , 73 A.3d at p. 36.) Resolution of this threshold issue turns on whether the evidence, viewed in the light most favorable to plaintiff, supports rebuttal of the presumption that the directors acted in the best interests of the shareholders-either by breach of the duty of loyalty or of the duty of care. ( Cede , supra , 634 A.2d at p. 371.) This requires us to examine whether an alleged breach by an individual director, such as DeWalt, triggers entire fairness review for the actions of the entire board. We also must consider how the exculpatory provision in the McAfee charter affects our review.

a. Duty of Loyalty

The duty of loyalty under Delaware law "mandates that the best interest of the corporation and its shareholders takes precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the stockholders generally." ( Cede , supra , 634 A.2d at p. 361.) A director is considered independent "only when the director's decision is based entirely on the corporate merits of the transaction and is not influenced by personal or extraneous considerations." ( Id . at p. 362.)

The Delaware Supreme Court in Cede , supra , 634 A.2d at page 362 examined "the quantum of evidence required to rebut the business judgment rule's presumption of director loyalty." The court clarified that self-interest on the part of a single director does not necessarily bar application of the business judgment rule to board action. ( Id . at p. 363.) Rather, "there must be

c. Exculpatory Provision under Section 102 ( b )( 7 )

We address as a preliminary matter the effect of the exculpatory provision in McAfee's charter, adopted pursuant to section 102, subdivision (b)(7) of the Delaware General Corporations Law (hereafter " section 102(b)(7)"). The purpose of section 102(b)(7) is to permit shareholders, through the certificate of incorporation, "to exculpate directors from any personal liability for the payment of monetary damages for breaches of their duty of care, but not for duty of loyalty violations, good faith violations and certain other conduct." ( Emerald Partners, supra , 787 A.2d at p. 90 ; see also Lyondell, supra , 970 A.2d at pp. 239-240 ; McMullin v. Beran, supra , 765 A.2d at p. 926.)

There is no dispute that McAfee's charter during the relevant time period contained a section 102(b)(7) exculpatory provision. The trial court found that McAfee's independent directors could not be held personally liable for breaches of the fiduciary duty of care, and accordingly analyzed the evidence as it pertained to the directors' alleged breaches of the duties of loyalty and good faith.

Plaintiff urges on appeal that any consideration of the exculpatory provision and its impact on defendants' potential liability is not proper at summary judgment and must be made after trial on the merits. (See, e.g.,

The transaction before us is not presumptively subject to entire fairness review. Since we proceed from the starting point of the business judgment rule (or enhanced scrutiny in connection with actions taken when merger negotiations began, see Lyondell , supra , 970 A.2d at p. 242 ), invocation of McAfee's

Mills involved an ongoing "battle for control" of Macmillan, Inc. ( Mills, supra , 559 A.2d at p. 1265.) Faced with an unsolicited takeover bid of the company, Macmillan's chairman and CEO (Evans) and president and COO (Reilly), pursued a management-sponsored buyout of Macmillan by an investment firm specializing in leveraged buyouts (KKR). ( Id . at p. 1264.) Macmillan's board of directors granted an asset option agreement (known as a " 'lockup' ") to KKR after it prevailed "as the purported high bidder" in a stilted " 'auction' for control of Macmillan." ( Ibid . ) The record teemed with examples of fiduciary misconduct. For example, Evans and his team agreed to endorse the leveraged buyout to Macmillan's board of directors before KKR had even disclosed the amount of its bid. ( Id . at p. 1273.) During the auction, Evans and Reilly called a KKR representative and " 'tipped' " the competing bidder's offer to KKR ( id . at p. 1275 ), then concealed that information from Macmillan's board of directors. ( Id . at pp. 1279-1280.) Throughout the auction process, "KKR was consistently and deliberately favored" ( id . at p. 1278 ) while the competing bidder was "deliberately misled" ( id . at p. 1281 ) and met "continuing hostility ...." ( Id . at p. 1282.)

