CIRCUIT COURT IN RE CONSTELLATION ENERGY GROUP, INCORPORATED SHAREHOLDER LITIGATION BALTIMORE CITY, PART 23 Case No.: 24-C-11-003015 MEMORANDUM OPINION
Upon consideration of Plaintiffs' Motion for Expedited Discovery (docket # 0045000),
filed July 14, 2011, Defendants' Motion to Stay Discovery in Accordance with the Court's Ruling
of May 18, 2011, (docket # 0048000), filed July 28, 2011, the memorandum attached thereto, and
the arguments presented at the hearing on these matters, Plaintiffs' Motion for Expedited
Discovery is DENIED. I. FACTUAL/PROCEDURAL HISTORY
On April 28, 2011, Constellation Energy Group, Incorporated (“Constellation”)
announced a plan to enter into a Merger Agreement with Exelon Corporation (“Exelon”).
Pursuant to the terms of the Agreement, Exelon and its wholly-owned subsidiary Bolt
Acquisition Corporation would acquire Constellation in a stock-for-stock transaction by which
Constellation shareholders would receive 0.930 shares of Exelon common stock in exchange for
each share of Constellation common stock they owned. The transaction is valued at
Shortly after the proposed merger was announced, the shareholders of Constellation
brought a number of closely-related actions that challenged the terms of the transaction. These
actions were combined into the above-captioned consolidated action by this Court's Order of
May 19, 2011 (docket # 0002002). On July 14, 2011, Plaintiffs filed their Consolidated
Shareholder Class Action and Derivative Complaint (docket # 0046000) in the instant action.
Plaintiffs aver that Constellation, Exelon, and Constellation's Board of Directors (“the Board”)
acted inconsistently with the interests of Constellation and its shareholders in negotiating the
terms of the Merger Agreement, and thereby breached their fiduciary duties to Constellation and
Plaintiffs filed the instant Motion for Expedited Discovery on July 14, 2011, requesting
expedited discovery to prepare for a preliminary injunction hearing. Plaintiffs allege that they
will suffer irreparable harm if they are unable to complete discovery prior to the scheduled
transaction closing date in early 2012. In particular, Plaintiffs aver that the proxy statement
disclosed by Defendants contains material omissions, and that as a result they are unable to fully
evaluate the propriety of the proposed transaction. For these and other reasons, Plaintiffs assert
that they will suffer irreparable injury if the merger goes forward without increased scrutiny.
Accordingly, Plaintiffs request that this Court grant their Motion for Expedited
Discovery, which would allow Plaintiffs to commence discovery of Defendants immediately.
Plaintiffs also seek the opportunity to file a motion for preliminary injunction and to have a
hearing prior to the consummation of the proposed merger. This Court notes that at the hearing
on this matter, Plaintiffs indicated that in the event they are granted expedited discovery, they
will need at a minimum Defendants' free cash flow projections, board books, and the minutes of
the board meetings. Plaintiffs further emphasize in their argument that depositions may be
needed as part of their requested discovery.
In response to Plaintiffs' Motion for Expedited Discovery, Defendants' Motion to Stay
Discovery in Accordance with the Court's Ruling of May 18, 2011 (docket # 0048000) asserts
that this Court has already addressed the issue of expedited discovery by ordering that no
discovery will commence prior to a ruling on the outstanding dispositive motion. Plaintiffs did
not object to this arrangement at the scheduling conference. Defendants also contend that
Plaintiffs have failed to articulate that they will suffer irreparable injury if expedited discovery is
not granted. Defendants request that this Court deny Plaintiffs' Motion for Expedited Discovery
and stay all discovery in this case. II. ANALYSIS
Upon consideration of Plaintiffs' Motion for Expedited Discovery and Defendants'
Motion to Stay Discovery in Accordance with the Court's Ruling of May 18, 2011, this Court
DENIES Plaintiffs' Motion for Expedited Discovery, and GRANTS Defendants' Motion to Stay
Discovery in Accordance with the Court's Ruling of May 18, 2011. This Court concludes that
Plaintiffs have not met their burden of showing that they would suffer irreparable harm if they
are not granted expedited discovery. Further, Plaintiffs have not demonstrated that they will not
have adequate time to conduct discovery in the proper course. A. This Court has the authority to grant expedited discovery.
The Maryland Rules govern the scope of discovery that a party may obtain from another
A party may obtain discovery regarding any matter that is not privileged, includingthe existence, description, nature, custody, condition, and location of any documents,electronically stored information, and tangible things and the identity and location ofpersons having knowledge of any discoverable matter, if the matter sought is relevant
to the subject matter involved in the action, whether it relates to the claim or defenseof the party seeking discovery or to the claim or defense of any other party.
