As previously reported here, a PFBB Bancorp ("PFBB") shareholder filed a derivative action against PFBB's directors in the Delaware Chancery Court, New Castle County, on September 22, 2008 (a copy of the complaint can be found here). The plaintiff alleged breach of fiduciary duty and sought a temporary restraining order to enjoin a proposed merger between PFBB and FBOP Bancorp ("FBOP") on the ground that PFBB's stock value would increase significantly if Congress approved the "Troubled Asset Relief Program” proposed by Treasury Secretary Henry M. Paulson. The plaintiff also requested the distribution of an updated proxy statement reflecting the increased value of PFBB's loan portfolio that would allow shareholders to fully assess the fairness of the proposed merger.
On September 24, 2008, just one day prior to the scheduled shareholder vote, Chancellor William Chandler issued a letter opinion denying the plaintiff’s motion to issue a temporary restraining order because the plaintiff did not demonstrate a likelihood of success on the merits. Specifically, the court found that the plaintiff failed to demonstrate that the disclosures regarding the proposed Relief Program are material to PFF stockholders because the proposed Relief Program, as of September 24, 2008, had not yet been finalized and approved by Congress. Though the court acknowledged that the proposed Relief Program might ultimately lead to an increase in shareholder value, the court noted that the Board would be unable to make an additional disclosure in the proxy statement as to the value added by the proposed Relief Program prior to its approval by Congress and the President. Chancellor Chandler reasoned that “[i]t would be impossible to impose on the Board an obligation to predict the outcome of Congressional deliberations and then to apply, ex ante, such speculation into their valuation models.” A copy of the court's opinion can be found here.
The court also granted the defendants' motion to stay the proceedings pending the resolution of a similar shareholder derivative action filed in California Superior Court on June 18, 2008.
Shareholders approved the merger on September 25, 2008.