*1 eluding that this was a sufficient affirma- testify truthfully.
tion that she would
Therefore, we conclude that this six
year properly old was found compe to be testify,
tent to her promise to “tell
the truth” was an affirmation sufficient to
impress duty on her mind her to be truthful required by D.R.E. 603.3
AFFIRMED. Gosselin,
Alden SMITH John W. Below, Appellants,
Plaintiffs
v. GORKOM,
Jerome W. VAN Bruce S.
Chelberg, Johnson, Joseph William B. Lanterman,
B. Morgan, Graham J. O’Boyle, Wallis, P.
Thomas W. Allen
Sidney Bonser, Browder, H. William D. Corporation,
Trans Union a Delaware
corporation, Inc., Group, Marmon corporation, Corporation,
Delaware GL corporation,
a Delaware and New T.
Co., corporation, a Delaware Defend- Below, Appellees.
ants
Supreme Court of Delaware. 11,
Submitted: June 1984. 29,
Decided: Jan. 1985.
Opinion on Denial Reargument: 14,
March 1985. (except specifical- mining 3. Because all witnesses those competency forth set child witness rules) ly competent State, excluded are to testi- Del.Supr., in (1978). v. A.2d Kelluem fy longer under JXR.E. we note it is no necessary through guidelines go for deter-
g59 *10 William (argued) Prickett and James P. Pazze, Dalle Prickett, of Jones, Elliott, Schnee, Kristol & Wilmington, and Ivan Irwin, Jr. Shank, Brett Ringle, A. Irwin, Conant Williamson, & Dallas, Tex., counsel, plaintiffs below, appellants. Robert K. Payson (argued) and Peter M. Sieglaff Potter, Corroon, Anderson & Wilmington, for individual defendants be- low, appellees. Black, Jr.,
Lewis S. A. Sparks, Gilchrist (argued) III Allen, and Richard D. of Mor- ris, Nichols, Tunnell, Arsht & Wilmington, for Trans Union Corp., Marmon Group, Inc., Co., Corp. GL and New T. defendants below, appellees. HERRMANN, C.J.,
Before and McNEIL- LY, HORSEY, CHRISTIE, MOORE and JJ., constituting the Court en banc. HORSEY, (for Justice majority): This appeal from the Court Chancery brought involves a class action share- holders the defendant Trans Union Cor- (“Trans poration Union” or Compa- “the ny”), originally seeking rescission of a merger cash-out of Trans Union into the (“New T”), defendant T Company New wholly-owned defendant, subsidiary of the (“Marmon”). Marmon Group, Inc. Alter- nate relief in damages the form of is sought against the defendant members of Union, Board of Directors of *11 864 T,
New and Jay by failing A. Pritzker Robert A. with the stockholders to disclose Pritzker, facts, Mamón.1 owners of all material which knew or known, should have before securing the trial, former Following Chancellor merger. stockholders’ approval of the granted judgr-ent defendant di- unreported opinion letter rectors dated I. fuly 6, Judgment was 1982.2 based on two (1) ’hidings: requires the Board of this case nature Directors a de- lad acted in informed manner so tailed an factual statement. The following >e protection entitled of the essentially facts are uncontradicted:4 business udgment approving rule in cash-out (2)
nerger; the shareholder -A- vote pproving merger should not be set publicly-traded, Trans Union was a diver- side because the stockholders had been holding company, sified principal earn- fairly informed” the Board of Di- ings generated by of which were its railcar ectors before thereon. The voting plain- leasing During period business. here appeal. ffs involved, Company had a cash flow of Speaking majority Court, for the of the hundreds millions of dollars annually. rulings However, e conclude that both the Company Court had difficulty in Chancery E clearly are erroneous. generating There- sufficient taxable income to off- >re, judgment we reverse and direct that increasingly large set investment tax cred- plaintiffs (ITCs). entered favor of the depreciation its Accelerated deduc- gainst the defendant directors for the fair tions had decreased available taxable in- plaintiffs’ due of the stockholdings against come which to offset accumulating Union, (cid:127)ans in accordance with Company Weinb ITCs. The took these deductions, UOP, erger Inc., Del.Supr., v. despite ITCs, A.2d their effect on usable because (1983).3 price the rental leasing in the railcar mar- already ket had impounded purported We hold: decision, the Board’s *12 savings. tax 20,1980, ached approve to oposed merger cash-out was not 1970’s, together In the late with other oduct of an judgment; firms, informed business capital-intensive Trans Union lobbied subsequent the Board’s Congress efforts to have ITCs refundable in Merger lend the Agreement and take cash to firms which fully could not utilize ineffectual, íer curative action were both During the credit. summer of ;ally and factually; Gorkom, defendant Jerome W. Van Trans ard complete did not deal with candor Union’s Chairman and Chief Executive Of- Smith, plaintiff, originally trial, sought 1. The Following Alden and before decision 2. but, njoin merger; following Court, extensive dis- parties stipulated Trial dismiss- overy, plaintiffs the Trial Court denied the al, prejudice, with of the Messrs. Pritzker as preliminary injunction by lotion for unreport- However, parties all defendant. references to opinion February d letter dated 1981. On defendants are to hereinafter the defendant di- 10, 1981, ebruary proposed merger Union, rectors unless otherwise noted. pproved Trans Union's stockholders at a jecial meeting merger and the became effec- stipulated plaintiffs It has been sue on 3. Thereafter, ve on that date. John W. Gosselin 10,537 consisting behalf of a class sharehold- permitted to intervene as an additional (out 12,844) ers of a class total and that the Saintiff; and Smith and Gosselin were certified 12,734,404 13,357,758 owned out of shares ; consisting representing a persons, class of all outstanding. Trans Union defendants, her than who held shares of Trans nion common stock on all relevant dates. At facts, ¡e 4. More detailed statements of consistent 54,000 merger, time of the Smith owned outline, por- appear with factual related stock, this tares of Trans Union Gosselin owned 1,600shares, Opinion. tions of this family members Gosselin’s 20,000 vned shares.
§g5 fjcer, testified and lobbied in Congress Romans, for Donald Chief Financial Officer refundability against of ITCs and further of Union, department Trans that his stated depreciation. By of the end had done a bit of work on the “very accelerated brief Van Gorkom August, was convinced that possibility leveraged buy-out.” This of a Congress would accept neither the refunda- work a had media article prompted been concept bility nor curtail further aecelerat- which regarding a lever- Romans had seen depreciation. aged buy-out The by management. ed work study” consisted of the “preliminary a Beginning 1960’s, in the late and continu- cash which the Com- generated could be through 197Q’s, the ing pur- Trans Union pany buy- if leveraged it participated in a program a acquiring compa- small sued out. As stated, analysis “was Romans this in order to increase available taxable nies very first and rough seeing whether cut at In July 1980, Trans Union Man- income. a cash might flow be support would what prepared agement the annual revision of considered a high price type of this for Company’s Five Year Forecast. This the transaction.” presented report to the Board of Di- at July, its meeting. The re- On 5, rectors at Man- another Senior projected an growth agement annual income port meeting which at- Van Gorkom report tended, The 20%. also concluded about that again Romans brought up idea Union would have about million leveraged $195 of a buy-out “possible as a stra- spare cash between 1980 and tegic “with alternative” to Company’s acquisi- surplus growing rapidly program. from 1982 on- tion Romans and Bruce S. Chel- report The ward.” berg, referred to the ITC President and Chief Operating Offi- and, as a “nagging problem” situation giv- Union, cer of Trans had been working on problem, leasing en company the matter in preparation meeting. for the still appear “would to be According constrained to a They Romans: did not “come tax breakeven.” report then up” listed with a price for Company. They four alternative projected uses of the merely 1982- “ran the numbers” at a share $50 equity surplus: (1) repurchase; stock and at $60 share with “rough form” (2) increases; (3) dividend major acquisi- of their figures cash at Their the time. program; tion “figures combinations indicated very would $50 be above. The sale of Trans Union was easy not to do but very $60 would be difficult among the report alternatives. The em- to do figures.” under those This work did that, phasized despite surplus, the overall purport fair price establish a operation Company would con- either Company of the stock. 100% sume all available equity for the next sev- It was intended to determine the flow cash years, eral result, and concluded: “As a we needed to service the debt that would have sufficient fully time to develop “probably” our be leveraged buy- incurred in a course of out, action.” “rough based on calculations” without
“any experts benefit of identify what the that, limits were to and so forth.” These -B- computations were not considered exten- On August 1980, Van Gorkom met sive and no conclusion was reached. with Management Senior of Trans Union. Van reported Gorkom lobbying on his At meeting, ef- this Van Gorkom stated forts in Washington and his desire to find a he would willing be per to take share solution to problem the tax credit 75,000 more for his own shares. He vetoed the permanent *14 than program suggestion a continued leveraged buy-out by of a Man- acquisitions. agement, however, Various alternatives were involving potential suggested and discussed in- preliminarily, conflict of Management. interest for Van cluding Gorkom, the sale of Trans compa- Union to a public certified accountant and ny with a large amount of lawyer, taxable income. had been an officer of Trans Union *15 66
t Van 24 million. Gorkom years, pany $690 of Officer Executive its Chief told t figure million $690 to use this more Peterson of years, than and Chairman 17 and > equity million $200 assume a to Board contribu- noteworthy 2 in years. for It is by buyer. the Based on these is tion assump- approach- then connection that he was tions, g Van directed Peterson Gorkom years 65 to age mandatory of retire- and portion whether the debt of determine ent. off price paid be in could purchase five For Septem- days following several if Trans or less financed years Union’s r meeting, 5 Van pondered Gorkom projected in the Five cash flow as Year ?a of a participated sale. He had Forecast, of by the sale certain and weaker my acquisitions and manager as di- a study in a done identified divisions for :tor of Trans Union a director of and as Boston Union Trans Consulting ter companies. He with was familiar (“BCG Group study”). reported Peterson methods, imisition procedures, valuation that, price, the purchase of approximately a negotiations; con- privately and he million would remain outstanding $50-80 the pros ered Trans eons of whether years. Van was five Gorkom disap- after ion should publicly- seek a or privately to but decided meet with pointed, Pritzker ¡d purchaser. nevertheless. »Tan Jay Gorkom decided with A. to meet arranged meeting Van a Gorkom with tzker, a corporate well-known takeover at the latter’s home on Pritzker Saturday, “cialist a acquaintance. social How- prefaced Van 1980. Gorkom ;r, rather than approaching Pritzker sim- presentation by stating to his Pritzker: acquiring determine his interest concerned, you can, far are I “Now as as I ms Union, Van a pro Gorkom assembled think, you pay how can show a substantial per ved price share of the Com- for sale present price premium over stock ;y and a financing by which to structure off most of the loan in the first pay five omplish * * * sale. Van did so Gorkom If years. you pay could for $55 this bout consulting any either his Board I Company, way here is a in which think it mbers of Management except Senior be can financed.” : Peterson, Carl Trans Union’s Control- Van Gorkom then reviewed with Pritzker Telling Peterson that he wanted no upon proposed his calculations based his er person on his what he staff to know Although price per $55 share. Pritzker = doing, telling but why, him without figure, as a more attractive $50 mentioned i Gorkom directed Peterson calculate However, price' mentioned. no other was feasibility of leveraged buy-out a at an that to be $55 Van Gorkom stated sure that anted price per Apart share of $55. obtainable, Union price was the best Trans n the Company’s market historic stock accept any offer. should be free to better and Van 5 long Gorkom’s association demurred, organi- stating that his Pritzker : Union, Trans the record is devoid of “stalking horse” would serve a zation competent represent- evidence that $55 only if Trans Un- an “auction contest” for he per share intrinsic value of the Com- 1,750,000 buy permit Pritzker to ion would y. stock at market shares Trans Union aving thus figure, any based chosen the Pritzker then sell price which could ly on the leveraged availability higher further discussion bidder. After -out, Van multiplied price point, Gorkom told Van this Pritzker Gorkom share by give him definite reaction shares out- he would a more number of iding to reach a soon. total of the Com- value high and high
5. The $241A. Its common and a low of stock of traded Trans Union was S39‘/2 (the range through September Exchange. New York Stock low <Overthe year e period trading day through before announcement from last merger) ton's range $38l/t-$29'/2. stock had traded within of a
g<S7 Monday, September aspects Pritzker ad- merger. Van of the Gorkom did On Gorkom that he was Van interested Browder, a Vice- consult with William merger proposal cash-out S55 ¡f. the of Trans Union and President and director more information on Trans Un- re'jynKted legal department, termer head its agreed privately Gorkom to meet Van jor, with the head of Trans Moore, William then Pritzker, accompanied Peterson, y/ilfr legal Union’s staff. Carpenter, and Michael Chelberg, On Van Gorkom Friday, September from the consultant Boston Con- Onion's special called a Trans Union of the meeting Group. meetings place took aüiúrig day. Board for He also following noon the 16 and 17. Van Gorkom was called a Company’s Senior meeting *17 "a.