Lynch v. Vickers Energy Corp.

Libby LYNCH, Plaintiff, Appellant, G. CORPORATION,

VICKERS ENERGY Es

mark, Inc., Alexander, William A. Rich Boushka, Hudson,

ard J. Edward J. Don Kelly, Phillips, Stormy

ald P. Robert D. Vickers,

F. Smith and Jack A. Defend

ants, Appellees.

Supreme Court of Delaware.

Submitted June April

Decided

.

Irving Joseph Morris and A. Rosenthal of Morris Rosenthal, & Wilmington, and Sid- ney B. Silverman (argued), Joan T. Harnes Martin H. and. Olesh of & Silvérman Harnes, City, counsel, New York for plaintiff-appellant. Richards, Finger Layton &

Louis J. Herzel, Finger, Wilmington, and Leo Susan (argued), Davis Getzendanner and Scott J. Platt, Ill., Chicago, Mayer, Brown & counsel, defendants-appellees Vickers Esmark, Inc., Corp., Richard J. Energy Boushka, Kelly, P. Robert D. Phil- Donald lips and A. Vickers. Jack Morris, (argued) of David A. Drexler Tunnell, Nichols, Wilmington, Arsht & Wilde of Bracewell & Patter- Key William Tex., counsel, son, Houston for defend- Alexander, Ed- ants-appellees William A. Stormy F. ward J. Hudson and Smith. HERMANN, en Banc: Before the Court DUFFY, McNEILLY, J., QUILLEN C. HORSEY, J. DUFFY, Justice: action on behalf of stock- This is a class Oil, (Trans- Inc. holders TransOcean to a Ocean) pursuant who sold their shares majority stockholder.1 tender offer companion During argument, suit in Illinois. While claims oral we were advised remaining many of the class are of the class have members counsel members record, respective participated we understand of their identified in a settlement A.2d 5 for defendants. 402 opin- ment appear prior in a pertinent facts appeal. Court, Lynch Energy v. Vickers then docketed ion of this Plaintiff (1977),and in Corp., Del.Supr., 383 A.2d 278 Judge considered the Trial opinion, In his Chancery, opinions by two the Court damages or measures of alternative several (1979), and 351 A.2d then, noting the for relief and formulas discuss the which reference is made. We he conclud- statutory guidelines, absence present pur- only necessary facts for ed that: poses. analogous appraisal to an proceeding “a merger for in provided as is hearing such I here, Poole v. N. V. appropriate cases is outstanding and majority A of the issued [DebSupr., 224 Maa.tscha.ppij,supra Deli by defendant stock of TransOcean is held in which (1966)], in a situation A.2d 260 (Vickers), Corporation Energy Vickers alleged or been fraud has not active subsidiary of de- wholly-owned which is a proved.” Esmark, (Esmark).2 Vickers fendant Inc. weighed 11. The Court then offer, 402 A.2d at through tender at acquired had the relevant to several factors each, 4,228,000 applied shares the some additional $12 value “proper” “fair” or fixing common. the of TransOcean proceeding, 8 statutory appraisal shares in a that: prior appeal, In the we held See, City g., e. Universal Del.C. 262. “Vickers, majority as the shareholder Studios, Francis I. duPont & Inc. v. TransOcean, fiduciary duty to owed a (1975). Those fac- DeLSupr., 334 required ‘complete candor’ plaintiff assets, tors are the value disclosing fully ‘all of the facts stock and its earn- the market value of the of- surrounding circumstances the’ tender adjusted Judge Trial then ings value. The fer.” findings of the value and summarized his A.2d And we concluded that at 279. share, time of as of the each TransOcean by Vickers to its the tender offer made offer, as follows: the tender shareholders, fellow 7.00 $ 17.50 x 40% “Asset value $ fully “failed to disclose two critical facts: 3.80 $ x 40% value 9.48 $ Market (1) ‘highly qualified’ petroleum that a en- $ 1.05 x 20% Earnings value 5.25 $ ..., gineer who was a member of Trans- 11.85” $ Total management, had calculated the Ocean’s 402 A.2d at significantly net value to be worth asset paid had been members of the class amount disclosed Since more than the minimum stock offer; for the TransOcean (2) per man- share that Vickers’ $12 Vickers, Court con- open they market which sold to agement had authorized damaged not been during plaintiff that purchases of cluded TransOcean’s the mate- by defendants’ failure to disclose preceding the period immediately $12 facts, of our rever- which was the basis up to rial per share tender offer for bids $15 prior appeal. See following sal per share.” at We then remanded 383 A.2d at 280. proceedings in the Court