On appeal, the Delaware Supreme Court emphasized that "judicial reluctance to assess the merits of a business decision ends in the face of illicit manipulation of a

The Court of Chancery observed that Haan's illicit counter-proposal "interfered with whatever opportunity ITI had to obtain financing from Bell Atlantic." ( Bomarko, supra , 794 A.2d at p. 1170.) The court found it to be evidence of bad faith, because Haan "intended to divert" the financing opportunity "away from ITI at the moment ITI most needed it" while "affirmatively tr[ying] to conceal" his conduct from the board special committee, and later from the plaintiffs in the shareholder action. ( Id . at p. 1173.) The court compared Haan's conduct to the CEO's " 'illicit manipulation' " of the board's process in Mills ( id . at p. 1178 ) and concluded that the "acts of disloyalty" by Haan "interfered with the other directors' efforts to benefit ITI's shareholders" and required the court to review the transaction under the "entire fairness" standard. ( Id . at p. 1179.)

In Weinberger , acquirer (Signal) owned a majority interest of stock in target (UOP), and several Signal directors and employees served on UOP's board of directors. ( Weinberger , supra , 457 A.2d at pp. 703-704.) Two members of Signal's senior management, who were also UOP directors, prepared a feasibility study about acquiring the balance of UOP's outstanding shares. The study concluded that it "would be a good investment for Signal ... at any price up to $24 [per share]." ( Id . at p. 705.) After UOP's president and CEO (who also was a Signal director) responded favorably to Signal's intent to acquire

Plaintiff likens DeWalt's conduct to that of the CEOs in Mills and Bomarko and the conflicted directors in Weinberger . Plaintiff points out that DeWalt never disclosed James's inquiry about $50-per-share to the McAfee board or its financial advisors, depriving them of material information against which to gauge the $48-per-share offer that came after. Plaintiff also asserts that DeWalt concealed project Inca and the pre-June 2010 merger discussions with Intel from the McAfee board members, produced key documents associated with project Inca only at the very end of discovery in this case, and was evasive and "affirmatively lied" in his deposition regarding McAfee's pre-June 2010 dealings with Intel and the timing of discussions with Intel about keeping McAfee's management team in a transition.

Defendants contest the relevance of Mills , Bomarko , and Weinberger to this case. We agree that the record as it relates to DeWalt's self-interest, alleged acts of deceit and concealment, and the efficacy of the board as a neutral decisionmaking body, contains no semblance of the conflicting interests or obstructive, manipulative conduct that permeated those cases and mandated review for entire fairness.

First, regarding DeWalt's self-interest, plaintiff presents DeWalt's actions as motivated by a lucrative career built on "pushing the companies he leads into change-of-control transactions" at "extraordinary financial benefits" to himself. Plaintiff asserts that DeWalt's expectation of post-merger employment predated the June 11 proposal by a few months based on indications that Intel would want a McAfee acquisition to be consistent with its recent acquisition of another company called Wind River. In support, plaintiff points to deposition testimony in which DeWalt stated that during discussions Intel "would point to the ways in which they had acquired a previous firm called Wind River and what they had done with that structure." Plaintiff argues that like Haan in Bomarko , supra , 794 A.2d at pages 1173 through 1174, who the court found had "attempted to conceal" ( id . at p. 1174 ) his wrongful actions, DeWalt "affirmatively lied" in deposition regarding his future employment interest. Although DeWalt responded "No" after being asked whether his June 10 meeting with James included any discussion of keeping McAfee's management on board through an acquisition, he also testified (only a few

In fact, the Delaware Supreme Court spoke to the issue of actual or assumed director interest in Cinerama : " 'The fact that some interested transactions are permitted under our corporate law demonstrates that they are not inherently detrimental to a corporation. As long as a given transaction is fair to the corporation, and no confidential relationship betrayed, it may not matter that certain corporate officers will profit as the result of it. ... The key to upholding an interested transaction is the approval of some neutral decision-making body.' " ( Cinerama , supra , 663 A.2d at p. 1170.) The high court thus approved the Court of Chancery's reasoning

Next, plaintiff asserts that DeWalt hampered the board's deliberative process by concealing project Inca and James's overture asking whether $50 per share would "get the deal done."