-,Hounded that events were moving with Management a.m., prior to convene at 11:00 amazing rapidity.” puch one, to the meeting of No the Board. Thursday, September Van Gor- On except Chelberg Peterson, told the and was again with Pritzker. At that met kom time, purpose of the did meetings. Van Gorkom Gorkom knew that Van Pritzker in- not invite Trans Union’s bank- investment merger make cash-out a offer at tended er, Salomon Chicago-based Brothers or its proposed per $55 share. Gorkom’s Van partner, to attend. his attorney, merger instructed a Pritzker specialist, begin acquisition drafting Of those present Manage- at the Senior There no documents. was further merger ment meeting September 20, on only Chel- price. However, $55 of the discussion berg and prior Peterson had knowledge of shares of Trans Union’s trea- number Pritzker’s offer. Van Gorkom disclosed to be offered to Pritzker stock was sury terms, the offer and described its he but shares; down one million negotiated copies furnished no proposed Merger $38 set at cents was above the —75 price Agreement. Romans announced his price at the close share market per department had study done a second which point, At 19. this September Pritzker on that, showed for leveraged buy-out, the the Trans Union Board act on insisted price range for Trans Union stock was merger proposal within the next three his between per $55 and Van Gor- $65 share. stating to Van days, Gorkom: “We have to kom study neither saw the nor asked Ro- decision no later Sunday than have mans to make it available for the Board September opening before the [evening, 21] meeting. English exchange stock on Monday morning.” lawyer Management’s Pritzker’s Senior reaction to the was then in- merger documents, structed to draft proposal completely negative. to Pritzker was lawyer, be reviewed Van except Gorkom’s No Management, member of Chel- "sometimes with discussion and berg Peterson, sometimes supported proposal. get not. the haste to it finished.” objected price being Romans to the as too low;6 timing he was critical of the On Friday, Gorkom, Van suggested giv- that consideration should be Chelberg, and Pritzker consulted with en to consequences the adverse tax of an Trans Union’s bank regarding lead the fi- shareholders; all-cash deal for low-basis nancing of purchase Pritzker’s of Trans position Union. and he agreement took the that the The bank indicated it could form a syndicate newly-issued to sell Pritzker million banks that one would fi- nance the shares price transaction. On the at inhibit day, same market would other \an offers, Gorkom Brennan, retained against James Es- prohibitions as would the quire. to advise legal Union soliciting furnishing bids and inside infor- 6. Van sale, express Gorkom asked particularly Romans to his one which enabled us to real- opinion price. to the Romans stated that ize the values of subsidiaries and inde- certain he “thought price too in relation to low pendent entities.” what he could derive the company in a cash *18 argued Romans Van the terms of stion to other bidders. Gorkom outlined up” at a “lock Pritzker offer as follows: Pritzker proposal the Pritzker would outstanding pay in cash for all agreed merger $55 d “an as amounted to shares Nevertheless, upon completion posed of Trans Union stock to an offer.” Van merged which Trans would be meeting Union proceeded >rkom to the Board as into Company, subsidiary New T a delay. wholly- aeduled without further by owned Pritzker and formed imple- Ten .on the Trans Union directors served merger; period ment the for a of 90 days, (defendants Bonser, iard, five inside receive, Trans could but Union could not Browder, Boyle, Chelberg, and Van Gor- solicit, offers; actively competing the offer in) (defendants Wallis, five and outside by had to acted on next be evening, hnson, Lanterman, Morgan and Renek- 21; Sunday, September Trans Union could i. present All were at the meet- directors r, except O’Boyle only competing publish- furnish bidders was ill. who Of information, not proprietary ed and infor- directors, corporate chief tside four were mation; subject the offer was to Pritzker the former ecutive officers one was necessary financing by obtaining Octo- University ian Chicago of the Busi- 10, 1980; financing ber if the contingency ss School. None was an investment Pritzker, were met or waived analyst. nker or All trained financial required Union was to sell to Pritzker one imbers of the Board were well informed million newly-issued shares of Trans Union Company operations out and its per at share. $38 ing They concern. were familiar with position Van Gorkom took the that put- i current financial condition Com- ting “up Trans Union for auction” through ny, operating earnings as well as 90-day market test would validate a deci- reported in the recent Five Year Sections sion the Board that a fair price. $55 was generally recast. The received Board He told the Board that the “free market jular and reports kept detailed and was opportunity will an judge have whether reast of the ¡dit tax accumulated investment price.” is a fair Van Gorkom framed prob- depreciation accelerated *19 the decision before the Board not as wheth- n. per er highest price $55 share was the that Meeting Van began Special Gorkom the obtained, could be but as whether the $55 twenty-minute the Board with a oral price price a fair that was the stockholders jsentation. Copies proposed the given should opportunity accept be the ;rger Agreement late were delivered too reject.8 (cid:127) study meeting.7 the during before or Attorney Brennan advised the members ! depre- reviewed Company’s the ITC and they might of the Board be sued if that problems tion and the efforts thereto- accept failed to the offer and that (cid:127)e made to solve them. He discussed his opinion required fairness not as a mat- was meeting tial with Pritzker and moti- his ter of law. tion in arranging meeting. Van Board, >rkomdid how- not disclose to the meeting Romans as chief attended er, methodology alone by which he told Company. financial officer of the He d arrived at figure, or the fact $55 the Board that he had not been involved proposed price it he first his knew negotiations with Pritzker gotiations until nothing merger proposal with Pritzker. about the Agreement 7. Therecord is clear can be as to terms of said is that Brennan had the Agreement. Merger y presented Agreement, original- during meeting. before him the Board on produced by despite tever >y defendants demands is decision" 8. In Van words: The Gorkom’s "real plaintiffs. is Nor it clear the di which it” “let the decide whether to stockholders given opportunity study were an ectors today." you being is "all are asked to decide Agreement voting Merger before on it. All *20 morning Agreement. However, meeting; of the that his stud- the Board later the price a for did not indicate either fair claimed ies to two conditions to have attached Company; stock or a valuation of the acceptance: the its Trans Union re- (1) that directly he did not see his role as that served right any the better offer accept issue; addressing he the fairness and that that was peri- made the market test during trying people his “were to search and od; and that could share Trans Union justify price a ways connection with its proprietary any with other information transaction, [leveraged a buy-out] such potential bidders. Board now the While say than to what the shares are rather accept claims to right have reserved the Romans worth.” testified: any better offer the an- after received study I told Board the ran the the that nouncement of the agreement Pritzker 60, numbers at 50 and and then the sub- (even though meeting the do minutes of the sequent study at 55 and and that was this), not reflect it is the that undisputed thing saying not the same that I have did Board actively reserve right to the company valuation of the at X dollars. solicit alternate offers. way step But it was a first towards —a Merger Agreement was executed reaching that conclusion. Van during Gorkom Septem- the evening of that, opinion, Romans told the in his Board ber 20 at a formal social that he event range price,” “in the of a fair but opening hosted for the Chicago Lyric beginning “at the range.” of the Opera. Neither he any nor other director President, Chelberg, sup- Trans Union’s agreement prior read the signing to its and ported presentation rep- Van Gorkom’s delivery to Pritzker. “partici- resentations. He testified he that pated to make sure Board mem- Monday, September On Company collectively bers were clear on the details press issued a announcing release agreement Pritzker;” of the or offer from Trans Union had entered into “definitive” that he “participated in the with discussion Merger Agreement with an affiliate of the Brennan, inquiring Mr. of him about the Group, Inc., holding Marmon a Pritzker necessity for spite valuation opinions in company. Within 10 of the days public way particular which this offer was announcement, among dissent Man- Senior couched;” and he was otherwise ac- agement over merger wide- had become tively in supporting positions involved spread. resigna- Faced with threatened being taken Van Gorkom before the officers, tions kqy Van Gorkom met with necessity Board about “the to act immedi- Pritzker agreed who to several modifica- ately offer,” on this ade- about “the tions Agreement. of the will- Pritzker was quacy of the question $55 and the of how ing to do provided so that Van Gorkom that would be tested.” persuade could dissidents to remain meeting The Board 20 last- Company payroll for at least six solely ed about upon two hours. Based months merger. after consummation of the presentation, Van Gorkom’s oral Chel- berg’s Van Gorkom reconvened the Board on representations, supporting Ro- statement, ap- October legal mans’ secured the directors’ oral Brennan’s ad- vice, proval proposed sight of the knowledge and their of the market amendments — stock,9 history Company’s the di- unseen. The Board also authorized rectors approved proposed Merger Brothers, employment of in- Salomon its premium prices 9. The Trial Court stated the relation- low at which Trans Union stock had *21 ship'of price history to the market premium a traded in over the of 48% Company’sstock as follows: closing price, premium last over 39% * * * highest price at which the stock of Trans merger price to the stock- offered prior any during Union had traded represented premi- time holders of Trans Union years. average six high 62% um of over the *22 (“KKR”), only the other & Co. for erts banker, offers solicit other vestment concern for Trans a firm offer “market to make proposed during Union, Trans the Union under its offer test” withdrew period. circumstances detailed. hereinafter 9, Trans Union day, The October next (1) that announcing: release press issued a 19, litigation December this was On com- financing com- “the Pritzker had obtained weeks, and, the plain- within four menced the to consummate” necessary mitments ten eight of the deposed had tiffs directors Union; (2) Pritzker that merger Trans with Union, including Van Trans Gorkom, of Trans shares one million acquired had Romans, Chelberg and its Chief Financial share; (3) per at $38 Union common stock 21, Management’s January On Officer. permitted was now that Trans Union February for the Proxy Statement 10 had retained offers and actively seek other meeting was mailed to shareholder Trans and purpose; that for Salomon Brothers January On stockholders. 26, Union’s were not offer a more favorable if and, met Union’s Board Trans after a 1981, 1, Trans February received before meeting, proceed voted to lengthy with the thereafter would shareholders Union’s merger. approved The Board also Pritzker proposal. Pritzker on the meet to vote 27,” mailing, January “on or about for following day, Octo- until the It was not Proxy to its Statement. Supplement The 10, that the actual amendments ber purportedly set forth all Supplement infor- prepared were Merger Agreement Pritzker to the Merger mation relevant for to Van Gorkom Pritzker and delivered divulged had not been Agreement, which seen, amend- execution. As will be Proxy first Statement. with variance considerably at ments were representations Van Gorkom’s 8; on October
amendments to the Board 10, February the stockholders On con- placed serious and the amendments approved merger the Pritzker Trans Union negoti- ability to Trans straints on Union’s outstanding shares, proposal. Of from the withdraw ate a better deal and the merger; were voted in favor of 69.9% Nevertheless, Van agreement. Pritzker merger; against the were voted 7.25% became proceeded to execute what Gorkom voted. were not 22.85% Merger to the the October 10 amendments conferring further with Agreement without II. without apparently the Board members and implications of comprehending the actual application the issue of the We turn to Septem- the amendments. judgment to the the business rule meeting of the Board. ber over a three- Salomon Brothers’ efforts from Chancery concluded The Court of January 21 to period month from October Directors’ Board of the evidence for only serious suitor produced one merger proposal Pritzker approval of the Cor- Electric Credit Union—General business protection of the fell within the (“GE Credit”), subsidiary of the poration found judgment rule. Court However, GE Company. Electric General atten- given sufficient time Board had an offer unwilling to make Credit directors transaction, since tion to re- unless Trans Union first Trans Union on proposal Pritzker considered the had Merger Agreement with Pritzk- its scinded occasions, different three refused, GE Credit ter- When Pritzker er. on Janu- finally and on October with Trans Un- minated further discussions Court basis, the 26, 1981. On that ary January. early , ion in over acquired, had that the Board reasoned informa- sufficient period, meantime, December, the four-month early In the judg- business informed Kravis, to reach an Rob- tion Kohlberg, investment firm of *23 exercising our merger proposal. on the cash-out In case. fact in proper inent duty ruled: Court power review, we have of sufficiency the evidence given the market value of Trans ... review findings stock, business acumen of Union’s and to propriety test the however, ignore the members of the board of Trans Un- not, below. We do ion, premium the substantial market over If judge. trial findings by the made by the Pritzkers and the ultimate offered the record are sufficiently supported merger provided on the price effect orderly and an product are the prospect of other bids for the stock in the exercise logical process, deductive that the board of directors question, them, even judicial accept restraint we *24 recklessly Union did not act or Trans might have though we independently improvidently determining on a course only It is opposite reached conclusions. they which action believed to be in the of clearly when the are findings below interest of the stockholders Trans best requires wrong doing justice and the Union. make their overturn free that we are of Chancery made but one find- Court The contradictory findings of fact. i.e., that the Board’s conduct over the ing; Applying prin- governing that standard and period September through from 20 entire ciples of law to the the decision record and 26, January 1981 was not reckless or im- Court, of the Trial that we conclude but informed. This ultimate provident, Court’s finding ultimate that the Board’s premised upon three subor- conclusion is imprudent” conduct was not “reckless or findings, explicit one and two im- dinate contrary product to the record not the and explicit finding The Court’s was that plied. logical reasoning pro- of a and deductive Union’s Board was “free to turn cess. proposal” only the Pritzker on down plaintiffs The the Court of contend that 8, 20 but also on October Chancery by law exon- 26, erred as a matter of January 1981. The im- Court’s under the (1) erating the findings subordinate defendant directors were: that plied, first deter- legally binding agreement judgment business without was reached rule no 26; parties (2) until condi- by January mining whether the rule’s threshold higher aif offer were to was satis- be forthcom- tion of prudence” “due care and ing, market test produced would have the Trial plaintiffs fied. assert it,10and Trans Union would have been con- directors to Court found the defendant tractually accept higher free to such offer. judg- have business reached an informed However, the Court offered no factual ba- consider- ment on the basis of “extraneous legal support any sis or for find- these Sep- after ations and events that occurred ings; and the compels contrary record con- deny tember The defendants 1980.” clusions. legal error that the Trial committed Court 20, 1980 relying upon post-September This Court’s standard of of the review acquired later findings of fact reached events and the directors’ by the Trial Court following full further sub- evidentiary hearing knowledge. is as The defendants Bouvier, per stated in Del.Supr., accept Levitt v. mit their decision (1972): (1) A.2d they were share was informed because: (2) they were “well-in- “highly qualified;” appeal an of this this court [In nature] formed;” over has the deliberated authority to the entire review times. On “proposal” record three findings and to make its own not once but 10. We Pritzkers and portion refer to the um underlined over market offered stated): provided merger price (previously Court’s ultimate conclusion ultimate on the effect ques- given "that stock, the stock in prospect Union's the tion, bids market value'of Trans other of Trans Union the business acumen of the members of that the board of directors Union, premi- recklessly improvidently-” board of Trans did not act the substantial *25 m making “prior under formed themselves a
:ssentially this evidence and our busi decision, review, ness of all1material tandard the defendants assert information reasonably available to them.” Id12 required. hat is We must disa- affirmance ;ree. judgment Under the business rule law, protection there is for directors Delaware the business no
Under
who
unintelligent
made “an
or
adgment
offspring
rule is the
of the fun- have
unadvised
Highland-Western
v.
principle,
judgment.”
amental
codified in 8
Mitchell
Del.C.
