*2 it, exchange agree- had an finalized McNEILLY, Before HORSEY and Industries, Inc. ment with Chris-Craft MOORE, JJ. BHC, (“BHC”), (“Chris-Craft”) a and Inc. Chris-Craft, wholly-owned subsidiary McNEILLY, HORSEY, joined by Justice exchange pursuant to which Warner would Justice: interest in its stock for a stock a 19% represents The case before us the efforts interest in BHC. Because Warner has of two shareholders of Warner Communica- supermajority voting require- place an 80% tions, (“Warner”) stipula- Inc. to vacate a actions, in- ment for certain shareholder against tion of dismissal in an action War- directors, cluding the removal of this 19% International, (“News”), pic by ner News interest, if shares combined with those English company by K. Ru- controlled by manage- owned or controlled Warner’s pert formerly larg- Murdoch Warner’s ment, would, effect, give Chris-Craft The two shareholders est shareholder. power change over a in Warner veto Intervenors”) (“Proposed contend that the management or over other shareholder ac- nature, by News was derivative in supermajority tions to the stipulation dismis- and that therefore requirement. improper parties because the to it sal was comply response to the Wamer/Chris-Craft failed to with the notice and court exchange agreement, News instituted the approval provisions of Court against underlying action Warner and cer- Rule 23.1.1 we must now determine Directors, of its Board of brought against whether News suit War- tain members provides: fort. The action shall not be dismissed or com- Court Rule 23.1 Court, approval promised without brought by In a derivative action 1 or more mail, publication notice or otherwise shareholders or members to enforce corporation given unincorporated compromise proposed or of an associa- dismissal or shall be tion, corporation having or association which or members in such manner to shareholders may properly directs; failed to enforce a except the Court that if the dismissal it, complaint allege asserted shall that the prejudice prejudice with to the to be without plaintiff or plaintiff was a shareholder or member at the only, then such dismissal shall be or- complains of which he time of the transaction notice thereof if there is a show- dered without ing membership or thereafter de- or that his share volved on him plaint efforts, compensation no form by operation of law. The com- directly indirectly passed or from allege particularity shall also attorney or defendants to the any, made to obtain if give any compensa- promise that no action he desires from the directors or com- tion has been made. parable authority and the reasons for his failure added). (emphasis making ef- to obtain the action or for not president, Chris-Craft and its and BHC. intervene the action under agreement deprived News that the original Rule 24.3 parties op- voting rights, News of its wasted vacate, posed claiming the motion to first assets, designed and was to entrench brought, News because intended to management. Initially, sought to en bring, an individual not a derivative join exchange the consummation of the *3 action, apply, Rule 23.1 did not second and agreement. Chancery The Court re independent that there was no basis for grant relief, injunctive noting fused to that intervention. obli apparently because Chris-Craft had no thereafter, Shortly Proposed the Inter- gation vote its War Warner shares with other venors several Warner share- management, exchange agreement ner the holders commenced new actions the “deprive plaintiff any would not the Chancery Court courts New right voting position or which has.” it now challenging York and California both the plc News International v. Com exchange agreement Wamer/Chris-Craft munications, Inc., al., Del.Ch., et No. C.A. agree- and the Wamer/News settlement (Brown, C.) slip op. (January at 3 actions, In desig- ment. these News was 1984) (letter opinion). defendant, along as a nated later, Approximately par- months two the Chris-Craft, BHC, ground on the that it and, ties resolved their differences on conspired with Warner Warner’s breach 16, 1984, agreement March into an entered fiduciary duty. pursuant purchased to which Warner response Proposed by stock owned News. March to the On Intervenors’ 19, 1984, in agree- stipula- accordance with their motion intervene and vacate the ment, parties stipulation the dismissal, filed a of dis- tion of the Court of by pursuant missal in the action complaint supports found while News’ 41(a)(1).2 Chancery Court parties Rule derivative as well as individual causes of attempt comply made no with the notice action, proceed News could and did with its approval provisions Chancery and court noting only, individual action com- the Court Rule 23.1. plaint alleges “special injury” to News’ rights contractual in Warner. The days Three stipulation after the dis- filed, accordingly Court concluded that dismissal missal was Intervenors subject moved both to of News’ suit was not notice vacate dismissal failing comply 23.1, approval with Rule 23.1 and to provisions and court of Rule 41(a)(1) provides: (a) Right. Upon timely appli- Court Rule Intervention of Dismissal; anyone permitted (a) be Voluntary cation shall to intervene Effect Thereof. (1) (1) Plaintiff; By a by Stipulation. in an action: When statute confers an Subject to intervene; (2) payment provisions unconditional or when costs and the Rule 23(e) relating applicant an may Rule action dis- claims interest to the 23.1 an be by plaintiff property missed without order of court or which is transaction (i) by filing any a dispo- notice dismissal at time action so situated and he is by party before service adverse of an practical of the as a matter sition action judg- summary or of answer a motion for impede ability protect impair or his ment, (ii) filing by interest, whichever or a first occurs applicant’s unless the interest ade- signed stipulation par- or dismissal all the represented by existing parties. quately appeared ties in the who action. Unless (b) Upon timely ap- Permissive Intervention. otherwise stated in the notice of dismissal or anyone may permitted plication to inter- stipulation, prejudice, dismissal without (l) in an action: When a statute confers vene except operates that a dismissal notice of intervene; (2) when or conditional adjudication upon an merits when filed applicant’s claim or defense and the main who has dismissed in once question have a of law or fact in com- action court of the United or of state an States exercising its discretion the mon. including based on or the same claim. will consider whether the intervention shall unduly delay prejudice adjudication or provides pertinent Court Rule 24 original parties. part: complains if he Intervenors’ ual action of an

and it denied the International, plc v. See News motion. distinct from that suffered share- Inc., al., Communications, et wrong involving holders or a one of his Del.Ch., 7420, slip op. at 5-9 C.A. No. as a contractual shareholder. More- (Walsh, V.C.) 10, 1985) (unreported (April over, while Moran quite serves as useful decision). guide, the case should not be construed as only establishing determining test for

II. whether a claim derivative or individual complaint Rather, To determine whether a in nature. as was established in an individual cause of Elster, states a derivative or ultimately we must look to whether to the nature of the we must look alleged “special” injury, wrongs alleged body in the of the com whatever form. designation plaint, plaintiffs not to the in Moran inter alleged, *4 American stated intention. Elster v. Air alia, majority corporation’s that a of the lines, Inc., 219, 100 34 Del.Ch. A.2d 223 “manipulated corporate directors had (1953); Moran v. Household Internation machinery entrench themselves in office to al, Inc., Del.Ch., 490 A.2d 1069-70 restricting right the shareholders’ to Elster, of In the Court proxy machinery gain make use of the that a stockholder can maintain established corporation. 490 A.2d at control of” the against corporation individual action 1070. The found that “special injury,” if a he sustained engaged in because the were impliedly which the Court defined as “a battle, they injury suffered no dis- proxy a wrong upon wrong inflicted him alone or a by other tinct from that suffered share- affecting any particular right which he is addition, holders. In the Court found that asserting,—such preemptive rights as his corporation while the was de- stockholder, involving as a the con shareholder, largest corporation’s fendant wrong corporation, trol of the or a affect holding approximately of the latter’s 5% ing corpora the stockholders and not the stock, any unique it did not suffer harm tion.” 100 A.2d at merely by holdings virtue of its because it Moran, set the Court posi- alleged had no intent to use its block plain-