case for further Court, argues that plaintiff In this rulings. Chancery consistent with our ap- erroneously interpreted and Judge Trial appeal; the first our decision on remand, plied on the re- trial was held After testimony fixed trial judg- uncontroverted entered maining issues and the Court argument 200,000 par- advised also at 2. We were did not shares counsel that about merged into Esmark. represented been TransOcean ticipate in settlement and are distinguish purposes, we do opinion, For discussion references to In this all in this action. Esmark; class, the text unless Vickers and between “plaintiff” her unless include members of otherwise, includes to one reference indicates text indicates otherwise. other. mining granted. value of the shares to Esmark whether relief should be TransOcean share; short, up that the Chancellor In the case calls for a different valuing weighing committed error damages of law on than the one which the assets; and that he erro- TransOcean’s net applied. Chancellor neously refused to order rescission. respond by saying, among Defendants A. things, Chancery other the Court of Poole, question raised was the determining used the correct standard measure of to be in an damaged by whether had been inducing of stock fraud- action for a sale facts; failure to disclose the material corpo- misrepresentation. ulent While correctly applied the Court that standard to (like in that case Vickers in rate defendant evidence; members of the class case) of the stock held more than 50% overpaid had been the TransOcean corporation whose shares were ac- shares; plaintiff injury in must show Poole was tried quired plaintiffs, from the remedy; order to be entitled to a and that misrepresentation as a case in which any rescission would be unwarranted in sought significant nature of the relief event. and, Court said: this “[Pjlaintiffs seek to recover the differ- II between the actual value of the ence controversy As we in context see the price paid, known as the stock and the

following ruling appeal, on the first our damages ‘out-of-pocket’ measure remaining very issue for decision is narrow. terms, In ultimate it amounts to this: Is Indeed, sought the relief A.2d at 262. and, so, relief if what is entitled to because the by plaintiffs was determinative it to be? Court, noting other measures of dam- after of relief to be accorded a The choice ages, said: prevailing plaintiff equity largely event, any plaintiffs’ “In action since the Chancellor, matter of discretion with the grounded upon out-of-pocket meas- (5 ed.) Pomeroy’s Equity Jurisprudence damages, is the rule to be ure Delaware, long history with its applied.” jurisprudence, has equity of common law 224 A.2d at 262. tradition. Cf. Wilmont followed that then, Clearly, pleaded Poole was and tried Homes, Weiler, Del.Supr., Inc. v. 202 A.2d limited as a fraud case in which the Court Here, however, (1964). is more to there out-of-pocket plaintiffs to the measure testing appeal merely than for abuse trial, gone had they on which it, As view the issue is not discretion. gener- applied 224 A.2d at and then applied an the manner in which the Court determining rule used in the “actual val- al damages, agreed undisputed measure of case.3 In ue of stock” involved in a fraud proper but whether the Court followed “going doing, corporate used a so the Court deciding law in whether the mem rule of rejected a claim that a concern” basis plaintiffs bers of class are entitled to relief. appropriate. “liquidation” basis was required reversal is be- We conclude that A.2d at 263. erroneously relied on cause the Chancellor then, the Poole question, is whether appraisal the Poole case and on an formula applied here. We think approach law should be (which developed has been in our case not, significant reason: a Statute, 262) for at least one in deter- under the Del.C. § assets, pertinent factors on a other 3. The Court said: ‘going This is the rule in concern’ basis. determining general “The rule is that in fraud cases.” stock, value of consideration should be actual 224 A.2d at 263. value to the various relevant factors of dividends, including earnings, price, market breach of alleged in this their respective sales. precedent There is litigation Court, and it was found by this ruling for such a because our Court of 383 A.2d at but such a claim was Chancery has ruled that materially mislead neither charged nor found in Poole. Given ing representations, party which induce a distinction, persuaded we are not contract, may entitle party to rescind plaintiff and the members of her class the contract. Eastern States Petroleum should be limited to the measure of dam- Co., Inc. v. Universal Oil Products Del. ages plaintiffs which the pleaded and Ch., (1939); 24 Del.Ch. 3 A.2d 768 cf. tried in Poole and which the Chancellor Brittingham N.J.Ch., v. Huyler’s, applied here. N.J.Eq. (1935), aff’d, 179 A. 275 N.J. A., N.J.Eq. Ct.E.