The record establishes that DeWalt contemplated the possibility of an acquisition by Intel as early as his first meeting with James and Intel representatives in March 2010, and brainstorming about potential synergies of an acquisition began in earnest after the meeting at Intel's headquarters on April 4, 2010. According to a "McAfee/Intel Partnership Chronology" that McAfee's Gerhard Watzinger sent to DeWalt shortly after McAfee received the June 11 proposal, April 2010 was the "first brainstorming meeting with Intel about potential synergies of an acquisition," and in May 2010 there were "various meetings and calls with Intel regarding pre-due diligence data collection." The record reflects detailed exchanges between McAfee and Intel management during this period. In an e-mail on May 28, Watzinger told DeWalt that "Inca" was sending "[l]ot's [ sic ] of requests for data; i.e. gross margins of businesses, renewal vs. x-sell vs. new customers, attrition, etc." The record shows that DeWalt did not update the board specifically about project Inca or these

Plaintiff argues that like Haan in Bomarko , DeWalt's actions "make it impossible to know what would have happened if

This record does not support an inference that DeWalt was acting other than in McAfee's interest by seeking to convince Intel that McAfee's second quarter results merited an offer in its "expectation range." Nor is there evidence from which to infer that Intel's board was prepared to authorize a higher offer, or that DeWalt deceived the independent directors after receipt of the $48-per-share offer by advising that Intel "was not willing to further increase its offer to acquire the Company." The internal exchanges between James and Andy Bryant suggest that while James had considered approaching Intel's board for authorization up to $50, Bryant advised her that she needed "better news" from McAfee in order to do so. James responded that she had "confirmation

Thus, plaintiff relies on inferences that are not supported by the record. Setting aside whether DeWalt's failure to share the details of his conversation with James raises any triable issues related to his individual fiduciary duties, we find that the

a. Independent Directors

In opposing the motion for summary judgment, plaintiff did not dispute that the independent directors-who comprised nine of the 10 members of McAfee's board-were experienced, outside directors, none of whom joined Intel after the merger. Indeed, plaintiff on appeal does not appear to contest the independent directors' independence, meaning that each director's decision was "based entirely on the corporate merits of the transaction and [was] not influenced by personal or extraneous considerations." ( Cede , supra , 634 A.2d at p. 362.) Nor does plaintiff appear to contest the reasonableness of the independent directors' actions or efforts to secure the best available price based on their knowledge of the circumstances at the time. ( Paramount , supra , 637 A.2d at pp. 44-45.)

Rather, plaintiff contends that triable issues of fact exist with respect to the independent directors' alleged failure to oversee conflicted fiduciaries-namely, DeWalt. This argument requires little additional consideration, given our conclusion above that plaintiff failed to establish a triable issue of fact concerning DeWalt's fiduciary duty of loyalty based on post-merger employment and financial interest in the merger. (See ante , section II.C.1.d.) Plaintiff cites no authority under Delaware law to support its argument that DeWalt's interest in the transaction-which was established by the June 11 proposal-required the board to take direct control of the negotiations with Intel or to form an independent committee. Delaware courts have rejected similar arguments in cases where the evidence showed the board met its overall supervisory obligations. (See,

Here, the record is devoid of any similar evidence of board passivity. Plaintiff does not challenge defendants' showing that upon receiving the June 11 proposal, the board, not DeWalt, retained outside legal counsel and financial advisors and negotiated the terms of Morgan Stanley's engagement with significant incentives for securing a higher offer. After determining that Intel's initial offer was too low, the board directed DeWalt to communicate to Intel that $45 per share was inadequate. The board met in formal session nine times over the course of about nine weeks of negotiations for updates on the process and considered reports from the board's advisors as well as DeWalt. During that time, with input from Morgan Stanley, the board considered other potential acquirers and their likely ability to complete an acquisition and ultimately directed DeWalt to approach the most likely company suitor, which declined, in order to gauge its interest.

