978-1285770178 Case Printout Case CPC-06-08 Part 3

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that effect, and Greenberg’s response seemed to agree that was a

possibility.

In finding that the Proxy Statement does not fairly address this issue, I do

not and need not make any finding that there was a purposeful intent on

January 25 Moderate Case DCF analysis-which was based on five years

of projections (and therefore involved less emphasis on a single terminal

value estimate) and used a cost of capital that was rationally explained–

was no longer reliable. That analysis cast the price Eisner was offering to

pay in a quite different light than that which Lehman performed on March

This court is aware that one of the tasks of a diligent sell-side advisor is to

present a responsibly aggressive set of future assumptions to buyers, in

order to extract high bids. Here, though, the Moderate Case was not

shared with bidders and there is no evidence that the January 25

presentation of that Case was intended as anything other than a

responsible and genuine attempt at valuing Topps’s future cash flows.

Given the major subjective changes that Lehman made that were not

explained, given that those changes made the Eisner bid look much more

attractive, and given that those changes were made only after Feder’s

attempts to negotiate a price higher than $9.75 had finally failed, the Proxy

Statement is materially misleading for failing to discuss the advice given to

the Board about valuation on January 25.FN14

certain subjects, it must do so in a manner that is materially complete and

unbiased by the omission of material facts”).

3. Alleged Omissions And Material Misstatements Of Fact Bearing On

Upper Deck’s Credibility As A Bidder

The other major category of disclosure claims essentially focuses on

whether the Proxy Statement accurately discloses the undisputed facts

regarding Upper Deck’s interest in acquiring Topps.

Upper Deck argues, with some fairness, that the Proxy Statement makes a

sustained attempt to demonstrate that Upper Deck does not have a

genuinely serious interest in acquiring Topps, suggesting by implication

that Upper Deck may simply want to gain a competitive advantage by

be discussed in the next section.

Lehman’s part to generate a range of value that eased its ability to issue a

The January 25 presentation cannot be slighted as a selling document.

I begin with Upper Deck’s contentions regarding the fact that the Proxy

Statement states that that during the second proxy contest, there was a

general belief in the marketplace that Topps may be “willing to entertain

acquisition proposals.” The intended implication of that statement is, of

course, that all potential buyers knew that Topps’s would entertain

and would not be considered by the Topps’s board-i.e., that Topps was not

for sale. The plaintiffs contend that although Topps may secretly have

been willing to entertain unsolicited bids, Shorin discouraged bids by

making that statement. They say that a reasonable Topps stockholder

should therefore be reminded of that, given the spin Topps is putting on

The next point of contention actually involves the question of which side

made the first move toward a possible Topps-Upper Deck deal in 2007.

The Proxy Statement implies that Topps made contacting Upper Deck one

of its first priorities once the Go Shop Period commenced. What the Proxy

Statement omits to mention is that Upper Deck sent an expression of

Much more substantial are Upper Deck’s arguments that the Proxy

Statement and other public statements of Topps have misrepresented the

two acquisition overtures Upper Deck has made to buy Topps following the

execution of the Eisner Merger Agreement. As explained, Topps has

publicly disclosed that it rejected Upper Deck’s bid because of Upper

reverse break-up fee that Upper Deck has proposed. That is the same

remedy available to Topps if Eisner breaches. Topps did not make that

clear. That was materially misleading. So was the failure to disclose the

lack of a financing contingency.

Moreover, Upper Deck has now presented Topps with a letter from CIBC

Deck).