A rule & 184 A. derived from a case in which the accepted preferable Rescission is the damage remedy formula for which plaintiffs asked, controversy present and if the specifically may form not, fairness, to limit had been here in an stage earlier present plaintiff based, whose litigation, claim is might well be ordered. But we on a similar cause of action nor on the same conclude that rescission is not feasible at damage formula, but on the violation of a late date. TransOcean has been different standard of conduct. The differ- merged into Esmark brought and time has important ence is because the appraisal ap- other changes. proach adopted in Poole has a built-in limi- tation, namely, gain present affairs, On the corporation to the re- state of sulting from a statutory merger is conclude that a not a fair result can be accom factor which is determining plished included in interfering present without with shares, value of the and it was not con- corporate through structure a rescission or sidered the Chancellor. But that limita- accomplished der. That can be by ordering tion does apply when fiduciary has damages which are the monetary equiva breached a duty to those to whom it will, lent of effect, rescission and which owed. equal the increment in value that Vickers enjoyed acquiring as a result of holding and Poole, do not overrule which re We the TransOcean stock in issue. That is con appropriate mains for an action based on sistent with the basis for which is misrepresentation. But a claim founded on case, the law of the and it is a norm a breach of duty permits a differ when equitable remedy of rescission is relief, is, ent form of accounting an or impractical. rescission or other remedy afforded for breach of trust a fiduciary. appropriate The measure and extent of recovery Cy is stated in 12A Fletcher B. clopedia Corporations (Perm.Ed.) 5598: § We now appropri- consider what relief is ate. prayed Plaintiff has “Rescission both rescis- calls for the cancellation of sion money damages and theory bargain parties and the of and the return of the the claim support judg- asserted would to the quo status and hence where ment in either form. Thus rescission impossible would disposal because of the parties restore the quo to the status before involved, retirement of the stock made, sales of the shares were and money proper measure of should be the damages for equivalent non-disclosure of information value of the stock at the time germane to the transactions is akin to a judgment. resale or at the time of legally added.) based action for fraud and (Emphasis deceit.

Compare Poole, supra. Fletcher, 5596, supra, discussing See also rescission,

As argued damages by the award of equity an court the members of her class should be when rescission is not available because the basis, option, parted on an individual to rescind defendant has with the stock. 502 Fields, Cir., In Myzel, 718 Court concluded that Myzel v. 8 386 F.2d

In denied, judgment (1967), cert. U.S. value the stock at the time of relief, (1968), af noted appropriate 19 L.Ed.2d Court and was the money judgment firmed substantial similar had reached a con- First Circuit minority stockholders who had sold favor clusion: circum corporate “insiders” under shares (1 Janigan Taylor, 344 F.2d 781 “In (including facts stances which relevant 1965), Appeals for the Cir. profit) sales known to relating those problem of First Circuit faced a similar de insiders were not disclosed. Since seller of securities damages where the they had disposed fendants had of the stock party defrauded. As Chief received, action the Trial Court treated the Aldrich, out, Judge realistically points damages, F.2d at The as one for justice required such that the an instance Fed Eighth Circuit determined under future ac- pocket’ theory ‘out of reflect law, 78cc(b), the sale was eral U.S.C. § cretions.” void 386 F.2d at “plaintiff was entitled to restitution of Mansfield Hardwood Lumber Co. John sold, or, of the what he since restoration son, Cir., 263 F.2d reh. denied 268 impossible, equivalent stock here denied, F.2d cert. added.) money (Emphasis judgment.” was an action for L.Ed.2d F.2d at 742. plaintiffs to defend rescission sales that: say The Court went on to ants of stock. Defendants had “[rjecision calls for cancellation of the corporation caused the dissolved after bargain, parties the return acquire plain arranging for stock ante; impos- quo the status where this is Corporation tiffs others. disposal or retirement sible because plaintiffs in bought its own shares from stock, equivalent value of the then share; evidence at 1953 for about (cf. resale the time of re trial showed a fair market value about Cir., Liebig, (1918)) or at 255 F. 458 corporate assets share. All were (cf. Strong judgment Repide, time corporation liquidated in sold and the was 421-422, supra, 213 at 29 S.Ct. U.S. [419] that, Trial found 1956. The [522, 853]), L.Ed. should be the minority plaintiffs “had the and other (Emphasis damage.” proper measure stock, would have sellers not sold their it original.) $2,068 per been share on worth about F.2d at the liquidation or over five times amount and Western Compare Barnes Eastern majority stockholders thus received. Co., Or.Supr., 287 P.2d Lumber 205 Or. $3,458,007 the profited by some The Restatement Restitution treasury purchases.” Myzel, which is cited in makes § 263 F.2d at 752. point: same the Trial The Court determined that money person “Where a is entitled to a Judge’s ruling “clearly erroneous by judgment against another because finding per se of defendant fraud fraud, tortious consciously duress or other through beyond officers was its established acquired, retained conduct the other has ” F.2d at 753. a reasonable doubt .... measure disposed property, of his or judgment But concluded that the the Court by for the benefit received recovery correct; thus: property other at is the value “However, results were correct and re- acquisition, improper time of its think, upon soundly predicated, are higher value if disposition, or or a tention fiduciary liability for breach of the injustice where required is to avoid officers to by corporation’s or owed in value property has fluctuated Practically its individual stockholders. been made it.”