On this record, we find no support for the alleged, "virtual abandonment" of the independent directors' oversight functions "in the face of [DeWalt's] patent self-interest." (Cf. Mills , supra , 559 A.2d at p. 1284, fn. 32.) To the contrary, "the record establishes that the directors were disinterested and independent; that they were generally aware of the company's value and its prospects; and that they considered the offer, under the time constraints imposed by the buyer, with the assistance of financial and legal advisors." ( Lyondell , supra , 970 A.2d at p. 237.) In Lyondell , the Delaware Supreme Court found similar evidence sufficient to entitle the director defendants to the entry of summary judgment. ( Ibid . ) Addressing the trial court's skepticism about whether the board of directors conducted the week of negotiations for the sale of the company in good faith, the high court emphasized that "there is a vast difference between an inadequate or flawed effort to carry out fiduciary duties and a conscious disregard for those duties." ( Id . at p. 243.) This stems from Delaware law's treatment of conduct not in good faith, which "encompasses not only an intent to harm but also intentional dereliction of duty ...." ( Id . at p. 240.) Examples include a fiduciary's " 'intentional[ ] fail[ure] to act in the face of a known duty to act, demonstrating a conscious disregard for his duties.' " ( Id . at p. 243, quoting Walt Disney , supra , 906 A.2d at p. 67.)

So too here, the independent directors did not breach the duty of loyalty under the facts of the case, and plaintiff fails to offer evidence that any disclosure violation was knowing or deliberate. Plaintiff relies on the independent directors' purported awareness of the evolving discussions between Intel and McAfee prior to June 2010. We find that under Arnold , the fact that defendants were generally informed about the discussions that precipitated the June 11 proposal does not in and of itself create a triable issue of fact as to whether the information was omitted from the proxy materials due to a failure of loyalty or bad faith. Following Arnold , "a violation of the duty of disclosure is not necessarily a breach of the duty of loyalty." ( Cinerama, supra , 663 A.2d at p. 1163, fn. 9, citing

b. DeWalt

This decision already summarized in detail plaintiff's contentions and the evidence demonstrating DeWalt's allegedly self-interested and deceitful conduct. (See ante , section ii.C.1.d.) We found that DeWalt's interest in the transaction " 'was disclosed[,] and a majority of the non-interested directors approved the transaction in good faith.' " ( Cinerama, supra , 663 A.2d at p. 1170.) The specific terms of DeWalt's compensation and employment agreement with Intel were not known until after the board's decision to authorize merger negotiations at the $48-per-share price, and McAfee's experienced compensation committee members reviewed DeWalt's employment agreement with Intel before the board's vote to approve the merger agreement. Further, it was undisputed that DeWalt stood to earn over $1.3 million for each additional dollar per share that Intel paid for McAfee, though other incentives like retention bonuses and accelerated vesting of stock were not contingent on the price obtained in a sale.

Next we found that DeWalt provided high-level updates, consistent with the board's expectations during the early merger discussions. After Intel unveiled its initial offer in the June 11 proposal, the board retained experienced transactional and financial advisors and consulted with those advisors throughout the process. We found no triable issues concerning DeWalt's alleged concealment of project Inca or failure to inform the board or Morgan Stanley about management's synergy discussions with Intel prior to June 2010. Finally, we concluded that DeWalt's rebuff of James's $50 overture and apparent failure to disclose it to the board or to McAfee's financial advisors did not undermine

Applying these principles in order to determine whether a triable issue of material fact exists on the subject of DeWalt's response to and subsequent nondisclosure of James's overture, we find that consideration of motive is inevitable. That is, a reasonable trier of fact could not find that DeWalt " 'intentionally act[ed] with a purpose other than that of advancing the best interests of the corporation' " or " 'intentionally fail[ed] to act in the face of a known duty to act, demonstrating a conscious disregard for his duties' " ( Walt Disney, supra , 906 A.2d at p. 67 ) if the evidence simultaneously shows that DeWalt acted reasonably in pursuit of the board's aim "to secure the transaction offering the best value reasonably available for" McAfee's shareholders. ( Paramount, supra , 637 A.2d at p. 44.) Just as the duty of loyalty "is not limited to cases involving a financial or other cognizable fiduciary conflict of interest," a director or officer " 'cannot act loyally towards the corporation unless she acts in the good faith belief that her actions are in the corporation's best interest.' " ( Ritter, supra , 911 A.2d at p. 370.)