Topps’s Proxy Statement also cites antitrust concerns and Upper Deck’s

“unwillingness to sufficiently assume the risk associated with a failure to

obtain the necessary antitrust approval.” The Proxy Statement does not

disclose, however, that in Upper Deck’s revised unsolicited bid that it

thing Upper Deck is unwilling to divest is its intellectual property, such as

the Topps or Upper Deck name. Despite having every urgent reason to do

so, Topps has identified no colorable argument as to why Upper Deck

would or should be asked to do that. And Topps does not even fairly

represent the substantial hell or high water provision offered by Upper

understandable. Fifty years ago, Topps bought its only competitor in the

sports cards industry. Later, in the 1960s and again in the 1970s-when it

was much harder to be an antitrust defendant-Topps was twice sued on

antitrust grounds. It won both cases and was not required to divest any of

its assets. FN17 In its papers and at oral argument, Topps could not

Topps, that a Topps-Upper Deck merger would be approved by the federal

antitrust regulators without so much as a second request for additional

information.FN18 One would expect in high-stakes litigation like this that a

well-heeled defendant like Topps would be able to present some credible

expert evidence to support its antitrust views, if those views were in fact

merger of McDonald’s and Burger King constitute a hamburger monopoly

simply because the combined enterprise owned both the Whopper and Big

Mac names. As a matter of fair disclosure, it seems required for Topps to

admit that it was the winning party in the leading cases that Upper Deck

would cite if antitrust authorities questioned its acquisition of Topps. In that

Topps stockholders or from even responding to Topps’s public statements

about the negotiations between the two rivals or the nature of Upper

Deck’s bid.

E. Who’s Telling The Truth?: The Parties’ Debate About How Things

Actually Went Down

For their part, the Stockholder Plaintiffs mostly point to the numerous

disagreements Dissident Director Ajdler has with the Proxy Statement’s

rendition of key events. In that regard, the Stockholder Plaintiffs dilate on

the Proxy Statement’s failure to disclose just how close Greenberg’s

relationship was with Eisner. They say that the Proxy Statement should

contentions, is not properly raised as a disclosure issue. On this record,

Ajdler’s version of events is no more credible on these points than

Greenberg’s. Indeed, if I had to choose, I would tend to find Ajdler’s

insinuation that Greenberg was in Eisner’s pocket unfounded. Even if

Greenberg asked Ajdler not to be on a call with Eisner for the reasons

against the Merger. He has been telling his version of events, ensuring that

the Topps stockholders hear his version and that of the other Dissident

Directors about a variety of issues, such as the dissolution of the Ad Hoc

Committee and the exclusion of the Dissident Directors from the committee

addressing the Go Shop Process and Upper Deck’s bid. The Stockholder

directors who were actively involved in the negotiations with a series of

nuisance emails about the negotiations. Ajdler also questioned whether it

was advisable for Topps to use management’s traditional law firm, Wilkie

Farr, to give the legal advice during the sales process, especially since

Wilkie Farr’s chairman served on the Topps board.

Topps has been able to tell its story to the Topps stockholders.

For example, as indicated previously, the Proxy Statement notes that

Lehman had advised Topps in 2005 that because of the divergent nature

of Topps’s Entertainment and Confectionary Businesses, there was no

“logical strategic buyer for the company.” But Upper Deck claims that it had

reiterated that desire in both 2003 and 2004, as well as in 2005. Topps

denies that Upper Deck contacted it in 2003 and 2004.

Topps and Upper Deck agree that in 2005, around the time Topps was

shopping its Confectionary Business, Upper Deck contacted Lehman

Brothers and expressed an interest in acquiring either the Entertainment

but gave up on pursuing a transaction after Topps informed CIBC that it

would not entertain an offer from Upper Deck for either the Entertainment

Business or the entire company, citing, among other things, antitrust

concerns. The Proxy Statement discloses only Topps’s version of events.

Likewise, Upper Deck believes that the Proxy Statement misrepresents the

Director Brog. Because Brog was on vacation at the time and away from

his office, he did not receive the letter until about a week later, yet before

the Merger Agreement with Eisner was signed. Nonetheless, Topps opted

to sign that Merger Agreement before talking to Upper Deck. This move

was supported by Brog, who suggested that Topps contact Upper Deck

discussions between the two rivals did not begin until Upper Deck’s

financial advisor, CIBC, made another unsolicited call to Lehman a few

days after the start of the Go Shop Period.

Upper Deck also denies Topps’s contention that Upper Deck was slow in

its due diligence review of Topps and in formulating its $10.75 offer.

Deck, Topps initially placed only a skeletal amount of information in the

virtual data room that Upper Deck was using to conduct due diligence.

Then, after Upper Deck complained, Topps flooded the room with large

amounts of irrelevant information.

Topps has reasonable responses, pointing out that it gave Upper Deck the

Upper Deck is highly knowledgeable about the sports cards industry. To

that point, Topps claims that it would have been unreasonable for Upper

Deck to have expected Topps to divulge its most sensitive information to

its chief competitor without a more definitive commitment to purchase.