831,
141(a),
Glass, Del.Ch.,
(1933).
affairs of
167 A.
833
that the business and
A
)elaware
in
corporation
managed by
duty
director’s
to inform himself
prepa
are
nder
a decision derives from the
Pogostin
its board of directors.11
v.
ration for
fidu
Rice,
619,
(1984); ciary
Del.Supr.,
capacity
480 A.2d
624
in which he serves
corpo
Lewis,
v.
Del.Supr.,
Aronson v.
473 A.2d
ration and its stockholders. Lutz Boas,
Del.Ch.,
(1961).
(1984);
Maldonado,
11
Zapata Corp. v.
Corp.
supra
imposes
v.
at 782. The
financial
interests of others
making
presumption
duty
protect
lie itself “is a
that in
director an affirmative
decision,
proceed
business
the directors of a eor-
those interests and to
with a crit
basis,
eye
assessing
oration acted on an informed
ical
information of the
type
present
ood faith and in the honest belief that the
and under the circumstances
Boas, supra;
ation taken was in the best interests of
here. See Lutz v.
Guth v.
*26
Aronson,
company.”
Loft, supra.at
Compare
íe
at 812.
Donovan
supra
510.
v.
hus,
Cir.,
1455,
party attacking
Cunningham,
a board decision
5th
716 F.2d
1467
(1983);
presumption
Compa
3uninformed must rebut
v.
Doyle
Union Insurance
(1979);
Neb.Supr.,
íat
)rmed
its
an in-
judgment
ny,
business
was
873
care,
in
duty
of a
as distin-
deliberate manner
of
act in an
nature
informed
the
of
Here,
from a duty
loyalty.
approve
agree-
to
an
determining
guished
whether
fraud,
allegations
no
of
were
bad
submitting
pro-
the
ment of merger
there
before
faith,
self-dealing,
proof
or
or
thereof.
the
posal
Certainly in
to the stockholders.
Hence,
presumed
it is
that the directors
may not abdi-
merger context, a director
in
judgment
good
their business
reached
cate
to
sharehold-
leaving
the
that duty by
faith,
Co.,
Allaun v. Consolidated Oil
Del.
disap-
or
approve
ers alone
to
the decision
(1929),
Ch.,
dard our conduct of the Union directors of judgment under the business rule tested, must be as a as a matter of law upon liability predicated director is con- fact, matter of of regarding exercise their (footnote gross of cepts negligence, an voting informed judgment business in omitted) approve the merger Pritzker proposal. A.2d at 812. again We We confirm that view. think III. gross of concept negligence is the also the The argue defendants that the determi determining proper standard for whether a accept nation of whether their decision to judgment by a business reached board of per represented share for Trans Union was an directors informed one.13 requires an judgment informed business consideration, they only
In the
of
specific
pro
context
a
of that which
posed merger
corporations,
of
knew and
but
domestic
learned on
duty
subsequently
has a
also
they
director
under
of
that which
Del.C.
251(b),14along
directors,
following
with his fellow
learned
four-
and did over the
Glass,
Compare
Highland-Western
incorporation
surviving corporation
13.
as
Mitchell v.
the
of
supra,
posed
question
the
merger
where
Court
the
or
are
effected
the
desired to be
the
consolidation, or,
whether
board acted "so far without infor-
noif
such amendments
passed
mation that
unintelligent
can be said to have
an
desired,
changes
cer-
are
that the
statement
judgment.”
and unadvised
167 A.
incorporation
tificate
of
of the constit-
of
one
Compare
Signal Compa-
at 833.
nies,
Gimbel v.
also
corporations
uent
be
certificate of
shall
Inc.,
per
316 A.2d
curiam Del.
aff’d
resulting
incorporation
surviving or
(1974),
Supr.,
lonth met the Pritzker cash-out the shareholders before reasons, summary, in are as February, > 1981. Our proposal vote on the in follows: he the thereby defendants seek to reduce (1) adequately directors did in- ignificance September on of their action Van form themselves as to Gorkom’s role D to frame for deter- and widen the time forcing Company the in the “sale” of and in accept lining their to the whether decision establishing per purchase the share price; ritzker proposal was an informed one. (2) were uninformed as to the intrinsic val- hus, the defendants the contend what Company; given ue of the these subsequent rectors did and learned to circumstances, minimum, at a were grossly through January 26, sptember 20 and negligent the of approving in “sale” the )81, properly was into taken account Company hours’ upon consideration, two determining te Trial in Court whether the notice, the prior without and without exi- judgment oard’s was an informed one. emergency. gency of a crisis or disagree re post approach. with this hoc noted, As has the based been Board its September approve to the 20 decision cash- The issue of the whether directors merger primarily out on Van Gorkom’s rep- ached an informed decision to “sell” the directors, resentations. None of the other nnpany September 1980 must be had Chelberg, than Van Gorkom and any upon itermined only the basis of the in- prior knowledge the of purpose the rmation then to reasonably available the meeting propose merger was to cash-out rectors and their relevant to decision to of Trans Union. No members of Senior cept the merger proposal. Pritzker This Management were present, other than say pre- not to that the directors were Chelberg, Peterson; Romans and and the altering nded from original plan their of only proposed latter two of had learned the tion, in had done an so informed general sale an hour earlier. Both counsel anner. say ques- What we do is that the Moore general and former counsel Browder of>n whether the directors reached an attended meeting, equally the but were un- formed in judgment agreeing business to purpose meeting informed as to the pursuant 11the Company, to the terms of upon. and the documents to acted be September Agreement e 20 in presents, ality, (A) questions: two di whether the any Without documents before them con- judg- etors an reached informed business cerning transaction, proposed the mem- 20, 1980; (B) on September mt' if bers of Board to required rely were not, did sy whether the directors’ actions entirely upon Van Gorkom’s 20-minute oral subsequent ten September 20 were presentation of proposal. No written equate any infirmity to cure in their ac- summary merger of of terms September n taken on con- 20. We first presented; given were no doc- the directors ler the September directors’ in action support adequacy umentation to of $55 (cid:127)ms of reaching their busi- an informed price per Company; for of share sale judgment. ss nothing and the Board had before it more
than under- Van statement of his Gorkom’s standing agreement of the substance of an -A- read, nor admittedly which he had never us, On the record must before we any which ever member of the Board had iclude that did Board Directors seen. an t reach judgment informed business § voting 141(e),15 “sell” “di 1980 in Under Del.C. Company per pursuant relying in fully share rectors in protected are 141(e) provides upon pertinent part: fully protected good relying 15. Section in in faith reports to the the books corporation by any made A of accounts or member board directors ... shall, officers, duties, performance an its be his
g7g reports urgent imposed by made officers.” faith Pritzk- time constraints good Duncan, Del.Ch., er, any v. A.2d 386 documenta- total absence Michelson (1978); part 1144, 1156 and rev’d duty tion were directors whatsoever—the aff'd on other grounds, Del.Supr., 407 part inquiry bound of Van reasonable make (1979). 211 See also Graham v. Al they Romans, if had Gorkom done A.2d Mfg. Co., Del.Supr., 188 A.2d so, upon which inadequacy of lis-Chalmers (1963); 125, 130 Prince v. Bensinger, Del. now have claim would been to have relied A.2d Ch., (1968). The term apparent. liberally has been "report” construed to following fac- rely on the defendants reports of personal informal investi include finding tors to sustain the Trial Court’s by corporate officers, v. gations Cheff Board’s an informed decision was Mathes, Del.Supr., (1964). 199 A.2d one: the magnitude premium However, is there no any evidence that spread offering between the Pritzker *31 § 141(e), defined "report,” under con price and Trans market Union’s current cerning the proposal, present Pritzker was price per (2) of share; $38 amendment the the Board September to on 20.16 Van ed Agreement of the Septem- as submitted on presentation oral of his under Gorkom’s permit ber 20 to accept any the Board to standing of the terms of proposed during better offer peri- the “market test” Merger Agreement, seen, which he had not od; (3) experience the collective exper- and Romans’ brief oral statement of his and tise of the Board’s “inside” and "outside” study regarding the feasibility preliminary directors;17 (4) their reliance on Bren- leveraged buy-out of Trans Union do legal nan’s advice that might the directors § 141(e) qualify as “reports” not for these they rejected be if sued pro- the Pritzker The former lacked reasons: substance be posal. We discuss each of grounds these Van Gorkom was basically cause unin seriatim: as to provisions formed essential of the very document about which he talking. was statement was Romans’ irrelevant A premium may pro to the substantial before the Board issues since it one merger, did not vide reason to recommend a to be a purport study. valuation At a in the but absence other sound valuation minimum for a report enjoy information, to premium status the fact of a alone §by 141(e), pertinent conferred it must be provide adequate upon does not basis an subject upon matter which a board is offering which to assess the of an fairness act, Here, called otherwise price. be entitled judgment reached as to faith, blind, good not Considering reliance. adequacy premium of the was based on all surrounding comparison historically circumstances —hast between the de ily calling the meeting prior without pressed price notice market Trans Union and the subject matter, of its proposed Using sale of Pritzker offer. mar amount of the Company any prior without price concluding considera ket as a basis for that the therefor, tion of the issue or necessity premium adequately reflected the true val- independent accountant, Hence, public certified studies. these documents sent valuation appraiser an selected with reasonable care do not evidence as to whether constitute ..., relying the board of directors or in judgment informed directors reached an good upon corpora- faith other records of the per September $55 share a fair tion. Company. value for sale of the support argument 16. In the defendants’ under Part III 17. We reserve for discussion judgment adequacy per their as to the hereof, their the defendants’ contention one, rely share was an informed the directors judgment, if then reached on study on the BCG and the Five Year Forecast. by virtue of their However, informed became informed no one even referred to either Agreement on October 8 and "review" of the September 20.meeting; these studies at the January 26. it repre- is conceded that these materials do not *32 September purposes ue of the clearly faulty, of um for Company the was a meet- ing. fallacious, indeed premise, as the defend-
ants’ own evidence demonstrates. dispute public- that a parties do The price solely a stock is ly-traded measure of Sep clear that before record is and, minority position the of value thus, 20, tember Van Gorkom and other mem represents only price the value market of a bers of Trans Union’s Board knew that the Nevertheless, September single share. on market consistently had undervalued the 20, adequacy Board assessed the of the the stock, worth Trans despite of Union’s market, offered premium over Pritzker, steady operat Company’s increases in the by comparing with it Trans solely Union’s ing years in preceding income the seven the (See price. and historical stock current merger. The this Board related occurrence 866.) supra note 5 at large part inability to Trans Union’s 20, as previously Indeed, use its ITCs noted. Van Gor- September of as Board kom testified that he did not believe on which to had other information no base price accurately market reflected Trans the intrinsic value a determination of worth; Union’s true of the going several as a concern. As Trans Union that, rule, general directors testified made September the Board had no eval- Company designed most chief executives think market that the uation value Yet, companies’ enterprise, nor had the undervalues their stock. the entire Board selling the September ap previously on Trans ever considered Union’s Board Com- consenting buy-out to a parently pany merger. believed that market stock Thus, adequacy premium of a is price accurately reflected the value of the inde- is terminate unless it assessed terms Company purpose determining for competent and sound valuation adequacy other infor- premium its for sale. partic- reflects the value of the mation that however, Statement, the Proxy In ular business. There, their position. directors reversed foregoing Despite the facts and circum- that, although earnings stated stances, Board, there was no call for prospects were “excel- Union thereafter, 20 or either for lent,” they believing found no basis *33 study any valuation or documentation of this that would be reflected in future stock |55 price per as a measure of the share the prices. regard past trading, With to a Company in cash-out fair value prices Board stated that the at which undisputed major is that context. It Company’s in common stock had traded of Trans Union was its cash flow. asset years recent did not reflect the “inherent” Yet, did the call for a at no time Board re- Company. having value But study taking into account valuation ferred to the “inherent” value of Trans significant Compa- highly element of the Union, no the directors ascribed number ny’s assets. Moreover, it. they nowhere did disclose had fix they no basis on which to imply that an outside valua- We do not beyond impressionistic “inherent” worth an support an in- study is essential to tion premium reaction to the market and over do we state judgment; formed business nor an unsubstantiated belief that the value of in- by independent opinions fairness “significantly greater” was assets than as matter required are a vestment bankers By their book value. own admission familiar with insiders of law. Often rely price an better going could the stock as concern are in a business Yet, rele- gather accurate measure of value. also position than are outsiders to admission, information; appropriate own their Board members and under vant fully circumstances, may be price assumed that Trans Union’s market such directors relying good upon adequate serve faith upon protected basis management. reports of their adequacy premi- valuation which assess *34 § 141(e). also v. See The establishes that the record also Del. C. See Mathes, Cheff scrutiny Board Van Gor- accepted without supra. kom’s to the fairness of as representation that the Here, establishes record the the for of the $55 share sale price per its Financial request Chief did not Board the Board had Company that subject —a Romans, any Officer, make valuation to never The Board previously considered. proposal the to deter- or of review study thereby Van Gorkom failed that discover to per share for sale adequacy of $55 the mine had suggested Pritzker price to $55 the the record before us: On Company. the of and, most had Gorkom crucially, Van that re- Romans’ elicited rested on Board arrived at the on calcula- figure