additions have jurisdictions recognize fiduciary all re near future and used economic coercion lationship arising minority to secure the sale of the shares.” from the directors and officers to their corporation and to the stockholders as a minority’ accord this duty to individual stockholders, purchase of stock from a shareholder. Whether this is cers and directors and their stockholders trust or confidence is is it likewise, breach is described as constructive termed ^[4] relationship especially immaterial whether whole, or quasi-fiduciary immaterial, and, while a concerning between offi ‘growing fraud, or 263 F.2d at sory damages that Vickers will be equivalent value of the TransOeean stock at the time Courts in below We purpose. apply agree as to Myzel when with judgment.5 here. plaintiffs and Mansfield Hardwood the record was required approach Specifically, See measured taken pay discussion closed for we hold rescis- enrichment, unjust fraudulent breach of C. trust, fiduciary obligation, breach of Relying on Mills v. Electric Auto-Lite otherwise, gross negligence, or 616, 24 L.Ed.2d 593 remedy given by whether the a con cases, argue and similar defendants trust, restitution, accounting. structive injury must show or economic describing These are all relative terms loss in to a remedy. order to be entitled equitable concepts. broad The standard narrowly. We do not read Mills so of a fiduciary’s duty beneficiary, to his was, course, 14(a) It an action under depending upon the instant relation and Exchange the Securities Act of 1934 in case, particular the facts of the lies some question presented which the was this: simple where between negligence and relationship “what causal must be shown willful misconduct or fraud with the in between a [materially such false or mislead tent to deceive. The actual intent to ing] merger statement and the to establish deceive is required where one party a cause of action” under the Act? 90 S.Ct. placed so advantageous posi such an at 618. tion to the other. Actual fraud will af concluding After had es- petitioners special ford redress in absence of “by showing prox- tablished their case relationship.” necessary approval merger ies 263 F.2d at 754. were materially obtained means of a solicitation,” misleading And the Court concluded Court reviewed various forms of relief special “the relationship between defend- awarded, might and determined ant’s officers plaintiffs and the demanded petitioners that were entitled to receive that plaintiffs restitution be made to they they what had been led to believe price difference of in their sold shares get. would upon and their value the almost immedi- liquidation especially Mills, receiving ate where the de- petitioners In were on the — promises fendant’s officers made concern- had been made end of the transaction which ing possible misrepresenta- curtailment of future dividends and the fraudulent Here, principle which plans liquidation disclosed for no tion. we focus on the clearly recognizes gained by fiduciary as a result of a breach of 4. Delaware law enforces a fiduciary Singer Magna trust, (5 ed.) relationship. Pomeroy’s Jurisprudence Equity such v. 4 Co., Del.Supr., (1977); 1075; 205; (3 ed.) vox 380 A.2d 969 Guth § 3 Scott The Law of Trusts § Bogert Loft, Inc., 255, Del.Supr., (2 rev.) 5 v. 23 Del.Ch. Trusts and Trustees ed. (1939); Dye Corp. 543(V). 503 Allied v. Chemical & to That standard has been § America, 1, Steel & Tube Co. of 14 Del.Ch. 120 in this State. affairs and directors (1923). Loft, A. 486 Singer Magnavox supra; v. Guth Inc., supra. Compare 5. that entitles a well settled law beneficiary actually advantages to claim all 504 produce