This sort of “he said, she said” stuff between a bidder and a target cannot

about who is right.FN19 But in this case, the Topps Incumbent Directors

have refused to release Upper Deck from the Standstill, even for the

limited purpose of communicating with the Topps stockholders.

FN19. See, e.g., Zaucha v. Brody, 1997 WL 305841, at *5 (Del.Ch.1997) (

“Assuming that one party’s disclosures are not adequate, the court will

outside sources.”), aff’d 538 F.2d 39 (2d Cir.1976).

IV. The Essence of The Revlon Claims

The Revlon arguments advanced by the Stockholder Plaintiffs and Upper

Deck differ a bit in their focus. I begin with the Stockholder Plaintiffs’

Revlon arguments, which are premised on the notion that the Incumbent

find a buyer who was friendly to him and would guarantee that Shorin and

Silverstein, his son-in-law, would continue to play leading roles at Topps. If

Shorin didn’t strike a deal to that effect before the 2007 annual meeting, he

faced the prospect of having a new board majority oust him and his son–in–

law from their managerial positions, and being relegated to a mere 7%

Topps board majority resisted the Dissidents’ desire for a public auction of

Topps, and signed up a deal with Eisner without any effort to shop the

company beforehand. Not only that, the Stockholder Plaintiffs contend that

defendant Greenberg capped the price that could be extracted from Eisner

by making an ill-advised and unauthorized decision to mention to Eisner

forty days, the Stockholder Plaintiffs contend that that time period was too

short and that the break-up fee and match right provided to Eisner were, in

combination, too bid-chilling. Therefore, although Topps approached over

100 financial and strategic bidders to solicit their interest, the Stockholder

Plaintiffs say that effort was bound to fail from the get-go, especially given

contend that the Topps board’s lack of responsiveness to its expression of

interest in presenting a bid at $10.75 per share evidences the

entrenchment motivations highlighted by the Stockholder Plaintiffs.

Upper Deck contends that the Topps board unjustifiably delayed its access

to, and the scope of, due diligence materials. Upper Deck argues that the

making a formal unsolicited bid at $10.75 per share, Upper Deck says it

met with further resistance, in the form of withheld due diligence and

unsubstantiated concerns about Upper Deck’s ability and commitment to

closing a deal. Finally, Upper Deck found itself publicly criticized by the

Topps board for having failed to act as a diligent, serious bidder.

fiduciary duties so required.

According to Upper Deck (and the Stockholder Plaintiffs), by this pattern of

behavior, the Topps board majority has clearly abandoned any pretense of

trying to secure the highest price reasonably available. Instead of using the

Standstill Agreement for a proper value–maximizing purpose, the Topps

without the chance to accept a tender offer from Upper Deck at a price

higher than Eisner’s offer.FN20

FN20. Consistent with its Revlon argument, Upper Deck also contends that

Topps has itself violated the Standstill Agreement. By falsely disparaging

Upper Deck’s conduct and bid in public, Topps allegedly breached an

toward Upper Deck, Upper Deck contends that behavior constitutes

another example of a prior material breach, relieving it of its obligations

under the Standstill.

These are in essence, the key Revlon arguments made by the Stockholder

Plaintiffs and Upper Deck in support of their application for a preliminary

Statement; and (3) prevent Topps from using the Standstill Agreement to

preclude Upper Deck from publicly discussing its bid for Topps or from

making a non-coercive tender offer directly to the Topps stockholders. In

the previous sections, I addressed the moving parties’ disclosure claims

and identified the additional and corrective disclosures that are required

Revlon claims; (2) they will suffer imminent irreparable harm if an

injunction is not granted; and (3) the balance of the equities weighs in favor

of issuing the injunction.FN21 I turn to those issues now, dividing the

analysis in two parts. First, I address the decisions of the Topps board

leading up to the signing of the Merger Agreement with Eisner. I then turn

auction before signing the Merger Agreement, that Greenberg capped the

price Eisner could be asked to pay by mentioning that a $10 per share

price would likely command support from the Incumbent Directors, that the

Incumbent Directors unfairly restricted the Dissident Director’s ability to

participate in the Merger negotiation and consideration process, and that

the Incumbent Directors foreclosed a reasonable possibility of obtaining a

better bid during the Go Shop Period by restricting that time period and

granting Eisner excessive deal protections. For its part, Upper Deck

echoes these arguments, and supplements them with a contention that