based $55 figure a was within $55 that the sponse tions designed the fea- solely determine to a range” within the context of price “fair sibility ques- of a No leveraged buy-out.19 sought any No director leveraged buy-out. tions impli- were raised the tax either toas di- from Romans. No information further cations aof how the cash-out merger or he why put $55 him at the asked rector price for the grant- one option million share range. No director asked his of bottom ed Pritzker was calculated. study, as his any details to the for Romans We do not say Di- that of the Board its it had been undertaken or why reason rectors was not give cre- entitled to some study; see asked to the No director depth. dence Van to Gorkom’s that representation asked Romans whether director no and adequate was an $55 price. or fair Under department finance could do Union’s Trans § 141(e),the rely directors were to entitled remaining study within the 36- fairness a upon their chairman’s opinion of value the available under Pritzker period hour adequacy, provided that such was opinion offer. reached on a Here, sound basis. the issue Board, member, any is or made an whether the the directors informed them- Had Romans, selves to presumably he would as all of information that was rea- inquiry sonably available to responded as he testified: that his them. Had done have so, they would have rough preliminary; learned of the source were calculations and derivation of the price and could was and, study designed $55 the not to reasonably not thereupon have relied Company, of the fair value the determine good faith. the feasibility assess of a rather to but Compa- financed the leveraged buy-out directors, Management None of the or flow, making cash certain ny’s projected outside, were investment or finan- bankers purchaser’s toas the borrow- assumptions cial analysts. Yet the Board did not con- presum- Romans would have ing needs. recessing meeting sider until a later view, the Board of his ably also informed (or day requesting hour that an extension of Manage- view widespread deadline) and the Senior Sunday evening of Pritzker’s to ment, timing of the offer was give it time elicit more information inadequate. offer, wrong sufficiency offer and the either from advice, study sought department made 18. not Romans’ information or assistance from until available Board circulation of to the either inside outside Trans Union directors as Proxy Supplementary Statement and Union’s the Company entity to the value as an or the 26, 1981, meeting January on the stock; Board’s price per fair share for 100% its and, meeting; as has eve of been for shareholder Compa- Van Gorkom had not consulted with the noted, produced study has never been ny's ana- investment bankers or other financial case. in the record in this inclusion lysts; that Van Gorkom with had consulted any or confided in officer or director 20 the directors did not As of 19. Company except Chelberg; Gor- and that Van know: had arrived at the that Van Gorkom deliberately ignore kom the ad- had chosen alone, figure figure subjectively,as to be opinion vice and his Senior of members of creating used ble a feasi- Controller Peterson Management regarding adequacy group leveraged buy-out by pro- structure *35 price. spective purchaser; Gorkom had not that Van *36 following (in Romans) rely the facts which upon e Management particular are essentially rom Union’s own investment uncontradicted: ms, :er, vn to ialist ition (cid:127)med s Union’s affairs. [20] on $55 Salomon the record September business information the per merger share Board Brothers, judgment compels the conclusion 20 and adequate for and the acquisitions sale of the Com- whose familiar with Board lacked to to reach an the fair- Chicago was ther the cantly, neither the defendants produce documents produced by the acceptable tified duction before ing Board the as that Merger Agreement, on plaintiffs’ Trial September explanation of this failure Court or originally as well defendants, several has been 20, as this presented to demands for during specifically has never Court. notwithstand- given trial. nor Signifi- to their iden- been pro- the No ei- to repre- have made the affirmative counsel that this critical document sentation has brings post-September is us to the 20 Thus, the is produced. been Court de- 'ket the defendants upon test” which which prived of the best evidence on lately to rely to confirm the reasonable- position judge the merits of the defendants’ September of their 20 decision to ac- In as to the care and attention which proposal. the Pritzker this connee- gave present two-part argu- Agreement the a to the terms of the directors on (a) by making September that a “market test” 20. a per
ritzker’s share offer condi- $55 that Van Gorkom states the ac- September of their 20 decision to Agreement incorporated as submitted the offer, they his cannot be found to have ingredients for market test authoriz impulsively 1 a or in man- an uninformed 20; (b) ing competing receive Trans Union to of September that the 90-day uacy premium period. the How of the sale of fers over next Company conclusively ever, Agreement was established he concedes that the following days by the 90 to 120 the actively soliciting barred Trans Union from ; mar- reliable evidence available—the furnishing such to offers from interest Thus, impliedly lace. the defendants any ed parties information about the Com md that the “market test” eliminated already public than in the pany other that perform any need for the Board to original Agreement domain. Whether Sep- r form either on of fairness test so to September 20 went far as autho >er thereafter. or pro competitive rize Trans Union to receive posals arguable. The unex is defendants’ fain, support do not the facts record identify plained produce failure to argument. There is no evi- lefendants’ Merger Agreement original permits (a) Agreement was Merger e: that the logical would inference that instrument :tively free- give to Board amended regard. support their assertions in this put up for auction sale Trans Union Motors Wilmington v. Trust Co. General bidder; (b) highest public that íe or occur, (1947); Del.Supr., A.2d Corp., 593 permitted ion in fact § (3d ed. II Wigmore on Evidence meeting no the Board make minutes of 1940). principle It is a well established Indeed, any rence this. when production of weak evidence di- compels rd the conclusion is, been, strong have available should expecting rational basis for ms had no only can lead to the conclusion attainable, given a market test was Inter strong would have been adverse. Agreement as executed terms States, U.S. ng evening 20. We state Circuit v. United tender pressures ap- with the of a hostile careful and reasoned faced 20. For far more Rice, offer, Pogostin supra v. at 623-627. board of see >ach another directors taken
879 either above: described 467, 474, 226, L.Ed. 610 two S.Ct. 83 “conditions” or the State, offer better Del.Supr., v. Deberry right accept to (1939); Gorkom, (1983). Van conced- information proprietary right to distribute A.2d stat- Agreement, never read the he Lgical witness ing The to third parties. relying upon his under- he was their con- confirm ed to call defendants law, that, di- standing corporate under Agreement struction clause of this right, have an inherent always rectors at- outside Union’s would have been fiduciary duty, accept better as a well defendants’ The torney, James Brennan. existing notwithstanding contrac- an offer call this failure, without explanation, (See by the Board. commitment tual inference logical again permits witness 55.) B(3) p. at infra, part III discussion have been testimony that his would directors assert that defendant The fact helpful to them. further amendments upon including two recessed, “insisted” than adjourned, directors rather *38 thereby permitting a Agreement, the to the meeting incorporating without the (1) give Trans Union the test: to market “conditions” Agreement important these offer; a better and to accept to right position. weakens the defendants’ further right distrib- to Trans Union the to reserve noted, Board’s nothing in the As has been Compa- information on the proprietary ute refer- supports these claims. No Minutes Yet, the defend- alternative bidders. tony of the so-called “conditions” ence to either they that did not seek to concede ants test right to of Trans Union’s reserved or Agreement permit Trans to Un- amend appears in notes of any the market competing solicit offers. to ion meeting Resolution or the Board Board of Trans Union’s outside Several in the Min- accepting the Pritzker offer or resolutely maintained that directors evening, in meeting itself. That utes of the approved on as submitted was Agreement he host- party midst of a formal which that, understanding got “if we better Chicago Lyric opening for the ed deal, right to take it.” Director we had Merger executed the Opera, Van Gorkom testified; added, so but he then Johnson mem- any or other Agreement without he agree put if didn’t that in the “And instru- having read the the Board ber of ment, management carry then the did not ments. of the Board. And I the conclusion out downplay the attempt to The defendants they did not.” don’t know whether just against prohibition significance of finally Agreement in the as only clause soliciting competing actively Trans Union’s point which the defendants can executed directors “un- that the arguing offers following open” door is the “keeping the financial communi- that the entire derstood subpara- found in statement underlined Union was for Trans ty know that would (a) Merger section 2.03 of the graph Pritzk- of the the announcement upon sale as executed: Agreement desiring to make a offer, anyone er and shall recommend of Directors The Board Yet, the do so.” free to offer was better of Trans Union the stockholders 22, with issued press release Merger adopt they approve Board, stated the authorization (‘the approval’) stockholders’ Agreement “definitive into entered Union had the Trans best efforts to obtain use its and to Pritzkers; with agreements” acknowl- votes therefor. GL requisite disclose even may did not press Trans Union directors release edges that accept obligation to receive competing fiduciary right have a limited Union’s press cir- this Accompanying under certain to the shareholders higher offers. announcement public cumstances. further release was a option an granted had been Pritzker be language on its fa'ce cannot Clearly, this shares of one million any time purchase at either of the incorporating construed as *39 ¡O stock at 75 capital
ms cents Union’s crisis on the the underlying value of assets price per >ve share. the then-current being subsidiary’s sold—all of its oil and gas interests. The Court found those fac- notwithstanding what Thus, sever- denoting tors competence to be outweighed later directors claimed to the outside by gross negligence; evidence of that man- meeting, at the “thought” re occurred agement in sprang effect the deal on ! the conclusion compels that record board by negotiating the asset sale without had no rational ms Board basis Union’s board; informing the that buyer intend- 20 inor September days conclude ed to “force a quick by decision” following, board; that the nediately Board’s ac- meeting the board was called on offer was only 'tance of Pritzker’s condi- notice; one-and-a-half days’ that its (1) offer; test” of the íed on a “market outside (2) right to directors were not notified of the l the Board’s withdraw from meeting’s Agreement accept purpose; any during meeting Pritzker spanning before the her offer received sharehold- “a couple of hours” a sale of assets worth neeting. approved; $480 million was and that the Board failed to appraisal obtain a current
(3) of its gas oil and interests. The analogy of Signal unfounded to the significant. The directors’ reliance case at bar is and the premium both the market test ;he accepting the pro basis Pritzker al the defendants’ undermines remain- Part of the defense is based on a claim the Board’s contention that collective legal directors relied on advice was a sophistication erience and suffi- rendered September at the meeting finding that it it basis for reached its Brennan, James Esquire, who present informed, with tember 20 decision rea at Van request. Gorkom’s Unfortunately, Compare able deliberation.21 Gimbel Brennan appear testify did not at Inc., trial Ch., Signal Del. Companies, even though participated his firm in the (1974), per curiam, d 599 Del. aff'd defense of this action. There is no r., (1974). contem- There, 316 A.2d poraneous given evidence of the advice Chancery preliminary enjoined rt of Brennan on only wholly-owned rd’s its sale of stock later ¡náde- deposition alleged and trial sidiary grossly testimony of for an certain *40 price. te ; so based on directors as to their finding It did recollections or under- judgment standing of the business rule had was said at meeting. been what management ced Since give testify, for failure counsel did not and the advice board opportunity “the make a rea attributed to Brennan hearsay is received ible decision.” and reasoned the Trial plaintiffs’ A.2d Court over the objec- tions, there reached 15. The this Court result we only consider it in the context of vithstanding sophistication the board’s present claims. In directors’ fairness experience; company’s counsel, need of im- we make no findings that the cash; ítete and board’s need to act advice attributed to him given. fact impact nptly to the of an energy due We focus solely efficacy on the 21. Trans five "inside” Union's directors major had corporations cers years and 50 of cu- ckgrounds accounting, years and in law experience mulative as directors Trans Un- employment Company Thus, collective argue ion. defendants that the Board was Board, years experience of combined on its eminently qualified judg- to reach an informed "outside” ans five directors Union’s included ment proposed on the “sale” of Union major corporations rr chief executives notwithstanding any their lack of no- advance was a economist who former dean of a proposal, tice of the delib- the shortness of their ijor eration, school of business of a chancellor and their determination to consult iversity. years "outside" directors had with their investment or to obtain banker experience chief combined executive opinion. offi- fairness *41 Thus, claims, Rice, years supra. made months and v. liability. Pogostin defendants’ of later, that the mere threat an effort to extricate themselves we in cannot conclude counsel, by acknowledged consti- liability. litigation, from any valid basis tutes legal either advice Several defendants testified that upon an uninformed pursue which to that advised them Delaware law Brennan course. require opinion not fairness or an did pur- Brennan’s Since we that conclude Company valuation of the before outside consequence to the ported advice is no of propos could act Board Pritzker unnecessary for of case, defense this it is given, If the advice was correct. How al. to which us invoke the inferences adverse ever, not Unless that did end the matter. may failing appear to be attributable to one adequate directors had before them trial and testify. at regarding the intrinsic value of information Company, upon proper which a exercise -B- made, judgment could be business mere of post-Sep- We now examine the Board’s and, type meaningless; of this is advice tember 20 of deter- purpose conduct for the this record of defendants’ fail given first, mining whether it and was informed ures, constitutes it no defense here.22 second, in- grossly negligent; if formed, legally whether it was to sufficient ' We conclude that Trans Union’s Board and cure of rectify the Board’s derelictions grossly negligent in that it failed to \was September 20.23 with informed reasonable deliberation act (1) agreeing merger the Pritzker proposal to ín First, as meeting to Board of October 20; pn September we further conclude of purpose 8: Its arose in the aftermath Trial as a Court erred matter of (1) September meeting: Septem- failing in to address that question be- law 22 press announcing ber release that Trans determining whether the la- directors’ fore agree- entered definitive Union “had into conduct was sufficient to cure its initial tter merge to with an affiliate of Mar- ments