forth a test to determine whether a gain corpo- of the tion to control defendant tiff has established an individual action: Court, therefore, required ration. The action, plain- To set out an individual Id. brought derivatively. the claim be allege tiff “an which must either separate distinct from that suf- and allegations of the in News’ review A shareholders,” fered ... or a complaint in the case now before us reveals wrong involving right of a a contractual complaint clearly supports individ that the vote, shareholder, right as ual as well as derivative causes of action. control, exists majority assert which alleges that the Warner/Chris-Craft News corpo- independently any right of the (1) designed exchange agreement: was ration. (2) management; constituted entrench a assets; (3) gross under waste 12B Fletcher (quoting 490 A.2d at shareholders’, partic mined Warner and Cyclopedia (Perm. Corps. § at 452 News’, voting other fundamental ular Ed.1984)) (citations omitted). (4) rights; specifically and was comparing two-pronged test exercising preventing News from aimed at of Moran with the definition of the term influencing Warner interest 7% Elster, “special injury” appears management. encompasses prongs the term both is, Following precedent established in Moran test. That plaintiff alleges a a above, has not Moran individ- and discussed News special injury and maintain an merely by right suffered distinct harm vir freely, stockholders’ vote [sic] Warner, tue of its stock corporation’s.”) interest which theirs 7% and not the complaint dicta, Elster’s to, because time previously sup- referred had News not indicated a desire use its ports same result the instant case. holdings corporation. Here, control complaint clearly the amended sets Moran, However, the plaintiffs unlike challenge forth a News for the control alleges harm to one its contractual Warner’s efforts to frus- rights. Specifically, it contends challenge, trate News’ in addition exchange agreement Wamer/Chris-Craft claim breach of for News’ contractual voting rights by securing violated its for Further, rights. for we note that counsel management power veto over all below, argued preliminary on a shareholder actions to su- 80% motion to dismiss failure of News to permajority requirement. We find pre-suit make demand on the Board allegation that this special inju constitutes complaint “studiously Elster, ry forming to News under thus avoids claim for derivative relief [be- basis of a viable individual cause Murdoch doesn’t want to be a deriv- cause] against right Warner. The vote plaintiff.” ative right possesses contractual that News as a Having pleaded concluded News indepen shareholder of Warner which is support claims that both individual de of any dent Warner. The rivative causes of we must now interference with that meets the re *5 proceeded determine whether News with Elster quirements of Moran setting in did, only. its individual it action If then it an forth individual A action.4 required comply provi was not the with peculiar who suffers an injury to itself relating sions in derivative actions Chan should be able to maintain an individual cery Court Rule 23.1. As the of Court action, though even corporation the also Chancery stated in Elster. suffers an from the wrong. same stockholder, In such case a if he should also Reifsnyder Pittsburgh See v. Out desire, may proceed so on his claim for Advertising Co., door 405 Pa. 173 protection the his of individual (1961) A.2d 319 (Pennsylvania Supreme right rather than in the corpora- the direct, individual, action, Court found a tion. The would action then not consti- primarily concerned the protection with tute a derivative action. plaintiffs voting the rights, plaintiff where 100 at A.2d his own wrong that votes had been ly by diluted the majority Chancery shareholder’s We the Court of believe was improper on a concluding proceeded votes resolution in which in correct that News majority pecuniary shareholder had a individually inter with its suit not on behalf est). Corporation Colonial Securities of Warner. At no time did News make Cf. Allen, Del.Ch., v. (Longobar C.A. No. comply require- 6778 effort to with the demand di, V.C.) 18, 1983) fact, (April (unreported deci ments Rule rather 23.1. than sion) (Court Chancery demand, plead futility argued stated as dicta: News that sought enjoin “If the comply Plaintiff had it with 23.1 need not Rule because potential vote due brought ... coercive individual claims. While effect agreements, might argument of these that an cannot create individual appeared sup- personal complaint as a not one vindi action where does one, plaintiff port cate and other it is an indication that a that, important management), inquiry is It to note while here is to the nature the substan- validity allegation tive of News’ of interference to its The the claim not merit. (i.e.. may with its vote be doubtful News prove wrong; he need need not do still was able to exercise its vote and Chris-Craft Moran, allege A.2d it. 490 at 1070. obligated was not to vote its shares with Warner 1080 derivative, individual, pursuing complaint claims stated in the and not amended re-