prohibits keeping undoubtedly differing a he would conse- what quences for And different shareholders. acquired in a less preceded by transaction complication arises from the num- another germane than fair disclosure of facts a TransOcean shares traded.7 ber of Nothing suggests Mills transaction. in case, gave up a who party in such that support In of its contention prove injury he had or economic what must mitigate obliged any out-of-pocket loss as a condition of relief. damages by repurchasing the TransOcean tendered, on she had Vickers relies shares Co., Cir., Sulphur Mitchell v. Texas Gulf 10 Ill 90, denied, 1004, 446 F.2d cert. argument developing based on a 564, (1971). Whatever L.Ed.2d mitigate damages, say defendants mitigation may which one derive the rule that stock over the TransOcean was traded case, apposite here. from that not counter and members of the class could that sale, press Sulphur effected a rescission of the at Texas Gulf had issued a have 12, which, effect, in April release on respective options, by buying their shares sig- had found a Company denied that open on the market. Canada, corpo- deposit ore but nificant agree general principle We with the such insiders reason to believe that rate requires out-of-pocket that a plaintiff with The Trial Court deposit been located. them, damages mitigate Restatement of deceptive press found that release (1932), mitiga Contracts but whether respect to material matters and with required depends the circum upon tion is Re- agreed. 446 F.2d Circuit Court case, R.E.B., stances of the Inc. Ralston release, plaintiffs lying press on Co., Cir., Purina 525 F.2d Sulphur stockholders sold other Texas Gulf subject and is to a of reasonableness. April April shares between 12 and their Cir., Greenbarg, 3 Krauss v. F.2d date, Sulphur latter is- On the Texas Gulf denied, 320 U.S. cert. press sued a release which revealed second 88 L.Ed. 477 discovery detail facts as to the some ore concluded deposit. The Court been Given the fact pub- that after the curative statement was case, per we are established no April on stockholders could lished of the class waived suaded members rely deceptive statement and longer on the respective rights they their relief mitigate any loss sus- obliged thus were estopped right, merely are to assert at 103. tained after that. F.2d purchases of open because market Trans- made. The might Ocean stock been rejected The Court rescission restitu- purchase time de shares at for reasons inappropriate tion as remedies factors, many including pends price face, on which, distinguish case on their stock, potential, Sulphur, view (a) one’s Texas from this: Gulf management, corpo known judgment as to were made to unknown sales of least, and, exchange; through last but no means a securities policy parties rate third condition, here, per- oth “direct ... including “privity” one’s own financial there dealings” spe- er commitments in common sonal which the Circuit investments or 105; absent, cifically were 446 F.2d at A those kinds of factors noted shares. mix of 4,228,000 Approximately example: merger, ac- shares were the Vickers held For after outstanding quired as a of the tender of Vickers result shares TransOcean 88% average (in Offering Circular) trad- shows that the had the offer. record announced remainder, by acquire merg- ing offer in shares after the tender its to the TransOcean intention quantity per day. Clearly, of necessary. position that er of over- was 600 if Vickers’ dominance, support purchase require- trading whelming conjunction would not with opted attitude, selling may to discouraged if all shareholders reinvestment ments have basis) by buying (on Company. personal Trans- rescind a the open on the market. Ocean (b) parties agreed such a 1978. The damages July measure would visit a to close Sulphur] “hardship upon ... Gulf the on that date and it is the date by record [Texas 105; a corporation,” 446 F.2d at no such damages ordinarily proved. are It showing (or argument) has here. been made also seems to be a reasonable accommoda- And, finally, the Court made it clear that the which the tion between date on shares Sulphur the Texas Gulf to was limited (1974) date on which were sold and the “unprecedented circumstances” in that third trial will be held case, and one for application was not “broad Second, at offered experts trial each side to all cases.” securities Thus: impressive who with credentials testified to divergent approaches “The taken running of values to range $10 litigants suspicion a set verify that about for each share TransOcean $41.40 rule of not been tested in record, common. As we understand the Furthermore, this kind of because case. grounded was much of difference uniqueness litigation, it respective assigned values to TransOcean’s would be unwise to set forth uniform And the assets. value which Chancellor applications rule with broad to all securi- significantly by fixed was influenced Thus, ties styled by cases. the rule assigned percentage which he to assets in court is for these unprecedent- fashioned the formula he seems to us used. It ed circumstances.” (40%) assigning the same to factor both 446 F.2d at 105. highly asset value and to market value was that, It should noted also be unlike Texas questionable. We because oil was say this Sulphur, Gulf Vickers did not release a cor- (and is) energy a limited and much needed rective press or notice communication to significantly source which affected its value TransOcean stockholders or to those who asset; contrast, as a Vickers’ Indeed, obliga- had sold their shares. dominance of and its an- TransOcean tion to cover would have to be considered in plan acquire nounced to all of the Trans- light of the Chancellor’s finding after stock undoubtedly Ocean an influence trial on that the TransOcean stock assigned value the market on the to the actually was less per worth than share. $12 shares traded.8 Requiring plaintiff mitigate to her dam- Third, in determining the amount of res- ages under the record would circumstances cissory damages, should be con- or, unreasonable, put to accu- more sidering a per price TransOcean share be- case, rately, setting in the factual of this a minimum of and a maximum tween $15 refuse to deny members of class The stock should not be valued $41.40. relief which would otherwise be available share, because that was per at less them, each of to limit such or relief because Vickers had authorized to be the amount repurchased he or she had not TransOcean open paid parties pur- third market learning misrepresenta- after Given the fi- chases TransOcean stock. tion. arms-length bar- duciary relationship, employed purchases should gaining IV minority resulted in stockhold- For guidance of the Trial Court after receiving ready ers less than Vickers remand, three we make other comments And, strangers pay Jby for the same stock. about relief. token, per- should not be plaintiff the same First, than rescissory damages are to be mitted now seek more the maxi- date, sought to prior determined date on mum she has as of to the amount is, is, damages ended, which the trial on share. $41.40 float,” is, “inability expert there were insuffi- 8. One who testified for noted average acquired (the trading shares after Vickers had some cient available 88% TransOcean, per day) permit large outstanding the mar- 600 shares in- shares of about buy price artificially of ket low because vestors was stock. 506 F.Supp. any judgment money. earned” use of the 283