Md. Rule § 2-402. Pursuant to Md. Rule 2-401 this Court can specify a time for discovery to
take place in a case, as it sees necessary:
Unless the court orders otherwise, methods of discovery may be used in any sequenceand the fact that a party is conducting discovery, whether by deposition or otherwise,shall not operate to delay any other party's discovery. The court may at any time orderthat discovery be completed by a specified date or time, which shall be a reasonabletime after the action is at issue.
Md. Rule § 2-401(b). Indeed, "[t]rial judges are vested with a reasonable, sound discretion in
applying [the discovery rules], which discretion will not be disturbed in the absence of a showing
of its abuse.'" Falik v. Hornage, 991 A.2d 1234, 1246 (Md. 2010) (citing E.I. du Pont deNemours & Co. v. Forma-Pack, Inc., 718 A.2d 1129, 1133–34 (Md. 1998)). Thus, this Court
may order that discovery commence at any time, and this Court's discretion in setting a timeline
for discovery in the instant matter will not be disturbed absent a showing of abuse. This Court
recognizes that discovery is not automatically stayed because there is a motion to dismiss
pending. Coca-Cola Bottling Co. of Lehigh Valley v. Grol, No. 92-7061, 1993 WL 13139559, at
B. Plaintiffs did not show good cause by presenting a colorable claim of irreparable harm sufficient for this Court to grant expedited discovery.
Expedited discovery is not the normal procedure, and granting of expedited discovery
requires a showing of good cause. Jasinover v. Rouse Co., No. 13-C-04-59594, 2004 WL
2747382, at *2 (Md. Cir. Ct. Oct. 25, 2004). In an action for expedited discovery, the plaintiff
has the burden of showing that expedited discovery is necessary and that there is good cause for
granting it. Greenfield v. Caporella, 1986 WL 13977, at *2 (Del. Ch. Dec. 3, 1986). The
plaintiff must show that expedited discovery is necessary and material by: (1) pleading a
colorable claim of irreparable injury, and (2) demonstrating that there is a "need for careful
judicial scrutiny and oversight to ensure that steps of supposed expedition are legitimate and
necessary prior to a court ordering a regimen on litigants that departs from normal procedure."
Jasinover, 2004 WL 2747382, at *2. Because courts have routinely held that extra details are
unnecessary and immaterial as a matter of law for a shareholder to make a fair and informed
decision whether to approve a recommended transaction, a plaintiff's burden of demonstrating a
need for this sort of information is particularly heavy. In re Nationwide Health Properties, Inc.S'holder Litig., No. 24-C-11-001476, slip op. at 39-45 (Balt. City Cir. Ct. May 27, 2011).
Indeed, the Delaware Court of Chancery, which regularly deals with corporate
transactions, has held that it will grant expedited discovery in only those cases where there is a
showing of good cause. Boland v. Boland, 5 A.3d 106, (Md. Ct. Spec. App. 2010) (noting that
the Delaware Court of Chancery "is widely recognized as the nation's preeminent forum for the
determination of disputes involving the internal affairs of the thousands upon thousands of
Delaware corporations and other business entities through which a vast amount of the world's
commercial affairs is conducted. Its unique competence in and exposure to the issues of business
law are unmatched"). This Court's position is exemplified by its holding in In re International
a party's request to schedule an application for a preliminary injunction, and toexpedite the discovery related thereto, is normally routinely granted. Exceptions tothat norm are rare. A paradigm exception, however, arises where the moving
papers fail to articulate a colorable claim of irreparable harm and any wrongfulconduct can be adequately remedied by a money damages award. In re Intl Jensen S'holders Litig., Consol. C. A. No. 14992, 1996 WL 422345, at *1-2 (Del. Ch.
July 13, 1996).1 Because of its familiarity with the subject matter at issue herein, this Court finds
the Delaware Court of Chancery's position persuasive.
