Tuesday, February 26, 2013

Solar Cells, Inc. v. True N. Partners, LLC case brief

Solar Cells, Inc. v. True N. Partners, LLC case brief summary
2002 Del. Ch. LEXIS 38

SYNOPSIS: Plaintiff shareholder corporation (shareholder) filed a motion for a temporary restraining order, requesting that a merger between defendant companies be enjoined. Named defendants included three individual managers and others, who agreed to postpone the consummation of the merger in order to permit the parties to conduct the limited discovery necessary to present their positions at the preliminary injunction hearing.

-The merger was legally approved by the execution of the written consent of three of five operating managers.
-The two managers appointed by the shareholder were not advised of the merger until shortly before the merger was to close.
-No mention of the merger had been made at a full, five-manager meeting, which occurred the day before the three non-shareholder managers consented to the merger.
-The shareholder, whose ownership interest in the voting units of the company would go from 50 percent to 5 percent of the surviving company, alleged that the three managers acted in bad faith.

The court found that these actions did not appear to be those of fiduciaries acting in good faith.

-It was not an unassailable defense for the managers to argue that what they did was in technical compliance with the law.
-The court found that more than likely the managers would, at trial, be required to show the entire fairness of the merger.
-There was a reasonable likelihood that they would not be able to demonstrate either fair dealing or fair price.
-The shareholder showed irreparable harm, with no adequate monetary remedy. The balancing of the equities favored granting the injunction.

OUTCOME: The motion for a preliminary injunction was granted. The order became effective upon the shareholder's posting of a secured bond.

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