Finally, before entered, to credit for the Vickers is entitled at 148. paid it member of the each class for each share of TransOcean stock V

purchased. And it is entitled to credit conclusion, arguments In we turn to the interest on that sum in the hands of defendants, of made the individual by three words, In other Vickers is entitled seller. Smith, Stormy F. William A. Alexander and arising to credit from the fact that All of them were Di- Edward J. Hudson. class) (and each other member of TransOcean, was the rectors of and Smith use share since the of $12 Company. President of the made in transaction was October Reves, 671, Del.Supr., 676 Dick v. 206 A.2d prior appeal, In these defendants their (1965); v. Hegarty American Common argued they any were exonerated from 86, Del.Ch., Corp., 19 Del.Ch. wealths Power re- good faith personal because Rosen, 616, (1932); 163 Baumel v. A. 619 counsel, upon liance because advice modified, D.Md., 4 (1968), 128 F.Supp. 283 judgment and for other of the business Cir., denied, (1969), 396 412 F.2d cert. 571 Chancery not reasons. 1037, 681, 681 90 24 L.Ed.2d U.S. contentions, did we. We ruled on those nor However, accept we cannot remanded, saying, imposed rate of return which was 13.1% judgment “We make no or comment explanation. the Trial Court without Con liability of indi- any about the ultimate fixing part in play siderations fairness any nor of defense al- vidual defendant rate, v. an interest Board of Commissioners on leged, except to direct remand 343, 352, States, United 308 and the Trial Court consider such matters 285, 289, (1939); v. L.Ed. Small findings make and state what- whatever Schuncke, N.J.Supr., N.J. appropriate as ever conclusions it deems (1964), reviewing we a rate and here are part judgment.” of its final in a precedent,9 Delaware which without again the Chancellor 383 A.2d 282. Because in of a situation which the victims breach he found for all defendants did consider fiduciary duty paying interest to will Smith, personal status of Alexander principle in Invoking the fairness violators. Hudson. to the setting, by analogy factual argu their Defendants renewed statutory interest rate at the time proper application of the busi ments that 2301(a),10and damages, trial on 6 Del.C. § Calhoun, rule, v. judgment ness see Warshaw cases, appraisal con the rate (1966); .Supr., A.2d 487 David is fair. clude that interest at the rate 7% Del International, v. Dunhill J. Greene and Co. Baumel, supra, in which the Court Compare Inc., Del.Ch., (1968), exoner A.2d 427 “simple interest required plaintiffs pay Plaintiff, personal 5%,” liability. from which the ates them at the rate of amount hand, that the issue is “safely on the other contends they Court concluded could have provided, 2301(a) Compare 10. 6 then follows: interest allowed Del.C. the amount of Schenley appraisal v. cases: Gibbons legal “The rate of interest for loan Industries, Del.Ch., (1975), Inc., money, express no contract has use of where Chancery the and in In Re Court awarded rate, interest percent 5.73% be 6 made for less shall been per , Del.Ch., Corp., Petroleum Creole annum, may any except that borrower (New County), interest C. A. 4860 at the rate of Castle any may charge agree pay, lender ordered; in Universal was borrower, 7% interest at collect such Studios, Inc., City supra, interest upon agreed writing 5.23% of 6 rate percent per in excess Anderson, Clayton Felder awarded. And in annum, but not in excess of (1960), & 159 A.2d 278 Del.Ch. charged by percent over the discount rate Spor 43A%; in interest was fixed at the rate of to its Federal Reserve Board of Governors Stores, Inc., City borg Specialty Del.Ch. member banks.” rate of 123 A.2d 121 April 4% See 62 Del. Laws c. effective fixed. 1980, for the current Statute.