Therefore, this Court seeks to determine whether Plaintiffs have shown irreparable harm
in the instant action. Irreparable harm is harm beyond that which can be compensated by
monetary damages. Alpha Builders, Inc. v. Sullivan, C.A. No. 698-N, 2004 WL 2694917, at *19
(Del. Ch. Nov. 5, 2004) (the plaintiff's allegation that defendants would not have sufficient assets
to pay a future monetary award absent any actual evidence is "mere speculation [which] is not
sufficient to support a finding of irreparable harm.") Such harm "must be of such a nature that no
fair and reasonable redress may be had in a court of law and that to refuse the injunction would
be a denial of justice." State v. Del. State Educ. Ass'n, 326 A.2d 868, 875 (Del. Ch. 1974). Thus,
when monetary damages are able to adequately compensate the plaintiff, there is no need for
expedited discovery. Foster v. Town and Country Trust, No. 24-C-06-001442, 2006 WL 991000,
at *2 (Md. Cir. Ct. 2006). For example, "shareholders would suffer irreparable harm only were
they to be forced to vote without knowledge of the material facts relating to the structure of
1 Although Jensen indicates that if plaintiffs can show good cause for expedited discovery, it should begranted, the court denied expedited discovery. In the case, the plaintiffs alleged that the defendants
breached their fiduciary duties of loyalty and care by failing to consider another transaction
where a competing bidder was willing to pay $1 more per stock in a potential merger. The courtdetermined that the plaintiffs did not sufficiently show that they would suffer irreparable harm ifexpedited discovery was not granted, stating "plaintiffs make no claim or showing that the defendantswould be unable to respond to a $2.1 million money judgment, there is no reason-equitable or economic-to subject the defendants to the expense and disruption of an expedited preliminary injunctionproceeding." In re Intl Jensen S'holders Litig., Consol. C. A. No. 14992, 1996 WL 422345, at *1-2 (Del. Ch. July 13, 1996).
bankers fees and, most importantly, their entitlement to appraisal rights under the transaction as it
is presently constructed." La. Mun. Police Exmployees’ Ret. Sys. v. Crawford, 918 A.2d 1172,
Indeed, courts have indicated that the irreparable harm must be sufficient to justify the
extra costs associated with expedited discovery, such as preparing for an expedited preliminary
injunction hearing. Giammargor v. Snapple Beverage Corp., Civ. A. No. 13845, 1994 WL
672698, at *2 (Del. Ch. Nov. 15, 1994) (discussing a case where the plaintiffs were asserting that
defendants were making side-deals prior to a potential merger). In the instant case, Plaintiffs
have not sufficiently articulated a colorable claim showing that the extra details not contained in
the proxy statement are necessary and material for the shareholders to make a fair and informed
decision regarding the proposed merger transaction.
For the reasons set forth above, this Court concludes that Plaintiffs have not sufficiently
shown that they will suffer irreparable harm if discovery is conducted in the proper course.
Therefore, Plaintiffs' Motion for Expedited Discovery is DENIED, and Defendants' Motion to
Stay Discovery in Accordance with the Court's Ruling of May 18, 2011, be and the same, is
hereby GRANTED. ORDERED, this 9th day of August, 2011.
______________________________JUDGE AUDREY J.S. CARRION
Patrick C. Smith, Esq. DeHay & Elliston, LLP36 South Charles Street, Suite 1300Baltimore, MD 21201Interim Liaison Counsel for Plaintiffs
Seth D. Rigrodsky, Esq. Brian D. Long, Esq. Rigrodsky & Long, P.A. 919 North Market Street, Suite 980Wilmington, DE 19801Counsel for Plaintiffs
Faruqi & Faruqi, LLP369 Lexington Avenue, 10th FloorNew York, NY 10017Interim Counsel for Plaintiffs
DLA Piper6225 Smith AvenueBaltimore, MD 21209-3600Counsel for Defendant Constellation Energy, Inc., Associated Individual Defendants
Matthew R. Kipp, Esq. Skadden, Arps, Slate, Meagher, & Flom, LLP115 N. Wacker Dri veChicago, Illinois 60606Counsel for Defendant Exelon Corporation
James L. Shea, Esq. G. Stewart Webb, Esq. Venable, LLP750 E. Pratt Street, Suite 900Baltimore, MD 21202Counsel for Defendants Exelon Corp. and Bolt Acquisition Corp.
Edward P. Welch, Esq. Skadden, Arps, Slate, Meagher & Flom, LLP
One Rodney SquareP.O. Box 636Wilmington, DE 19899Counsel for Defendants Exelon Corp. and Bolt Acquisition Corp.
Brant W. Bishop, P.C. James P. Gillespie, P.C. Jeffrey Gould, Esq. Alexandra S. Peurach, Esq. Kirkland & Ellis, LLP655 15th Street, N.W., Suite 1200Washington, DC 20005Counsel for Defendants Constellation Energy Group, Inc.
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