claims. pending, main vaiable and Court legal did not commit error or argue Intervenors dismissing prej- abuse its discretion in with press News made in its releases statements udice the individual claims asserted based complaint and in its concern exhibited private on the suit settlement reached for the interests of all Warner shareholders reasons, itself, parties. For merely not these we con- and that it there proceeding derivatively. fore As stipulation was clude that the of dismissal must noted, Court of it was un stand. plight

usual for News comment on general shareholders order to III. public against support fight in its also ar management. “Litiga Intervenors The Court stated: gue usually they permitted tion over control to inter ac should be companied public orchestrated relations vene this action under designed picture efforts each side as the stipulation Rule 24 in order to vacate the champion of shareholder interests.” prosecute dismissal and the derivative International, plc v. Communi against claims well as new Warner as cations, Inc., Del.Ch., slip C.A. No. against general, claims News. In interven (Walsh, V.C.) 10,1985) (unre op. (April at 7 only pending tion is allowed actions. decision). ported Mandel, 12, 172 Braasch v. 40 Del.Ch. A.2d uphold Because we now proceeded

We find that News with its action is dismissal of News’ only, individual action and that therefore it longer required comply pending. exception was not the notice no An to the approval provisions exist, however, and court 23.1 reopen of Rule for “the rule dismissing against its action Warner. ing judgments entered reason of col parties lusion and fraud to the between Further, support proposi- we cannot Id. prejudice rights.” intervenors’ finding tion that the mere of a derivative *6 apply not exception A.2d at 274. This does plaintiffs complaint claim within a that here. and Warner were Because News also states com- individual claims for relief stipulate free to to a dismissal of this ac pels ruling necessarily that Rule 23.1 complying tion without applies to prejudice a dismissal with above, 23.1, Rule as we have found A individual claims for relief. shareholder complaint arguably improper whose de- there is no conduct to warrant asserts both exception. rivative and individual claims but who es- More intervention under the any proceed derivatively chews effort over, noted, to of News’ indi as the dismissal permitted should be to resolve his individu- rights prejudice vidual action will not the of claim, provided prejudice al it does not any nor of War the Intervenors adversely viability perceived affect the They ner shareholder other than News. derivative claim. pursue claims are still free to derivative arising ex out of the Wamer/Chris-Craft Here, it is clear from the record that the agreement change or the Warner/News prejudice claims that were dismissed with fact, agreement. several settlement claims not were individual and derivative claims; already been filed the stipulated, and defendants have as such actions have Court, represented any well as and in courts of other this Court of derivative claims asserted shall survive must states. The Intervenors and that the defendants prejudice without pursue their claims. look to those actions to jurisdic- remain to the Trial Court’s * * * tion for resolution of all such derivative AFFIRMED. perceived claims. Since the derivative

1081 MOORE, Justice, concerned, concurring. dirty I’m has been this deal done to me and all I’m the shareholders. (1) judgment. I concur for But fight every going agen- it in court and pendency companion actions in the Court cy can, necessary if and all the before Chancery, at least two of were which shareholders.” intervenors, [Warner] brought by (2) repre- made us at reargument sentations In connection with his efforts to have the unconditionally News would submit itself Federal block Communications Commission jurisdiction Delaware Courts transaction, proposed Mr. Murdoch actions, (3) in those and the trial court’s stated “is not in the best interest of ruling that the settlement and dismissal of Speaking and stockholders.” prejudice this will case chapter New York Rela- Public any shareholders, than America, Society tions Mr. Murdoch News, pursue pending their claims in said: actions, I today’s those doubt that result oppose expose gross “We will and mis- would obtained. management, fraud, racketeering and Nonetheless, my several, concerns are abuse of shareholder funds we wherever they persist. appar Because of their find it.” result, pragmatic ent both the majority Chicago opinion and that Tribune Mr. Murdoch trial court interpreted sanctioning termed the agreement one rule for the Warner/Chris-Craft large litigant, deal, by guile rinky-dink who “a a terrible one War- gives pleading artful impression ner’s go every shareholders ... We’ll championing of all stockholders country stop it”, court in the and that intention, without such while small protected Warner “should be at