507 and, Moreover, event, particu none as two properly any not before us now. to the judgment apply. business rule does not lar as facts cited violations Lynch opinion, in this Court’s initial v. We the time to end think has come Corp., Vickers 383 A.2d Energy Del.Supr., against lawsuit these We defendants. have (1977), (1978), applica 278 denied reh. determined members is the law legal tion of the test to the facts of her class are entitled a new trial on again. open of the case and not to review damages arising from the transaction Wells, Massey-Ferguson, v. Compare Inc. acquired which Vickers owned (1980). Del.Supr., A.2d 1320 421 them, respectively. each of That relates against Vickers, only to the class claim It be noted Court in should also that this bought which had the TransOcean shares. its 1977 of the Chancellor’s 1976 reversal perceive, We are on present unable opinion proceed- “remanded for [the case] briefs, any record and from the basis for ings A.2d at consistent herewith.” 383 282. these against individual defendants effort, Nothing in the Chancellor’s latest which arises from or is related to our Del.Ch., 402 Lynch Corp., v. Vickers pay determination that Vickers must rescis- guid- as violated that mandate no follows, sory to the It class. damages, ance alone as let therefore, these defendants are enti- suggestion single of damages that a and, judgment accordingly, tled to so much mandatorily governed. of the of the Chancery order Court of enter- opinion I majority While find ing judgment in their favor will be af- well-stated, I primarily be am concerned firmed. implications about the on the decision lengthy briefs, We should add discretionary power of the Chancellor and argued propositions each side number implications corollary the consequent on the specifically not reviewed herein. Our fail- role of this of evi- evaluation ure to do that as reflects a decision to what dence and of relief. choice about, to write not a failure consider all suggests today’s majority Insofar arguments. law the Chancellor as a matter of did not part, Affirmed reversed remanded out-of-pocket, to apply discretion an proceedings consistent herewith. appraisal damage remedy, to me it seems opinion Pomeroy’s Equity is in error. 1 QUILLEN, Justice, with whom McNEIL- Jurisprudence (5th 1941) ed. 109. See also § Justice, LY, joins, dissenting: Homes, Weiler, Del.Supr., Wilmont Inc. v. I respectfully my dissent. view Since 576, (1964); Tenney Jacobs, 202 v. A.2d 580 persuaded by colleagues, therefore 526, 138, Del.Supr., Del.Ch. 140 A.2d effect, is of no I briefly will state it as as I Barry, (1968); Wilmington Company Trust v. can. 135, 138(1979). “Eq l.Supr. 397 A.2d De uity adapts decrees to fit nature and litigation It should noted that in this consequences gravity of the breach and the any judicial disagree- there never has been Bogert, to the beneficiaries and trustee.” “complete ment over candor” test. See (2d 1978) Trust Trustees ed. rev. opinion. Lynch the Chancellor’s initial 1976 & Del.Ch., 543(V), thing Energy p. It is one to analo Corporation, Vickers (1976).1 express gize disloyal There can be and is to the trustee of Indeed, (1977) anything, incorporating if the Chancellor’s 1976 federal standards stronger “germane”. Compare than TSC Indus- statement law seems oth definition of 438, 450, tries, Inc., Northway, ers See uttered Delaware courts. Resource Inc. v. Law, Corporation (1976). Document on Delaware 48 L.Ed.2d 20, 26-29, Del.J.Corp.L. particularly disagree incorpora- n. 38 I note this not to with such (1977); tion, sense, good re TransOcean Tender Offer Securi but rather which makes Ill., F.Supp. Litigation, emphasize ties N.D. the Chancellor’s contribution to and Lynch Compare liability. empathy legal 1220-1221 Vickers for the standard of Corp., Energy Del.Supr., 383 A.2d say appellate for me to from the property personal trust uses difficult who trust quite abso perch legally improper benefit but it is another to be it was to con- lutely by analogy the exclu genuine replace bound effort sider that “no of say sion all others. To there is a fiduci appears tendered shares to have been ary “only begins analysis” “gives duty made”. 