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FSI Shareholders Plow Ahead on Claims of Board Misconduct Following Sale of Company

April 17, 2013

On April 17, 2013, the Minnesota District Court in Carver County issued an important decision in favor of shareholders, denying a motion to dismiss filed by the members of the Board of Directors of FSI International, Inc. following the $250 million sale of the company to Japan-based Tokyo Electron Limited. Plaintiffs alleged that the takeover of FSI by Tokyo Electron was the product of fraud, deceit and similar corporate misconduct where the Board ignored numerous “red flags” in the valuation analyses conducted by its financial advisor, Barclays Capital, failed to promptly form a special committee of independent directors as required by Minnesota law, and agreed to sell the company for well below its fair value.

The members of the Board moved to dismiss the case, arguing that their conduct was protected by the business judgment rule, that appraisal was plaintiffs’ exclusive remedy, and that an exculpatory provision in FSI’s Articles of Incorporation insulated the Board from liability.

The court denied the Board’s motion to dismiss, ruling that “it is possible that Plaintiffs will be able to proffer evidence consistent with their theories and in support of the relief demanded.” The court further concluded that plaintiffs’ allegations of fraud and deceptive conduct by the Board were sufficiently alleged to take their claims outside of the FSI Articles of Incorporation’s exculpatory provision, the business judgment rule, and Minnesota’s appraisal statute. Plaintiffs will now seek damages against the members of the FSI Board for their roles in the unlawful takeover of FSI. Robbins Geller attorneys Stuart A. Davidson and Christopher C. Gold serve as lead counsel for the plaintiffs in the action.

In re FSI Int'l, Inc. S’holder Litig., No. 10-CV-12-1118,  2013 Minn. Dist. LEXIS 1 (Minn. Dist. Ct. Apr. 17, 2013).

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