costs.” firmly stockholder is held to the strictures Finally, controlling he observed of those Rule 23.1. Future reliance on Warner that he had “never seen mis- such creating this case as sort distinc management waste.” tion, opening thus the door to collusive filings In its Schedule 13D with the Secu- settlements, would be ill-advised con Exchange Commission, rities and trary our in Wied v. warnings earlier represented acquisition that its Inc., Valhi, Del.Supr., 466 A.2d 15 stock “to was make an with no investment” denied, (1983), cert. 465 U.S. “present acquire intention to seek to con- S.Ct. L.Ed.2d 687 Carried request trol of representa- or to [Warner] conclusion, to its ultimate princi tion on Board of Directors.” While [its] ple destroy would the efficacious intent of *7 News any reserved take Rule 23.1. “necessary deemed protect or desirable” to troubling aspects The of this case are investment, any its the disclaimer of intent legal. both factual and pleadings, its acquire representation control or on seek filings, public and the statements of repeated Warner’s Board was in both director, its managing chairman and Mr. K. original filing subsequent and a amended Rupert Murdoch, conveyed News clearly Schedule 13D. message bringing that it was this ac- Although filing there under rights tion to vindicate was a later of all Warner shareholders, Improve- protect Antitrust Warner as a Hart-Scott-Rodino corporate entity. regard In that Mr. Trade Mur- ments Act 1976 with Federal doch’s statements widely were and careful- Commission the Antitrust Division ly appropriate Justice, directed to audiences. The im- Department which could reported say: Wall Street Journal him ply might attempt con- Warner, any fight “We’ve decided trol of News did not mount but haven’t we actually on our As settled tactics far as effort to do so. or.... management put in

Through drafting, artful News’ com- for Warner them jeopardy. plaint Chancery appears in the Court corpo- speak derivatively on behalf of the subtly mixing in cer- enterprise, rate while COUNT language upon which it now relies to tain THE PRIMARY PURPOSE OF THE claims.

stake out “individual” we PROPOSED TRANSACTION IS TO allegations find such as: ENTRENCH WARNER MANAGE- Give-Away Corpo- Wasteful “Warner’s MENT Assets, Including rate * Control * * # * * 39. The Transaction has Exchange Agreement reveals manage- entered into Warner been assets, gross waste of lacks primary purpose ment for the of en- any purpose business and is valid obvi- trenching management in their ously intended to entrench Warner’s enormously positions lucrative of em- management to the detriment of Warner Moreover, although ployment. the Pro- clearly shareholders. It aimed at posed damage Transaction would countering any effort of to ac- other than the de- Warner shareholders quire management in a voice Warner. by improperly hindering their fendants required by Exchange replace present or ability to control War- Agreement to issue to BHC 15.2 million management, ner Transac- shares of a new series of non-convertible specifically designed tion is to ensure stock, preferred total 19% rights cannot exercise the (21.9% voting power of dividends accompany interest War- 7% default) are which cannot be diluted ner. irrespective many of how additional vot- ing shares are issued the future ^[******] (or with a dividend $33.1 12% Proposed Transac- 41. Because the prime per year) million or over a rate 1% Exchange Agreement tion and the (whichever higher) in form which agreed management been to Warner at cannot be redeemed time. purpose entrenching itself for the sole preferred Warner non-convertible minimizing and would have the effect of (1.2 per vote share votes in the of 2 event eliminating plaintiff’s and other share- defaults) quarterly dividend and an abso- and other War- holders’ on lute veto dividend Warner’s especially intended to ner and was except divi- common shareholders cash replace plaintiff’s right to seek to thwart amount, a defined and divi- dends below management, current consummation payable in dends common stock. Proposed Transaction would violate filmed entertainment ment has ^[*] ^[*] addition, put ^[*] jeopardy Warner’s ^[*] operations, ac- ^[*] Warner’s manage- ^[*] plaintiff’s Warner. ****** COUNT a shareholder of II *8 among knowledged company’s to be DI- THE PROPOSED TRANSACTION assets, dissipating most valuable while WARNER SENFRANCHISES company’s on Atari and other assets SHAREHOLDERS AND IS CON- including the unprofitable adventures LAW TO DELAWARE TRARY Proposed filmed Transaction. Since the ****** operations entertainment constitute If, corpo- having caused the after portion of Warner’s share- substantial voting adopt super-majority ration to equity, holders it is