402 A.2d 9. inquiry.” direction to further Securities was, my judgment, There in no abuse of Exchange Chenery Commission v. I recognize chosen. remedy discretion in the 80, 86, 454, 458, Corp., 318 U.S. legal important prin- involves an the forest (1943). L.Ed. Given Chancel accountability, I fear the ciple of but him, I lor’s on situation before emphasis trees has lost of the factual and the track giving analogy legal find no error in his on prime responsibility equity of focus discretionary to the methodol consideration of the case at the determined circumstances ogy Maatschappij, in Poole v. N. V. Deli used particular hand. of in decide equity Courts .Supr., Del.Ch. Del eases. (1966). Barrack, Compare 9th Blackie of ma- thoughtful opinion Were Cir., (1975). F.2d Court, it jority opinion Trial question The real is whether the Chancel- But it is would entitled deference. choosing in lor abused his discretion emphasized particularly This not. appears have remedy he did. His choice The distressing chronology of this case. least factors. been motivated three 18,1974. A complaint was filed on October First, he relied on the evidence before May and June multi-week trial was held in trial over a days him after ten three-month opinion, initial After this Court’s period in the second trial after remand. July May, second held June and trial was in choosing 402 A.2d at 12-13. yet today require of 1978. The decision will he took the case as he found the remedy', trial, damage theory, third on mandated say evidence I cannot his view warranted. history, presumably in 1981. Given evidence, remedy as insofar choice surely question must whether we concerned, wrong. appellate perspective. Applica- in our role Second, particularly, proper- he and more Ass’n, Del.Supr., Racing tion of Delaware ly carefully made an assessment (1965). A.2d particular in- fiduciary duty nature of the it unneces- luxury of dissent makes volved in the factual context and found not sary for whether or me to determine “not as some compelling” others. application appraisal the Chancellor’s opinion of the A.2d at 11. Insofar as the remedy September these facts as of majority may suggest particu- that the two result. Rather clearly reached a erroneous lar nonfraudulent breaches of to no ef- question than face that difficult opinion first were found in Court’s overzealous, fect, merely I will refer may take major culpability ones of surviving general reader to comments account, on issue with the Chancellor Kirby my concurrence Bell v. Lumber views entitled only are Chancellor’s Corp., A.2d 150-51 Del.Supr., 413 to the usual deference those fact-finder, but, clearly my judgment, he argument. has the better of the

Third, passing the Chancellor viewed mitigation differ-

the issue of at 8-9.

ently majority. than the two creating

Since the omissions later publicly were disclosed not

breaches price of

than the first trial in 1975 and the remained twelve

Trans-Ocean stock below market, it is limited

dollars a share

Case Details

Case Name: Lynch v. Vickers Energy Corp.

Court Name: Supreme Court of Delaware

Date Published: Apr 3, 1981

Citation: 429 A.2d 497

Court Abbreviation: Del.