There are two aspects of DeWalt's conduct at issue-the response to James's overture and the subsequent nondisclosure. We find the fact that DeWalt rebuffed James by citing a higher, desired offer price insufficient to support an inference that DeWalt was acting disloyally or in bad faith. We agree with the trial court that DeWalt's rejection of James's negotiation tactic and push for an offer in the $52-54 range cannot be reasonably construed as anything but negotiating for an authorized, higher amount-conduct consistent with the duty to seek the "best value reasonably available for the stockholders." ( Paramount, supra , 637 A.2d at p. 44.) DeWalt's e-mail correspondence with James after the July 4th weekend and her testimony recalling their conversations at several junctures supports this understanding of the record. A contrary interpretation, inferring a motive to undersell McAfee in order to close a deal quickly, is logically inconsistent with the evidence that DeWalt actively sought to justify a higher value to Intel throughout the negotiations.

Even if the evidence is insufficient to create a triable issue of material

To summarize, we find that plaintiff has raised one or more triable issues of material fact related to DeWalt's apparent nondisclosure of arguably material information about James's $50-per-share overture. Even if the evidence at the time that Intel made its revised offer at $48 per share showed that it was Intel's best and final offer (see ante , section II.C.2.a), conflicting inferences emerge as to why DeWalt did not mention James's probing inquiry two weeks earlier. DeWalt bears the burden under the enhanced scrutiny standard of review to show that he exercised his fiduciary duties in furtherance of the obligation "to secure the transaction offering the best value reasonably available for the stockholders ...." ( Paramount, supra , 637 A.2d at p. 44.) The trial court's grant of summary judgment in favor of DeWalt must be reversed.

3. Aiding and Abetting

Plaintiff's complaint asserted a single cause of action for breach of fiduciary duties and aiding and abetting and identified McAfee and Intel each as "an aider and abettor" to the conduct alleged. A claim for aiding and abetting a breach of fiduciary duty requires proof of: "(1) the existence of a fiduciary relationship; (2) a breach of a fiduciary duty; (3) knowing participation in the breach by a defendant

Here, the sole basis for defendants' motion on the aiding and abetting claim, and the basis on which the trial court granted summary judgment in favor of defendants McAfee and Intel, was the claimed absence of an underlying breach of duty. By relying entirely on the theory that plaintiffs could not demonstrate a triable issue on any breach of fiduciary duty claim, defendants have failed to meet their initial burden to show that one or more elements of the aiding and abetting cause of action cannot be established ( § 437c, subd. (p)(2) ) with respect to an assumed breach by DeWalt. Since we conclude that triable issues remain as to the fiduciary duty and disclosure claim against DeWalt, the trial court's determination that McAfee and Intel cannot be liable for aiding and abetting must be reversed.

D. JURY TRIAL

Plaintiff contends that the trial court improperly denied its right to a jury trial under the California Constitution. ( Cal. Const. art. I, § 16.) According to plaintiff, its claim for breach of fiduciary duty and aiding and abetting should be characterized as an action at law rather than in equity because (1) the relief sought is legal (damages), (2) California law characterizes the relationship between shareholders and the directors and officers of a corporation as legal in nature, and (3) model jury instructions envision jury trials on breach of fiduciary duty claims. Defendants respond that the matter is properly tried to the court without a jury because plaintiff's breach of fiduciary duty claims are equitable in nature. Both sides cite California law governing the right to a jury trial but disagree about whether California or Delaware law should apply in determining the nature of the action.

Under California law, " '[t]he jury trial is a matter of right in a civil action at law, but not in equity.' " ( C & K Engineering Contractors v. Amber Steel Co . (1978) 23 Cal.3d 1 , 8, 151 Cal.Rptr. 323 , 587 P.2d 1136 ( C & K Engineering ).) In determining whether the action is one triable by a jury at

Interactive Multimedia, supra , 62 Cal.App.4th at page 1556, 73 Cal.Rptr.2d 462 , which concluded that a shareholder action for breach of fiduciary duty was equitable and the plaintiff was not entitled to a jury trial, illustrates this point. In that case, a minority shareholder sued the majority shareholder and two directors after the company merged into a new corporation, designating to the minority what it alleged was "less than the fair value of its interest ...." ( Id . at p. 1549, 73 Cal.Rptr.2d 462 .) The court examined the action, which sought monetary damages, under both Delaware and California law, and explained in applying California law that its "gist" was