abusive and wasteful requirements para- described above in 63. Since the true nature of the Pro- graphs management permit- posed 19 to Transaction not what it has been reported be, proceed ted with the Trans- can said to consti- upon plaintiff tute a fraud and Warner’s thereby placing twenty a bloc of public other shareholders. percent or more Warner’s stock management “co-venturer” Chris- testimony one Mr. Murdoch’s Craft, remaining then the shareholders supports chief financial officers deriva- (who present are of its sharehold- 100% tive nature of News’ claims. Rich- ers), agreement, even if in unanimous Sarazen, ard A. Director/Executive Vice would from prevented thereafter be President —Finance of News America Pub- causing company pursue certain affiliate, lishing Incorporated, a News testi- pur- courses of action which it now fied: sue an vote of shareholders. 80% Q. your Is it belief that Warner * * * * * * grossly overpaid position for the in BHC contemplated that is by this transaction? attempted creation of such A. Yes. on new strictures Q. suppose you also believe existing shareholders without first seek- that is detrimental to the interests all ing approval shareholder violates funda- shareholders; that correct? principles mental of Delaware law. Yes, A. I do. ****** Q. fact, you you Do think III COUNT be, believe it to Warner grossly overpaid particu- for interest BHC CONSUMMATION THE OF PRO- larly Mr. affects Murdoch more oth- than POSED TRANSACTION WOULD er shareholders? CAUSE WARNER TO BREACH ITS Yes, A. only but to the extent that we WITH CONTRACT PLAINTIFF TO a larger than other shareholder MAINTAIN NEW WARNER’S YORK shareholders. STOCK EXCHANGE LISTING Q. It all affects the shareholders * * * * * * basis, equally on a share-for-share but shares; you you have more is that what proposed 52. Warner’s issuance of saying? are infringes non-convertible Preferred A. Yes. upon voting rights of and discrimi- nates ing, if cluding plaintiff, by substantially reduc- approval, ing shares of common stock seek to * against acquire and renders * in Warner without shareholder Sliminating, existing * interest Warner. person * shareholders, less shareholder vot- acquisition attractive * who might * in- tions that events? levels with cles and about the various nies A. Q. ^[******] currently What Is it true that Murdoch bylaws provide respect does are “concerned” mean? concerned provisions certain percent Communica- in the arti- kinds unhappy compa- vote Q. Unhappy. is, 62. The Transaction in- A. Yes. deed, designed a sham to thwart Q. right. All (or of voting involves the issuance debt law) companies’ view violation of Delaware and was Isn’t it the Murdoch intended to minimize unfair to plain- provisions and thwart that these are tiff’s as a Communica- seek shareholders management influence the of Warner. tions? *9 Capital Arthur H. Rosenbloom of MMG

A. Yes. Corporation, opined that Warner/Chris- say that the Q. it be correct to Would Craft deal: pri- that the companies believe Murdoch materially unfair to Warner and its [I]s mary the Chris-Craft transac- purpose of point shareholders from a financial manage- existing tion is to entrench view. ment of Communications? A. Yes. light of our conclusions that the fair say Q. it it is also fair to I take of the BHC market value be securities that that companies’ is the Murdoch view by in the received is to all shareholders Warner unfair million less Transaction is about $115 Communications; that correct? by than those to be transferred Warner A. Yes. BHC; potentially materially dilu- true, understanding, Q. your Is it by shareholders tive loss to Warner’s compa- by Murdoch that there is concern put option; the current reason BHC’s impact possible on New nies about earnings per dilution to year’s share be listing the com- Exchange York Stock by Warner as a result of the sustained mon shares as a result of the Chris-Craft Transaction; and the material- proposed transaction? greater capitalization market ly Warner common into which the Warner A. Yes. preferred convertible converts versus delisted, Q. If Warner would capitalization, total market Chris-Craft’s impact would have a bad the Murdoch we, professional judgment, in our believe shareholders; companies’ views on all materially transaction is unfair that the that correct? and its shareholders. A. Yes. record, including foregoing Given Q. Isn’t it true that the Murdoch com- actually attempted never fact that News trans- panies that the Chris-Craft believe gain and thus be control effect, voting rights affects the injury a distinct to its position to claim of all shareholders of Warner Communi- very difficult position, find it stock cations? permitted here with the square what was A. Yes. conclusions