In 2024, KSF filed a class action complaint in the Delaware Court of Chancery on behalf of former stockholders of Trecora Resources Inc. (“Trecora”), alleging that Trecora’s directors (“Defendants”) breached their duty of loyalty by agreeing to sell Trecora for an unfair price in a cash-out merger (the “Merger”) in service of Defendants’ own personal interests—namely, avoiding the consequences of losing their board seats in a then-pending proxy contest led by activist investors.

On April 1, 2026, Vice Chancellor Nathan A. Cook denied the defendants’ motion to dismiss in its entirety.  In so ruling, the Court held that the complaint sufficiently alleges that Defendants omitted material facts when recommending the Merger to Trecora’s stockholders, thus precluding dismissal under Corwin v. KKR Financial Holdings LLC, 125 A.3d 304 (Del. 2015):

The complaint alleges that . . . the board abandoned pursuit of a potential acquisition and instead transitioned to seeking a sale of the company in response to the activist [investor] threat.  Around the time of this decision, Defendant Carter (a longtime board member and former chairman and CEO who owned 2.5% of the Company’s stock, owed debt to the Company through one of his entities, and was at mandatory retirement age, and whose two sons-in-law worked as Company employees) “secretly” met with one of the activists.  He did so without board authorization, after having been instructed, along with the rest of the board, at an earlier board meeting by counsel not to do so. 

The Company omitted any disclosure of the director’s meeting with the activist from its Recommendation Statement. . . .

These allegations, and the minutes incorporated by reference at Defendants’ insistence, compel a pleading-stage inference that Carter secretly disclosed, for self-interested reasons and against the prior instruction to board members, Company confidential information to an activist in the midst of a strategic transactions process and threatened proxy contest.  Considering the Recommendation Statement’s laudable laundry list of disclosures of other communications between the Company and the activists, the Court cannot do otherwise than conclude it is reasonably conceivable this omitted information was material for Rule 12(b)(6) pleading stage purposes. . . .  Given this compelled conclusion, Defendants cannot avail themselves of pleading-stage dismissal under Corwin.

The Court likewise held that the complaint states a cognizable “Revlon” claim—i.e., that Defendants breached their fiduciary duties by failing to obtain the best price reasonably available for Trecora’s stockholders in the Merger: 

Plaintiff includes ample allegations that, despite the activists’ warnings, Defendants pursued and agreed to a merger on a rushed timetable and at a price below that which Defendants had, only short time earlier, informed the single remaining bidder was the minimum for the Company to continue negotiations, all to avoid a pending (i.e., no longer only threatened) proxy contest. . . .  The Section 220 documents provide the board was advised “[t]he advisors continue to believe Ortelius can win 2-3 Board seats at our annual meeting[.]”  Plaintiff further points to support for the notion the directors were concerned about financial harm they would suffer if they lost the proxy contest. . . .  The motion to dismiss is denied.

The case is captioned Rosenbaum v. Quarles, C.A. No 2024-0552-NAC (Del. Ch.).