jerror. Inc.;” Group, Manage- mon Senior A is second claim that counsel ensuing ment’s revolt. subject the Board it would be to advised press stated: Trans Union’s release rejected per if it the $55 lawsuits share FOR IMMEDIATE RELEASE: is, course, corporate It a fact of offer. CHICAGO, Corpora- Union IL—Trans today when faced with difficult or life today it had entered tion announced issues, subject directors often are sensitive merge with agreements definitive into suit, irrespective of the decisions Group, Marmon Inc. an affiliate of The However, counsel’s mere acknowl- make. whereby Trans Union a transaction edgement of this circumstance cannot be per would receive share stockholders rationally justification translated into a each Trans Union share held. cash for stampeded permitting itself to be a board is Group, Marmon Inc. controlled The act. into a unadvised While suit patently family Chicago. the Pritzker rejection merger might result from the offer, subject merger approval law makes clear is or tender Delaware aat acting stockholders of Trans Union within the ambit of the that a board to be held special meeting expected judgment rule faces no ultimate business officers, Nonetheless, upon experts reports ap- certain we are satisfied that in an liance 22. proper propriate company. factual context a exercise records of the and books and include, judgment may as one of its business upon aspects, reliance the advice of reasonable seen, do the second will we not reach 23. As be wholly statutory is outside the counsel. This question. 141(e) protections involving re- § of 8 Del.C. *43 $82 merger during early
sometime that the were December or Gorkom unless Jan- called uary. off, personnel key would fifteen resign. 10, 1980, purchaser Until October the Board, reconvening the of Instead Van right merger has the to terminate the if again privately met with Gorkom Pritzker, financing is satisfactory pur- that to the developments, him of the informed obtained, chaser not been has but after sought Pritzker then made his advice. the right. that date there is no such overcoming for following suggestions Man- transaction, In a related Trans Union (1) agement’s dissatisfaction: the has to agreed designee to sell a permit Agreement be amended to Trans purchaser newly-issued one million receive, solicit, higher well as Union to of shares Trans Union common stock aat offers; and that the shareholder meet- price per $38 cash share. Such shares early ing January be from postponed to only merger will be issued if the financ- return, In February 1981. Pritzker ing has been committed for no later than a asked Gorkom to obtain Van commitment 10, 1980, purchaser October or if the Management from Senior to remain at merger financing elects to waive the con- Trans for at least six months Union after addition, In dition. the New York Stock merger the was consummated. Exchange will to approve be asked the listing pursuant of the new a shares to Van then advised Senior Gorkom Man- listing application which Trans Union in- agement Agreement would the be shortly. tends to file give right to Union the amended Trans to Completing of the is also transaction competing through offers solicit January, subject to of a preparation the definitive agree if to would remain with proxy making statement and various fil- Management Trans Union. Senior ings obtaining approvals the or con- mollified; temporarily and Van Gorkom government agencies. sents of special meeting of then called a Trans Un- press The made no release reference to 8. ion’s Board for October allegedly reserving ovisions to the Board Thus, primary rights perform purpose e to a “market test” and meeting from Agreement withdraw the Pritzker October Board was to amend Trans Union received a Agreement, agreeable better offer he- in a manner Merger meeting. re the shareholder Pritzker, The defend- permit to to Trans Union to con ts concede also that Trans Union never duct “market test.”24 Van Gorkom un subsequent ide a public announcement proposed derstood that amendments iting it had in fact reserved the Company give were intended'to an un ;Tat accept offers, to Agree- alternate openly solicit “right fettered to offers ;nt notwithstanding. 31.” through January down Van Gorkom represented presumably the amend so public The announcement the Pritzker ments Trans Board members on irger resulted in an “en Union’s masse” revolt of session, directors Management. ms Union’s Senior October 8. In brief operations approved presentation id Trans Union’s tank car Gorkom’s oral Van division) i profitable proposed most amend- informed Van of the substance of the noted, previously mistakenly opinion 24. As Board as to the fairness of Pritzker’s submit its lought that it had amended the merger proposal Trans or to value cash-out agreement to include a raft market test. entity. Union as an secondary purpose meeting A of October 8 the Octo- There no evidence of record that is approval the Board’s 'as obtain for any purpose; we meeting had ber 8 other advisor, employ its investment nion Salo- the October also that the Minutes of note Brothers, purpose lon the limited of assist- any including meeting, Board meeting, notice Management ig in the solicitation of other of- part records are of the voluminous Management :rs. nor the Neither Board then of this case. - requested thereafter Salomon Brothers to
«83 reviewing the in- ments, the re- without terms which were not Union Trans if were con- writing to But struments determine until October 10. duced previously grant- authority sistent waiting with than review the amend- rather amending docu- The ed him ments, Board. again approved Board them approved ments apparently adjourned, were giving unseen and Van sight a much later Trans until Union’s Board authority to papers execute the Gorkom date, record does not The December 2. he received them.25 when Trans Union’s affirmatively establish Thus, Chancery’s finding the Court of 10 amend- directors ever the October read meeting October Board con- was ments.26 to reconsider the Pritzker “propos- vened Merg- to the The October 10 amendments Further, clearly is erroneous. the con- al” Agreement Union er did authorize faulty sequence Board’s conduct on offers, the amend- competing solicit but approving amendments to October far-reaching ments had effects. more had which not even draft- Agreement been significant change most in the defini- *45 apparent ed, will become when actual to available third-party tion “offer” Agreement to the hereaf- are amendments with- possible Trans Union as a for basis examined. ter Merger Agreement from with drawal its 9, day, next and October before the Pritzker. Under the 10 amend- October amended, Agreement was Pritzker moved ments, longer a better no suffi- was offer swiftly to proposed off-set the test market permit to cient Trans withdrawal. Union’s First, Pritzker informed amendment. permitted Trans Union was now to termi- completed he Union that had ar- Trans Agreement nate the Pritzker and abandon rangements financing for its acquisition if, 10, merger prior only February parties thereby mutually were 1981, Trans Union had either consummated purchase to a firm arrange- and sale bound (or assets) merger sale of with third a Second, Pritzker the ex- ment. announced or a “definitive” party had entered into option of his to purchase one million ercise merger agreement favorable than more treasury of Trans at shares Union’s stock greater consideration— Pritzker’s per share—75 cents above the current Fur- subject only approval. to stockholder price. Trans Management market Union’s ther, test the market the “extension” of responded day by press the same issuing a 10, was February circum- period announcing: (1) financing release that all which re- by amendments scribed other arrangements acquisition for Pritzker’s preliminary to file its quired Trans Union completed; Trans Union had been merger the Pritzker statement on proxy purchase of Pritzker’s million one shares 5, 1980 and use its proposal December treasury per Trans Union’s stock at $38 to its mail the statement efforts to best share. Thus, 1981. January shareholders period effectively re- market test day, The next October Pritzker deliv- (See duced, at note 29 not extended. infra proposed ered to Trans Union the amend- 886.) September Merger Agree- ments to the view, compels proceeded the con- promptly ment. Van Gorkom In our the record conduct on Octo- countersign that the directors’ all the instruments on behalf clusion cast Board suggest failure this do the consistent which 25. We that a board must read in upon its unredeemable course. every legal haec verba contract or document successfully approves, it but it is to which if of record that There is no evidence 26. charges type made absolve itself from here, any objections, ever raised Union’s directors procedural contempo- be there must some credible substantive, to the October rary demonstrating that evidence the directors them, including any Van amendments or doinj*, were knew what and ensured Gorkom, their opposite result of understood purported given is their action was effect. That late. it was too intended effect—until *46 I Board-sponsored sults the same deficiencies as did exhibited “market 20. September
r on The Board test.” conduct Merger Agreement nitted its with first and proposal was only The KKR in a it had zker to be amended manner subsequent to offer received Pritzker nor !ier authorized intended. The The offer Agreement. Merger resulted decision, Chancery, rt in its over- Romans efforts of from the primarily and significance of the October ed the 8-10 an propose to other senior officers alterna- their relevance to the its and )f sufficien- of Trans acquisition to Pritzker’s tive Un- directors’ conduct. The Trial Romans’ September, In group ion. late ignores: opinion letter rt’s October possibility of KKR about the contacted a mendments; the manner of their adop- members of buy-out by all leveraged Man- effect of the October 9 press By Gorkom. agement, except early Van and the October amendments on ise October, gave of KKR Henry R. Kravis test; a market feasibility of and the KKR’s notice of Romans written “interest to the question tiate reasonableness purchase making offer to 100%” an reliance on a íe directors’ market test common stock. Trans Union’s ¡commending ap- that the shareholders Thereafter, early December, and until merger. e the Pritzker KKR group worked with devel- Romans’ We conclude that the Board Van It did so with Gor- op proposal. a grossly negligent i in manner a on apparently grudging knowledge kom’s and 8; that Van repre- iber Gorkom’s 2, Kravis and December Ro- consent. On ations on which the Board based its Van Gorkom for- mans hand-delivered to “reports” >ns do not constitute under all of purchase mal letter-offer 1(e) on which the directors could rea- all of to assume assets and its Union’s Further, bly have relied. the amended cash considera- aggregate liabilities for an Agreement imposed *er on Trans Un- equivalent per share. offer $60 tion acceptance party of a third con- offer equity completing contingent upon imposed ns more onerous than those million, which Kra- financing of bank acceptance 'rans Union’s Pritzker’s complete. The represented vis as 80% r 20. After October to discussions KKR made reference letter accept par- is Union could from a third por- loan regarding the major with banks only incorporat- offer if it were better and stated that buy-out cost tion of the agreement i definitive between that commitments KKR was “confident * * * ies, financing conditioned on *47 can be obtained financing the bank ny contingency. other purchas- two or three weeks.” within release, press coupled key le October 9 certain named to include ing group was amendments, Manage- the October had the Senior members of Trans Union’s (cid:127) locking Trans Gorkom, major effect of Union’s Board ment, and a excluding Van Agreement. the Pritzker Pritzker had Kravis stated company. Canadian sby foreclosed Trans Union’s Board “definitive into a willing were to enter negotiating any i better “definitive” conditions terms and agreement” under remaining eight weeks ement over con- those “substantially the same” required re Trans Union was to clear- with agreement tained in Trans Union’s 5roxy submitting Statement the Pritzk- was addressed Pritzker. The offer roposal to its shareholders. of Directors Trans Union’s Board Board, scheduled meeting with afternoon, requested. was ;xt, “curative” as to the effects pro- KKR reaction to conduct, Van Gorkom’s post-September 20 re- (cid:127)d’s we he did negative; posal completely detail the in more reaction of Van its being firm because proposal KKR the offer as tom to the and the re- view *48 negotia- further out, 21, to GE terminated financing pointed It was Credit condition. avail, rea- only Its stated that offer had not Union. Pritzker’s tions with Trans no conditioned, on similarly accepted “unwilling- but others, its were sons, been among expedited basis. Van Gorkom refused bidding an a con- in ness to become involved request a that Union issue Trans Kravis’ of the absence with in test Pritzker offer, announcing KKR’s on release press to willingness interests] Pritzker of [the ground any other might that it “chill” merger.” cash $55 proposed terminate the with the Romans and Kravis left offer.27 be understanding proposal that their would af- Board that by to Trans Union’s
presented finding explicit any In the absence of ternoon. of the Trial reasonableness Court as to the aon mar- Trans reliance Union’s directors’ shortly a hours and