in Moran v. trial court’s earlier was stressed. investment damage & Warner and its shareholders. “[T]he Company affidavits filed News’ Jje to Warner transaction is bankers, ^[*] stated: Stanley S. Shuman ^[*] and all its stockholders on a similar grossly unfair to ^[*] behalf ^[*] theme of of Allen ^[*] Household 490 A.2d Supr., 500 A.2d 1346 Household’s directors flect causes tive in first claim Plaintiffs’ Chancery ruled: nature, not individual. Moran's International, alleges of action which are deriva- complaints, 1070-71 that a (1985), manipulated the fairly Inc., Del.Ch., majority There, aff'd, read, Del. re- machinery entrench them- transac- whether one views this restricting the share- in office selves perspective tion from the of the value proxy right to make use of holders’ perspec- give up what Warner is to or the machinery control of Household. tive of the value of what it will receive ****** return, grossly unfair the transaction is engaged shareholders. The minimum are not to Warner Because the battle, no they suffer proxy difference between the value of Warner’s in a suffered from that value of the consid- distinct contribution and the of this as a result shareholders receive is million. $90 eration it

1085 Airlines, ability gain of restraint on control v. American 34 Elster Del.Ch. through proxy Household a contest. 94, 219, (1953), 100 A.2d 222 that: Furthermore, although D-K-M is House- cases, course, There of are in which shareholder, ap- largest holding hold’s injury corporation there is to the also stock, proximately its it not 5% of does special injury to the individual stockhold- any unique injury merely by suffer vir- stockholder, er. In such case a if he holdings. allega- tue of is no its There desire, may proceed should so on his employ tion that D-K-M desires to protection claim for of his individual position gaining block as a means of con- rights right rather than conclude, therefore, trol Household. I corporation. The action would then not brought be that this claim must deriva- a constitute derivative action. 100 A.2d tively. at 222. plaintiffs’ second cause action alleges manipulation corporate ma- accept I foregoing principle, While it chinery deprive which acts to sharehold- party seems to me that when a seeks right ers their to receive and consider enforce, solely claim, as an one individual proposals. Although takeover the Plan having implications, equity derivative may indeed have the effect limiting require fairness so ability shareholder’s to consider takeover clearly and equivocation without state — —in proposals, possess do shareholders not may order that other stockholders be not contractual to receive takeover rights being led believe that their are ability bids. The shareholders’ championed opposite when the is the case. premiums through activity takeover This Court’s mandate Schnell v. Chris- good to the faith judg- business Inc., Industries, Del.Supr., 285 A.2d Craft ment of the board of directors in struc- (1971), 437, “inequitable 439 turing defensive tactics. Absent an alle- permissible simply does not become be gation the Rights Plan directly re- legally possible”, cause finds consider stricts transferability, depri- there is no application able to such circumstances. vation of a distinct contractual the shareholders. Because do suggest I no My criticism here. concern allege any not distinct injury from the proud is for the future. Delaware has a ability restriction on their to re- preserving record bids, ceive only takeover this claim derivative actions even when dismissal was brought derivatively be on behalf technically warranted. See Hutchison v. Household. Bernhard, 43 Del.Ch. 220 A.2d alleges third cause of action (1965). past in the Certainly the Court the issuance is invalid under permit pri- loath been Delaware law. clearly This claim is de- litigants ac- settlements between vate rivative since it calls question into having representative tions overtones. authority capital Board to alter though is so has noted This even structure of the corporation, not con- parties’ good complete can- faith and right of tractual the shareholders or Raynor Aerospace dor. See v. LTV Cor- plaintiff. distinct to the 490 A.2d Del.Ch., 317 A.2d poration, at 1070-71. if case was It would be unfortunate this Indeed, reargument at counsel for War- authority a means for presaging viewed having ner had admitted a difficult time Chancery Rule I destruction of 23.1. Household, distinguishing this case and intent, and I that is trust do not believe and neither Warner nor News ever satis- the result—and all latter it will factorily explained the difference. imply for the future Delaware would it a very justify find slender reed to grasping result here at the dicta law.