WILMINGTON, Del. (From news reports) -- A shareholder class action suit challenging the $9 billion merger of packaging firm MeadWestvaco Corp. did not survive a motion to dismiss from the company's board when a Delaware state court judge tossed the case, saying the shareholders did not adequately plead bad faith by the directors in the process leading up to the deal.

In a memorandum opinion, Chancellor Andre G. Bouchard said the shareholders did not make any arguments challenging the independence or disinterestedness of the nine members of MeadWestvaco's board of directors named as defendants in the breach of duty suit, so their claims rested solely on an allegation of bad faith by the directors in approving the deal with Rock-Tenn Co.

"In my opinion, the complaint's allegations fall far short of pleading the 'extreme set of facts' necessary to establish a reasonably conceivable bad-faith claim on the theory that the concededly overwhelming majority of disinterested and independent MeadWestvaco directors intentionally disregarded their fiduciary duties with respect to the process that led to the merger," Chancellor Bouchard wrote.

The complaint alleges that an activist investor, Starboard Value LP, pushed the company to engage in the merger with Rock-Tenn and caused the board to enter into a deal without a proper process that significantly undervalued MeadWestvaco and left $3 billion on the table.

Chancellor Bouchard determined that the MeadWestvaco board began merger discussions with Rock-Tenn in April 2014, before Starboard became a significant stockholder in the company, and was engaged in the process from the beginning by asking pointed strategic questions about the transaction. MeadWestvaco also terminated merger talks twice in the nine months between the first overture from Rock-Tenn and the ultimate merger agreement in early 2015.

The board twice walked away from talks when Rock-Tenn was reluctant to provide an acceptable stock exchange ratio, ultimately agreeing to the deal at a 9.1 percent premium for MeadWestvaco shares, giving the company's shareholders more than 50 percent of the combined company in exchange for just less than 50 percent of its earnings and revenue.

The opinion cites MeadWestvaco's engagement with skilled legal and financial advisers during the talks, including Goldman Sachs & Co. and Bank of America Merrill Lynch. The deal also gained the approval of 98 percent of voting shareholders.

"Based on the facts pled in the complaint ... it is not reasonably conceivable that the directors' decision to agree to a strategic merger of equals yielding a 9 percent premium for MeadWestvaco's stockholders is essentially inexplicable on any ground other than bad faith," Chancellor Bouchard opined.

A second claim for aiding and abetting the breach of duty by the MeadWestvaco board lodged against Rock-Tenn was also dismissed because the underlying breach claim was tossed.

"We are disappointed in the court's decision and we are evaluating with our clients whether to appeal," Mark C. Rifkin of Wolf Haldenstein Adler Freeman & Herz LLP said in an email.

Representatives for MeadWestvaco did not immediately respond to a request for comment.

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