Within matter of may make meeting, Kra- test we feasibility, the scheduled Board ket and its before gave He as withdrew his letter-offer. Our vis record. findings our own on the based by the Chief reason a sudden decision his finding that of the a compels review record leasing rail car Trans Union’s Officer of the appropriateness confirmation of the pur- to withdraw from the KKR operation or free Pritzker offer an unfettered chasing group. spoken to Van Gorkom had in meaningless virtually market test was in the participation officer about his that face of the limitations terms and time proposal his meet- immediately after KKR Agreement with Merger of Trans Union’s However, ing with Romans and Kravis. 10, 1980. Pritzker October as amended any responsibility for Gorkom denied Van change mind. officer’s meeting Finally, we Board’s turn to the meeting later after- At the Board 26, January di- The defendant 1981. noon, di- Van did not inform the Gorkom rely to upon action there taken he rectors proposal of the KKR because rectors they did not considered it “dead.” Van Gorkom did refute the contention again January KKR until when contact in judgment reach an informed business lawsuit, he faced with the realities of this merger. The de- Pritzker approving the negotiations. attempted reopen then cor- the Trial Court fendants contend that of the KKR declined due to the imminence di- Union’s rectly concluded that February meeting. 10 stockholder effect, were, “free to turn as rectors interest in Trans Corporation’s January GE Credit on proposal” the Pritzker down November; until develop Union did not September 20. as were proposal it no until mid-Janu- made written of re- standard appropriate Applying then, was not in the ary. proposal Even its Bouvier, supra, v. forth Levitt view set there been time form of an offer. Had finding the Trial Court’s we conclude so, to offer prepared do GE Credit by the supported regard is neither in this the $55 share above $2 between per orderly and an product nor the record offered. per price which Pritzker share process. disa- deductive Without logical to60 GE Credit needed an additional But a principle that business greeing with days; unwilling to make and it was uninformed board originally an decision from without a concession formal offer circum- may, appropriate under of directors February 10 “dead- extending the Pritzker stances, as to become timely be cured so meet- line” Trans Union’s stockholder deliberate, v. West- Muschel informed stated, ing. Pritzker refused previously As Ch., 310 Del. Corporation, January ern Union extension; grant and on such press justified posal. Gorkom had then Van es- 27. with Gorkom’s This was inconsistent Vap chilling later encouraging rather than release pousal ing press release follow- pro- offers. acceptance Pritzker's Trans Union's *50 (1973),28 (c) fact that the Board had 904 The we find that the record independent fairness sought an opinion; not permit the defendants to invoke principle in this case. that, (d) September at the The fact 20 meeting, Management Romans Senior and January meeting e Board’s 26 was the Management several members of Senior meeting following filing the of the the per indicated both concern $55 tiffs’ suit in mid-December and the inadequate a price was share belief neeting previously-noticed before the higher price should and could that a be ¡holder meeting February of 10.29 All obtained; lembers of the Board and three out- (e) Romans had The fact that advised the attorneys meeting. attended the At 20, meeting September on Board at its meeting facts, following among the prepared had department he and his a aspects Merger Agreement, of the study indicated that the which Company discussed: range in the of per $55 $65 had a value to share, and that he could not advise the 20, prior September The fact that to per offer Board that the share made by no Board member or member of Sen- Pritzker was unfair. unagement, except Chelberg and Pe- characterize the The defendants Board’s ü, knew that Van Gorkom had dis- January meeting Minutes of the as a Pritzker; possible merger d a with sequence “review” of “entire The price per fact of $55 events” from Van Gorkom’s initiation of had suggested initially been to negotiations September on for- Gorkom; by ter Van rely The defendants also on ward.30 28. hedefendants concede that Muschel is trative of the nsider a 29. Thiswas the te n t 8-10 amendments. We refer to the docu- :le A VI of the parties agreed, s., mber all not nts and es its pt ior to oxy id] he solicitation of such offers or rectors of TU to recommend the special meeting of its Stockholders on or . shall not be less another offer or ement” 10, scheduled to be held Agreement provided is the this postponed factually distinguishable in lieu 'other "Amendment titled Statement shall [******] Merger Agreement 1980. Under new Section Supplemental Agreement 5, 1980, Preliminary Proxy February (1) delay promptly seeking present executed approvals required prior offers that Trans Union be deemed of the meeting to deemed to constitute a breach proposition uses its best efforts to mail its by January February decision and that it is other- “Supplemental Agreement,” intention of the Board of Merger Agreement'] by by part, Agreement 1981 ... which, that ... [in January as follows: to the parties proposal 10 under the Octo- Statement that a board compliance] from this case. under the terms 1981 and hereunder with [Trans Union] Supplemental Stockholders, or the "as of’ Octo- 10 and was 2.03(a) proposals might approval is made Pritzker, all con- Merg- holds only may if it De- TU ... ac- 30. With utes in their cently meeting relevant things, Alden duced in connection with taken uted to Directors the for the After further not be stockholders Electric motion er’s with issuing Supplement sidiary which in their mailed to stockholders on on the printing uled to be held on ny. each pany ing resolution was the Stockholders than the RESOLVED, Proxy proof copy filed In respect thereto: Director in connection with the lawsuit filed be and he regard portions Board then reviewed the making Smith in Delaware proposed $55 special meeting duly made and of GE Company addition, of the February shareholders’ Statement which had Board noted that entirety: discussion and review of a to the having an offer to that the opinion of the Corporation. Among Proxy January certain facts had been had indicated that it would hereby February 10, proposed Pritzker cash been unanimously adopted, impending of stockholders sched- we set forth the Secretary preceding day, upon Statement mailed to suit to seconded, is more favorable to Merger Agreement." acquire merger individually polled is authorized 21, 1981, January pretrial subsequent Chancery Proxy 10, 1981, merger, Supplement enjoin been distrib- necessity stockholder with a sub- the follow- Statement discovery 21, 1981, General Compa- to vote the re- it, Court. to the print- other Com- Min- ad- *51 of review and testimony of Board members the delibera- several the further Board’s affirm Court as'confirming Minutes.31 tions on this must January trial the On at evidence, the of this defendants conclusion basis Trial Court’s improvi- reckless or Board’s that whatever the Board action was not argue information dent. make deliberate and informed lacked September 20, on or on October
judgment Trial We We find the cannot agree. fully divulged 8, was entire Board on Court to as a matter erred, have both January Hence, argument goes, 26. law, relying fact and as a matter of January again Board's vote on 26 to bring de- the action on 26 to January merger “approve” the Pritzker must be protection fendants’ conduct within an have been informed and delib- found the business judgment rule. judgment. erate Johnson’s Min- and the Board testimony evidence, this On basis of the defend- January utes of remarkably consist- are assert: the Trial Court was ants ent. Both clearly recognition indicate legally widening correct the time frame question the alternative courses *52 determining whether the defendants’ action, January available to the Board on approval merger represent- the Pritzker respect 26 with to the was merger, Pritzker an judgment ed informed business to in- legal question, a Board presenting to the the entire period during clude four-month its review of devel- the full record {after the Board the oped through pre-trial which considered matter op- discovery) three September 26; through (1) from January tions: to to the “continue recommend” (2) that, given merger; and this extensive evidence Pritzker to that “recommend Supple- Q. directed to to the regular mail stockholders a Was there a meeting board of the Statement, Proxy substantially ment January to in the of Trans Union on 1981? proposed form of Supplement Proxy the to A. Yes. Statement meeting? submitted to the Board at this And what was discussed 0. at that meeting, changes Everything with such and A. therein modi- relevant to this transaction. see, shall, fications thereof as he proxy with the advice You since the statement 19th of the counsel, mailed, see, and approve being assistance of had been ad- General Electric had desirable, necessary, appropriate. going or vised that bid. It weren’t to make a suggest Board then reviewed and discussed at was concluded to that the shareholders that, great length sequence per- required supple- the entire of events be advised of and that taining statement, proposed merger proxy to the required with a mental and au- cash board, subsidiary Corporation, beginning of GE of the a total with thorization that led to 13, 1980, beginning every aspect first the discussion on review from end of be- to Jay develop- tween the the whole all Chairman and Mr. Pritzker rela- transaction and relevant merger. possible to a ments. tive of the Each Directors occurring supplemental Since that was and a was involved in this discussion as well as coun- shareholders, going it joined statement to the also meeting. sel who had earlier Follow- discussion, to me review ing was obvious that there should be a this review and such counsel position light again of the board’s in the light advised the Directors that in their dis- cussions, whole record. And we went back (a) from they could continue to recommend beginning. Everything was examined and re- stockholders that the vote latter in favor present. viewed. Counsel were And board (b) proposed merger, recommend that the was advised we could recommend the (c) against merger, stockholders vote take deal, Pritzker we could it to the share- submit position respect recommending no with recommendation, holders no could with or we proposed merger simply leave the decision against recommend it. discussion, to stockholders. After further it was supplemental The board voted moved, seconded, to issue unanimously voted that unani- statement to the It shareholders. voted the Board of Directors continue recommend mously this time had a we unanimous pro- stockholders vote in favor of the —and board, missing where one man was before —to posed merger, being individually each Director Indeed, at that recommend the deal. Pritzker polled respect with to his vote. truth, And, point there was no other deal. particular, rely any In there had other that’s 31. never been deal. And defendants the testi- mony transpired: situa- what tion, of the GE of director Johnson on direct examina- total review everything tion: KKR and else that was relevant. *53 58 wrongdoing by Pritzker. mental against” Pritzker Clearly,
e stockholders vote “free” Board was not to withdraw (3) srger; posi- or take a noncommittal to from agreement Pritzker on January its with merger “simply >n and on the leave 26 simply relying on its self-induced cisión shareholders.” to failure [the] reached an informed business have to judg must conclude from the forc We original agreement. at the time of its ment ing the Board was mistaken as a Wilmington Company v. Trust See Coul regarding its itter of law available ter, Del.Supr., 200 A.2d 453 (1964), January Op- action on 1981. urses of Company v. aff'g Pennsylvania Wilming (3) (2) legally ns and were not viable or Del.Ch., 186 Company, Trust A.2d ton to the Board under 8 ailable Del.C. (1962). 251(b). The Board could not remain com- Therefore, the Trial Court’s conclu merger yet to the Pritzker and rec- tted that the Board reached an sion down; informed unend that its stockholders vote it judgment January 26 in business deter position r it could take a neutral and mining whether to turn down the Pritzker legate to the stockholders the unadvised “proposal” day on that cannot be sust accept reject cisión as to whether to or ; § conclusion is not ained.32 Court’s 251(b), sup merger. Under the Board record; contrary by the it is to (1) ported options: proceed d but two ; with § 251(b) provisions principles and basic merger meeting, and the stockholder law; product it contract and is not the th ap- the Board’s recommendation of logical reasoning process. deductive jval; agreement to rescind its with itzker, approval its withdraw
srger, notify its stockholders that the foregoing, we Upon basis of the hold jposed meeting shareholder can- post-September the defendants’ con- led. There is no evidence that the Board did not cure the deficiencies of their duct these, any only ve its consideration that, conduct; September according- ;ally viable alternative courses of action. according the Trial Court erred in ly, defendants the benefits of the business
But the second course of action rule. judgment clearly uld have involved substantial
k—that the Board would faced be with IV. byt Pritzker for breach of contract sed on its Whether the directors of Trans Union agreement noted, individually ended should be treated as one or previously October 10. As invoking protection der the terms of the terms of October 10 amend- *54 nt, judgment applicabili- rule and the only ground the Board’s business for release § 141(c) questions which agreement ty >mits its of 8 Del.C. are with Pritzker was originally par- ;ry into a were not addressed more favorable definitive briefing of this case. This reement to sell the to a ties their Company third Thus, *ty. supplemental briefing resulted in a reality, the Board was not n eeto turn down the rehearing en banc on two basic proposal” second Pritzker (a) Indeed, questions: whether one or more of the Trial Court found. short of jotiating deprived protection were of the agreement a better with a third directors judgment rty, the the business rule evidence only Board’s basis for release faith; (b) good whether Agreement m Pritzker an absence of without lia were have or more of the outside directors ity would been to establish funda- one bers, premium market the substantial over 32. To extent the Trial Court's ultimate con- judgment availability lusion to invoke the is business rule of the market test to confirm explicit supporting ased on previously other criteria and adequacy premium), we have (i.e., vidence market value Union's insufficiency evidence. of such discussed tock, the business acumen of the Board mem-
889
claimed, nor
However,
have not
protection
plaintiffs
to invoke the
8 Del.C.
of
entitled
decide,
141(e)
that
was a
by
reasonable, good
did the
§
evidence of a
Trial Court
grossly
per share for sale
“reports,” including legal
pric®
inadequate
reliance
faith
so,
being
pre
the
advice,
of the Company.
in-
That
rendered the Board
certain
sumption
judgment as to
and the
coun-
that a board’s
special
directors
Board’s
side
adequacy
an honest ex
of
sel,
price represents
Brennan.
(absent proof
ercise of
judgment
business
including
parties’
response,
The
inadequate)
that the sale price
grossly
was
reargument,
majority
has led the
of the
question
is irrelevant
of
to the threshold
(1)
to conclude:
all of the
that since
Court
whether
an
was
judgment
informed
directors,
in
outside as well as
defendant
Corp. v.
Compare
reached.
Oil
Sinclair
side,
position,
are re
take
unified
we
Levien,
(1971);
Del.Supr.,
717
280 A.2d
all
one as
to treat
of the directors as
quired
Bell,
v.
Kelly
Del.Supr., 266 A.2d
protec
are entitled to the
whether
(1970); Cole v.
