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Shareholder suit over Towers Watson merger with Willis reinstated

John J. Haley

The Delaware Supreme Court on Tuesday reinstated a shareholder lawsuit challenging the $18 billion merger in 2016 between Willis Group Holdings PLC and Towers Watson & Co., holding that Towers CEO John J. Haley’s potential conflict of interest in the matter was material.

The 4-1 ruling by the Delaware Supreme Court overturns a July 2019 ruling by the Delaware Chancery Court in which its vice chancellor dismissed the suit, City of Fort Myers General Employees’ Pension Fund et al. v. John J. Haley, et al.

A key element in the ruling was Mr. Haley’s alleged failure to reveal that defendant San Francisco-based ValueAct Capital Management LLP Trust made an allegedly undisclosed proposal to Mr. Haley that would have potentially increased his compensation at Towers by nearly five times.

“We hold that the Court of Chancery erred in granting the defendants’ motion to dismiss the claim that Haley breached his fiduciary duty by failing to disclose material information to the Board,” the ruling said.

Plaintiffs “have adequately alleged that the (ValueAct) Proposal altered the nature of the potential conflict that the Towers Board knew of in a material way,” the ruling said.

“It is elementary that under Delaware law the duty of candor imposes an unremitting duty on fiduciaries, including directors and officers to 'not use superior information or knowledge to mislead others in the performance of their own fiduciary obligations,’” the ruling said, citing an earlier case. 

“Further, ‘(c)orporate officers and directors are not permitted to use their position of trust and confidence to further their private interests.’”

The ruling states, “We emphasize that we make no finding that (Mr. Haley) did, in fact, subordinate Towers stockholders’ interests to his own, but at this point in the proceedings, we accept the well-pleaded allegations as true,” the majority opinion states.

The dissenting opinion states, “In my view, the September 2014 ValueAct presentation did not alter or add anything material to the nature of Haley’s already disclosed material self-interest.”

Willis Towers Watson said in a statement, “The Delaware court decision did not make any factual findings but merely assumed the plaintiffs’ allegations in the complaint were true for purposes of a decision on an early stage motion to dismiss.  We will continue to dispute the allegations and to fight the case vigorously.”

A federal appeals court reinstated a shareholder lawsuit filed by former Towers Watson shareholders in September.

Aon PLC  said in March it would buy Willis Towers Watson for nearly $30 billion in an all-stock deal that would create the world's largest insurance broker.

In May, two shareholder lawsuits were filed in federal court against Willis Towers Watson and its directors and officers, stating “incomplete and misleading” financial information has been provided about Aon’s proposed plan to buy the company.