As
National Cash Credit
(2)
rule;
judgment
of the business
and
tion
sociation, Del.Ch.,
(1931); Al
fnem defendants that the contend may result in a class multi-million dollar sal stockholders’ “overwhelming” approv- vote against having defendants award ing Merger the Pritzker Agreement had allegedly an uninformed business made legal curing any effect of failure of involving any in a judgment transaction not Board to judg- reach an informed business gain, self-dealing or claim of bad personal in approval merger. ment its faith. parties agree that a tacitly The reach an brief, discovered failure of the Board to In their the defendants simi judgment approving informed in business larly mistake the judgment business rule’s voidable, merger rather constitutes a application by erroneously to this case in void, Hence, merger be than a act. can voking presumptions good faith sustained, notwithstanding infirmity of “wide discretion”: action, by major approval the Board’s if its This is a case in chal- plaintiff which is found to ity vote of the shareholders lenged the judgment exercise of business have been based on an informed electorate. independent an Board of Directors. Duncan, Del.Supr., 407 Michelson v. allegations proof There no were and no Cf. (1979), aff'g part rev’g A.2d fraud, faith, self-dealing by bad Del.Ch., (1978). 386 A.2d part, directors.... parties disagreement between the arises rule, judgment The business which was (1) disclosing the Board’s burden of over: Chancellor, al- properly applied by the and materi to the shareholders all relevant in mat- lows directors wide discretion information; sufficiency al ter of valuation and room for affords whether the Board satis the evidence as to In order opinion. honest differences of fied that burden. prevail, plaintiffs heavy had the bur- summarily this Trial den On issue the Court proving merger price that the the stockholders of so concluded “that grossly inadequate display as to itself pend- as to the fairly Union were informed badge of fraud. That is a burden no merger....” provided ing The Court which plaintiffs have not met. *57 Duncan, supportive reasoning nor the v. supra did Court at 220. As this Court any make reference to the evidence of stated v. Heyden Gottlieb Chemical record. Corp., Del.Supr., 91 A.2d 59 (1952): entire plaintiffs atmosphere The is contend that the Court freshened [T]he by committed a new set of applying error an rules invoked where erroneous a for- “adequacy” approval given disclosure standard of rather mal by majori- has been than “completeness” determining ty independent, fully the of informed stock- sufficiency Company’s merger proxy of the holders .... plaintiffs argue materials. The also Lynch In v. Energy Corp., Vickers supra, statements, proxy orig- the Board’s both its this corporate Court held that directors January inal dated 19 and statement its fiduciary owe to their stockholders a duty January 26, supplemental statement dated germane to disclose all facts to the transac- incomplete were in various material re- tion atmosphere at issue in an complete of spects. plaintiffs Finally, the assert that candor. We “germane” defined in the Management’s supplemental statement tender offer context as all “information (mailed 27) or January “on about” was such as a reasonable stockholder would untimely either as a matter of law under 8 important consider in deciding whether to § 251(c), untimely Del.C. aas matter of sell or retain stock.” Id. at 281. Accord equity and requirements the of complete UOP, Inc., v. Weinberger supra; Michel- candor and fair disclosure. Duncan, son supra; v. Schreiber v. Penn- deny defendants that the com Court Del.Ch., zoil Corp., 419 A.2d (1980). legal mitted or equitable error. On the reality, “germane” In means material question of the Board’s burden of disclo facts. sure, the defendants state that there was Applying this standard to the dispute no at trial over the of standard us, record before we find that Trans Un required Board; disclosure of the the but ion’s fully stockholders were not informed concede that the Board re was
[defendants
of all facts material to their vote on the
quired to
germane
disclose “all
facts”
Merger
Pritzker
and that the Trial Court’s
which a reasonable shareholder would have
ruling
the contrary
is clearly erroneous.
important
considered
in deciding whether
We list the material deficiencies in the
approve
Thus,
merger.
the defend
po
proxy materials:
ants argue that when the Trial Court
(1) The fact
finding
Board had
no rea-
Company’s sharehold
ppeaks
ers to have
sonably adequate
information indicative of
“fairly
been
informed” Man
materials,
agement’s proxy
Company,
intrinsic
value
other
Court is
fcpeaking
concededly
than a
depressed
in terms
“complete
price,
candor” as
market
required
question
was
under
without
material
Lynch
Energy
v.
to the share-
Vickers
Corp., Del.Supr.,
(1978).
voting
merger.
ion would The had advised which the meeting September its 20 istify price, Board at the of such ... payment department prepared his he and had a 26, January hough by the directors study indicated that the which Company figure, w did $55 the basis of the range in of to per $65 had a value $55 disclose that Gorkom chose the Van $55 share, that he could not advise figure :e because that would enable per Board that the share offer $55 ;zker which purchase finance of to both made unfair. Pritzker was buy-out through leveraged ns Union , years, substantially repay within five generated by out of the cash
loan flow over parties The differ whether the no- Company’s operations, § 251(c) of 8 Del. requirements tice C. apply mailing supplemental of i) to the date Supplemental The Proxy proxy Board’s iement, 27, original or that of the January proxy material mailed on or after mate- matter, summarily disposed rial.33 The Trial Court significant material ed new to issue, stating proposal 10, the notice it was February to be voted on “satisfied proxy that the material furnished to Original eh in was contained xy fairly presented Union stockholders ... Statement. of this new mat- Some question February to be voted on at only which 10, information had been meeting.” January 26; 1981 losed the Board on
:h was or information known reason- argue The defendants the notice r January available before but not § 251(c) provisions of must be construed as ;aled Statement, in Original Proxy only requiring that stockholders receive no informed stockholders were not time, place, purpose tice of the of a e facts. Included the “new” matter meeting to a merger consider at least 20 ; Supplemental Proxy disclosed in the days prior meeting; to such and since the following: ement were the Original Proxy Statement was disseminat ) days ed more than 20 before the meeting, prior The fact that urge the defendants ), affirmance of the Trial no Board member or member of Sen- ruling Court’s as correct as a matter Management, except Chelberg and Pe- statutory Apparently, construction. on, Van knew that had dis- Gorkom question has not been addressed either possible Pritzker; ed merger with Chancery Court; Court this ) price per The fact that the sale authority jurisdictions other is limited. e suggested initially had been Specialty See Electronic Co. Int’l v. Con Gorkom; sker Van Cir., Corp., 2d trols 409 F.2d fact the Board had not *61 (1969)(holding that a tender Sep offeror’s ;ht independent opinion; an fairness 16, previous tember 1968 correction aof ) The fact that Romans and several misstatement, combined with an offer of Management ibers Senior had indi- running eight days withdrawal for until d 24, concern at 20 Senior September was to cure sufficient agement meeting per past any and eliminate need for violations price inadequate rescission); e and had stated Nicholson File v. H.K. Co. higher Co., D.R.I., price should could be Porter 513-14 F.Supp. ined; (1972), Cir., aff'd, 1st F.2d time, pertinent 251(c) meeting provisions purpose 33. The ivide: place shall § 8 Del.C. stock, whether be mailed to each holder of voting (c) agreement required non-voting, his corporation of the at subsection b) appears shall be submitted the stockholders of address as it corporation, on the records corporation ach constituent at an annual or days prior the date at least 20 pecial meeting purpose thereof meeting.... of the cting agreement. on the Due notice
893 us, mis- correction of a material is the record before it (permitting electorate. On by mailing to stockholders clear failed to meet that statement the Board days Inc., seven of a tender offer with- UOP, supra burden. within v. Weinberger date). Both Nichol- 703; Duncan, Electronic and at supra. drawal Michelson v. security arising are federal cases not son § 251(c) they Del. C. and are other- under reasons, For the we conclude foregoing distinguishable this their from case on wise that the their breached director defendants facts. fiduciary failure to duty by their of candor we Manage have Since concluded that make true of all and disclosures correct Supplemental Proxy Statement does ment’s had, information had, have should or the meet Delaware disclosure standard material to the submitted transaction “complete candor” under Lynch v. Vick stockholder approval. ers, supra, it is unnecessary for us to plaintiffs’ legal argument the as to address VI. § 251(c). proper construction of How the ever, To express ; we do find it the di- advisable to summarize: we hold that that, case, in an rectors of appropriate an other- view fidu- Union their breached j ciary proxy duty candid may statement so (1) by wise be their their stockholders i untimely purpose as to defeat its . of meet- failure to inform informa- themselves of all fully ing the needs of a elector informed tion reasonably rele- available to them ate. vant to their decision to recommend Pritzker merger; by failure their case, this In the Board’s ultimate disclo- disclose all material as a information such as contained in Supplemental sure reasonable im- stockholder would consider Proxy Statement related either to informa- portant in deciding approve whether to readily tion accessible to all of the directors Pritzker offer. they had asked the right questions, if already was information at their disposal. hold, therefore, We Trial Court that the short, In by information disclosed committed applying the reversible error in Supplemental Proxy Statement was infor- judgment business di- rule in favor of the mation which the defendant directors knew rector defendants in case. this or should have known at the time the first remand, Chancery On shall Court Proxy Statement was issued. The defend- hearing evidentiary conduct an to deter- simply ants original duty failed in their of mine represent- the fair value of the shares knowing, sharing, disclosing informa- class, plaintiffs’ ed based on the tion reasonably that was material and Septem- intrinsic value of Trans on Union available for discovery. They their com- ber 1980. shall be made Such valuation pounded failure their continued UOP, Weinberger accordance with v. lack of Supplemental Proxy candor Thereafter, Inc., supra at an 712-715. Statement. While we need not decide the damages may award be entered to the here, that, issue we are satisfied in an extent that the fair value of Trans Union case, appropriate completely but candid per exceeds $55 share. belated long disclosure of information readily known or available to a board could pro- REVERSED and REMANDED for
raise serious of inequitable issues conduct. ceedings Inc., consistent herewith. Industries, Schnell v. Chris-Craft (1971). Del.Supr., A.2d McNEILLY, Justice, dissenting:
The burden must fall defend ants majority opinion who claim on share like an advo- ratification based reads holder closing jury. vote to establish sharehold cate’s a hostile that the address to er approval I fully say Throughout And lightly. resulted from a informed that not *64 opinion great emphasis only officers, is directed years utive and 53 cumulative ser- negative, nothing vice lip with more than as Trans Union directors. service granted positive aspects of this The inside directors badge wear their of my (re- case. In opinion Chancellor Marvel expertise in corporate affairs of Trans tired) should have been affirmed. The Union on their sleeves. But what about opinion product Chancellor’s was the of the outsiders? Dr. Wallis is or was an conclusions, well reasoned upon based statistician, profes- economist and math sound process, clearly supported deductive sor of University, economics at Yale dean by the evidence and entitled to deference in graduate of the school of business at the this appeal. my Because of diametrical University Chicago, of and Chancellor of opposition evidentiary to all conclusions of University of Rochester. Dr. Wallis the majority, I respectfully dissent. had been on the Board of Trans Union since 1962. He also was on the Board of It would no purpose, partic- serve useful Lomb, Kodak, Metropolitan Bauseh & Life ularly date, at this late for me to dissent at Company, Insurance Standard Oil and oth- great length. I myself restrain from doing ers. so, but compelled feel point to at least out William B. University Johnson is a what I of consider to be the most glaring Pennsylvania graduate, law President of deficiencies in majority opinion. Railway Express until Chairman and majority spoken has and has effectively Chief Executive of I.C. Industries Holding said that Trans Union’s Directors have Company, and member of Trans Union’s been the victims of a “fast shuffle” Van Board since 1968. Gorkom and Pritzker. begin- That is the ning of majority’s comedy of Lanterman, errors. Joseph a Certified Public Ac- The first important countant, and most error made is is or was President and Chief the majority’s Steel, assessment of the directors’ Executive of American on the Board knowledge Harvester, of the affairs of Trans International Peoples Union Ener- gy, and their Illinois ability Telephone, combined Bell to act in this Harris Bank Company, situation under Trust protection Kemper Insurance busi- Company judgment ness and a director of Trans Union rule. years. four Trans Union’s Board of Directors consist- Morgan achemist, Graham is was Chair- men, ed of ten five of whom were “inside” man and Chief Executive Officer U.S. directors and five of whom were “outside” Gypsum, and in years prior and 18 directors. The “inside” directors were Van to the Trans Union transaction had been Gorkom, Chelberg, Bonser, William B. involved in 31 32 corporate takeovers. Browder, Viee-President-Law, Senior Thomas P. O’Boyle, Robert University Senior Vice-President- Reneker attended Chicago Administration. At the Harvard merger time the Business Schools. He was proposed vas President and Chief Executive of the inside five directors had Swift and Company, director Un- collectivelybeen of Trans employed by Company ion since and member of the Boards years for 116 and had years of combined corporations including seven other U.S. experience as directors. The “outside” di- Gypsum Chicago and the Tribune. Wallis, (cid:127)ectors were A.W. William B. John- son, Joseph Lanterman, B. Graham J. Mor- Directors of this caliber are not ordinari- gan and Robert W. Reneker. With the ly taken in a “fast I submit shuffle”. Wallis, exception of these were all chief they were not taken into multi-million this executive officers of Chicago corpo- based being dollar corporate transaction without rations that were at least as large as Trans fully informed and state aware of the Union. The five “outside” corpo- directors had 78 the art pertained as it to the entire experience of combined True, mars as chief panoroma exec- rate even of Trans Union. *65 these, their such with business repeated explanation the of transaction and directors acumen, go expertise, interest and can as- the given he had earlier to Pritzker offer do not believe that to be the case I senior tray. Having heard Van management. Tnese men knew Trans Union like of explanation Gorkom’s the Pritzker’s of- here. fer, of their hands and were more than back explanation of the Brennan’s spot make on informed qualified merger directors discussed well documents the judgments concerning the affairs the matter. an discussion arose business Out of this including Union sale 100% insistence on the directors that part of forget, corporate Lest we corporation. two be made. the offer modifications to operates then now on what is First, they world required com- any potential that referred to as “the fast track”. aptly peting so bidder given be to the same access integral were at the men time an These information concerning Trans Union world, professional all business part provided had been Sec- Pritzkers. figureheads. men, intellectual ond, merger to be were documents modified to di- reflect the fact majority this Court holds that the rectors could accept decision, offer better reached on Board’s would not required be to recommend approve merger not the Pritzker offer if a made. better judgment, of an offer was business product informed *66 The following into language was inserted subsequent the Board’s efforts to that agreement: the Merger Agreement the and take amend legally action were curative and days “Within 30 other after of the execution fac- ineffectual, and that the tually Board did Agreement, this meeting TU shall call complete with candor with the deal (the of its not stockholders ‘Stockholder’s by failing to disclose all mate- Meeting’) stockholders for the purpose approving facts, they which knew or should have rial and adopting Merger Agreement. the known, securing before the stockholders' The Board of Directors shall recommend merger. disagree. I approval to the they ap- stockholders of TU that prove and adopt Merger Agreement the September time of the At the (the Approval’) ‘Stockholders’ and shall Board meeting acutely was aware of use its requi- best efforts to obtain and its prospects. prob- Union Trans however, therefor; site vote provided, created accumulated investment lems acknowledge that GL and NTC that the depreciation credits accelerated tax Board may Directors TU have a repeatedly discussed at Board meet- were competing fiduciary obligation to the ings, and all of the directors understood Stockholders circum- under certain thoroughly. Moreover, problem at added) (Emphasis stances.” July, meeting 1980 Board the directors had newly prepared reviewed Union’s drawn, language artfully While the is not forecast, five-year August, and at the 1980 the is evidence clear that the intention un- meeting Van presented Gorkom the results derlying language specif- was to make comprehensive study of a of Trans Union' right they ic the that the directors assumed Consulting Group. made The Boston had, is, any accept to offer study This prepared was an over 18 month thought better, was recommend period analysis consisted of detailed the Pritzker offer in of a the face better subsidiaries, all including Trans Union meeting, one. At the conclusion of competitiveness, profitability, throw- cash proposed merger approved. off, consumption, compe- cash technical At a subsequent meeting on October tence prospects and future for contribution directors, 1981 the with the consent of net Trans Union’s combined income. Pritzkers, Agreement Merger amended the At meeting right Van Gor- so as to of Trans Union establish kom aspects higher proposed reviewed all solicit well as to receive bids. *67 $2,650,000 roughly would receive a of although Pritzkers insisted that their fee the plus disbursements. be merger presented to the stock- proposal proposal holders at same time that the the in step proceeding to As the first carry presented. A sec- any of was party third commitment, out its Salomon Brothers amendment, ond on which became effective a set prepared, had brochure which forth 1981, 10, provided that October further history, Trans Union’s describ- financial might unilaterally company's Trans Union terminate ed business in the detail and merger operating com- set Union’s proposed the with the Pritzker Trans forth Salomon 10, projections. pany prior February the to in event Brothers financial also list prepared compa- a over agreement a definitive 1981 there existed of might nies it believed be which suitable party merger, for a with a third consolida- merger partners, and while such tion, assets, purchase or ex- four sale of of namely, companies, General Electric, change of Union stock which was Trans Bendix, Genstar, Borg-Wamer, Ltd. more the stockholders of favorable a merger, showed some interest such than Trans the Pritzker offer Union proposal none to made a Trans Un- firm upon receipt which conditioned was only ion and Electric General showed a approval and the of an stockholder absence transpired, sustained interest.1 As matters injunction its consummation. against no firm offer which bettered the Pritzker meeting Following the October 8 board per offer of share ever made. Union, banking the investment 21, January proxy On 1981 a statement firm of Brothers Salomon was retained was sent to the shareholders of Trans Un- to offers corporation search for better advising February ion them of a Pritzkers, than that of Salomon Broth- meeting merger would in which be vot- charged being ers with the responsibility of January ed. On 1981 the directors held doing possible if there is “whatever to see regular meeting. At meeting their this superior marketplace in the a bid bid over merger the instant Board discussed as well that is the table for Trans In Union”. events, including litigation, as all this sur- undertaking project, agreed such it was rounding it. At the conclusion of the meet- paid that Salomon Brothers would be ing unanimously Board voted recom- $500,000 expenses amount of cover its approve mend to the stockholders equal veil as a %ths fee 1% merger. Additionally, the directors re- aggregate market value of the fair consid- Supplemental Proxy approved viewed and company eration received to be which, among things, Statement other ad- ;he like, merger case of a or the which vised the what had oc- stockholders neant that in event Salomon Brothers meeting curred at the and of the instant *68 buyer willing pay price ihould find a of a fact that Electric had decided not General 10, $55.00, of February 156.00a share instead such firm to make On 1981 an offer. pro company. Shortly Operating 1. the announcement of Chief of the new after Officer posed merger Kruzenga Operat- senior members of President was the and Chief management got Trans with Union’s in touch ing of Trans Officer of the seven subsidiaries possible participation in KKR to their discuss Union of Trans which constituted backbone leverage buyout scheme. On December through Union as exhaustive studies shown Henry through actually KKR Kravis made a bid analysis Union’s value on of Trans intrinsic per $60.00 share for Trans Union stock place respected market bank- investment but December the offer was withdrawn interesting ing Morgan Stanley. firm of It is three it was made com hours after because of during test note that at the market no time arising plications negotiations out of with period any corporations contact- did family, extremely wealthy Reichman Canadians time complain ed Brothers Salomon leveraged change of attitude toward availability corporate frame or records scheme, by Kruzenga, Jack buyout the member independent judgment of mar- order make an management of who senior Union ket value of 100% Trans Union. likely have been most would President
897 of pursu- Trans Union met stockholders ers required Lynch Energy v. by the Vickers overwhelmingly notice and voted in Corp., A.2d Del.Supr. 383 ant the merger, of Pritzker of the [Lynch proxy I], favor 89% in the materials were that being cast in favor of it. deficient votes in five areas. quarrel no majority’s have with the
I Here again negative of exploitation the is analysis judgment the by business rule. It the giving credit to the majority without application of positive. that rule to facts the these is To to the conclusions of respond wrong. is An overview of the entire the majority unnecessary which be merely would record, rather than the limited of bits prolonged view argument. briefly what did But pieces which the majority exploded has the proxy proxy The materials disclose? popcorn, convinces me the di- material like informed the shareholders made an judg- informed projections business rectors pur- potential were furnished to which was by buttressed their test of ment chasers and such projections indicated market. the Trans Union’s net increase to might income approximately $153 in That million 1985. the time of the September meeting At projection, what is the almost three times 10 members of Trans the Union’s Board of net income of $58,248,000 reported were highly qualified and well Directors Trans Union as its net Decem- income for about the prospects affairs and informed 31, ber 1979 confirmed the statement in the Union. These acutely Trans directors were proxy materials that the Di- “Board of of the problems facing aware historical that, rectors believes reasonably assuming Union which were caused the tax favorable economic and financial condi- They had problems laws. discussed these tions, the Company’s prospects for future fact, nauseam. In ad within two months earnings growth are excellent.” This ma- meeting the board had terial was certainly place sufficient to reviewed and study discussed an outside Company’s stockholders on notice that company done by The Boston Consult- there was a reasonable basis to believe that ing Group and an year internal five fore- prospects earnings growth future prepared by management. cast Sep- At the excellent, were and that of their the value tember 20 meeting presented Van Gorkom stock was more than the market val- stock offer, the Pritzker and the then board ue of their shares reflected. Brennan, heard from James company’s matter, counsel this Overall, who discussed the my review of the record leads legal this, documents. Following the me to proxy conclude that materials Board directed changes that certain be adequately complied with Delaware law made in merger documents. These informing the pro- shareholders about the changes made it clear that the posed Board was transaction and the events surround- accept free to a better offer than Pritzker’s ing it.
if one was made. The above facts reveal majority suggests Supple- that the that the Board grossly did not act in a Proxy mental Statement did comply negligent manner in informing themselves with the requirement notice of 8 Del.C. of the relevant and available facts before § 251(c) time, that notice of place passing merger. on the contrary, To the purpose meeting of a merger to consider a this record reveals that the directors acted must be sent to each shareholder of record with the informing utmost care in them- days at least 20 prior to the date selves of the relevant and available facts meeting. In original the instant case an before passing merger. on the proxy statement January was mailed on
The majority finds time, that Trans Union 1981 giving place notice of the fully stockholders were not purpose informed and meeting. Supplemental A that fiduciary directors breached Proxy January their Statement was mailed duty of complete candor to the stoekhold- 1981 in an effort to advise Trans Union’s *70 gg *71 judgment would of the
rareholders as to had occurred at affirm what Court of 26, Chancery. íe January meeting, and that 1981 eneral make Electric had decided not to ON MOTIONS FOR REARGUMENT
i meeting offer. The shareholder was decision, 10, Following ild this February days Court’s 1981 fifteen after Thomas O’Boyle, P. one of the director le Supplemental Proxy defendants, had Statement sought, granted, and was leave for change sen sent. Thereafter, of counsel. individual di- § 251(c) All requires is that notice of the defendants, O’Boyle, rector other than filed me, place purpose meeting of the be reargument a motion for and director ven at days prior meeting, least 20 to the O’Boyle, through newly-appearing counsel, ns accomplished by proxy state- separate then filed a motion for reargu- 19, January Nothing ent mailed 1981. in responded ment. have Plaintiffs to the 251(c) prevents supplementation of several motions and this matter has now n oxy days materials within 20 of the meet- duly been considered. information, g. Indeed when additional Court, through majority, its finds no hich a reasonable shareholder would con- merit to either motion and concludes that vote, important deciding ler in how to both motions should be denied. We are not light mes to that information must be persuaded any errors of law fact sclosed to stockholders in time sufficient reargument. have made that been merit r the stockholders to consider it. But § (thing 251(c) requires in this additional However, O’Boyle’s defendant mo days formation to be disclosed at least 20 requires Although tion comment. O’Boyle ior to meeting. contrary To a reach adopt continues to his fellow directors’ ar ignore practice suit would the current guments, O’Boyle now asserts the alter discourage id would supplementation standing posi native that he has to take a proxy materials in order to disclose the tion different from that of his fellow di intervening my currence of In legal grounds events. rectors and that exist for inion, days finding fifteen in the instant case him not liable for the acts or omis is a sufficient amount time for the sions of his fellow directors. Specifically, O’Boyle (1) two-part argument: Dckholders to makes a receive and consider the undisputed proxy formation in the his absence due to illness supplemental from both the 20 and itement. the Octo meetings ber 8 directors per Union entitles him to be from relieved CHRISTIE, Justice, dissenting: liability sonal for the failure other respectfully I dissent. directors to exercise due care at those Del.Ch., Sadacca, meetings, Propp see v. Considering scope the standard and 33, (1961), 175 A.2d 39 other Bouvier, r review Del. modified under Levitt v. 187 grounds, Propp, Del.Supr., Bennett v. 671, Supr., (1972), I 287 A.2d 673 believe (1962); A.2d 405 that his attendance at the a supports record taken as a whole 26, 1981 participation January in the nclusion that the actions of the defend- meeting result Board does not alter this protected judg- ts are by the business error given precise findings this Court’s Lewis, Del.Supr., mt rule. Aronson v. meeting. committed at that (1984); Rice, 8 A.2d Pogostin v. Del.Supr., (1984). argu- 480 A.2d I also reject O’Boyle’s We defendant new timely i supports satisfied standing record ment as to because not One, nclusion that the acted with asserted. defendants Our reasons are several. complete required e candor brief- by Lynch supplemental v. connection with the March, 1984, Corp., Del.Supr., ing special Energy Vickers 383 A.2d of this case in de- (1978). opportunity Under I circumstances was afforded the individual
gQQ fendants, including O’Boyle, any present change following this Court’s position any legal why or reasons each comes to be decision on too late factual the merits ‘ be individually should treated. hat clearly waived considered. He has them Thereafter, argument at Court right. before the 11, 1984, following colloquy June on all de- Reargument for Motions place between this Court counsel took fendants are denied. defendants outset the individual at the Justices, CHRISTIE, McNEILLY and argument: counsel’s dissenting: argument I’ll make the on COUNSEL: ruling toas We do not disagree with nine individual defendants behalf have would O’Boyle, the defendant we but plaintiffs against whom the seek more granted issues reargument other $100,000,000 damages. That than is raised. case, ultimate issue in this whether honest, experienced or not nine business- subject damages should
men be
case where— MOORE: Is there a
JUSTICE distinction Chelberg Van vis-a- between Gorkom PORTER, Porter, Leon M. Sr. and June *73 vis other defendants? individually and as next friends of No, COUNSEL: sir. plaintiff, minor Porter, Brian K. Plain- tiffs, JUSTICE MOORE: None whatsoever? COUNSEL: I think not. v. DELMARVA POWER & LIGHT COMPA- Two, in Opinion this Court’s dated Janu- NY, City a corporation, Delaware 29, 1985,
ary relied on Court the indi- Dover, Delaware, municipal corpora- a having vidual defendants presented as tion, Corpora- Delaware Home Builders unified defense. We stated: tion, a corporation, Delaware Defend- parties’ response, including reargu- ants. ment, has led the majority of the Court to conclude: that since all of the INTERNATIONAL AND TELEPHONE directors, defendant outside as well as CORPORATION, TELEGRAPH a Dela- inside, take position, a unified we are corporation, ware Defendant and Third required to treat all of the directors Plaintiff, Party one as to whether are entitled to the v. protection of judgment the business rule
LARAMORE, DOUGLASS AND POP YORK, INC., HAM OF NEW a New Three, previously O’Boyle posi took the corporation, Party York Third Defend tion that the January Board’s action taken ant. 26, 1981—in which he fully participated— virtually determinative of all issues. Superior Delaware, Court O’Boyle Now signifi seeks to attribute no New County. Castle cance participation to his January 17, Submitted: Oct. 1984. meeting. O’Boyle explain Nor does seek to Decided: Dec. 1984. lis having given before the meet- directors’ ng of October 1980 his “consent to the ;ransaction such may business as come * meeting." >efore the It is the view of
he majority O’Boyle’s of the Court that
* Wedo (or hereby nol an determine approval) by endorsement director’s the absent di- any a waiver of meeting meeting. notice of rector of execution action taken at such a consent to the transaction of business constitutes