663 A.2d 1156
PROCEDURAL HISTORY: Plaintiff film corporation appealed a decision from the Court of Chancery of the State of Delaware, in and for New Castle County, which denied it recessionary damages for its breach of fiduciary duty claims against defendant corporation.
-Plaintiff film corporation alleged a breach of loyalty against directors of defendant illustrator corporation for a proposed merger to a third-party.
-To prevent the merger, plaintiff petitioned the chancery court for an appraisal of its shares pursuant to Del. Code Ann. § 262.
Plaintiff also filed a personal liability action of fraud, breach of fiduciary duty, and unfair dealing against the defendant, along with a plea of recessionary damages.
-The appraisal and liability proceedings were consolidated, and the chancery court held that defendant was found to breach its duty in approving a merger, but plaintiff failed to prove damages.
-In addition, the appraisal scheme was found to be consistent with the entire fairness determination.
-On final appeal, the Supreme Court affirmed the lower court's decision holding that its use of a disciplined balancing test in determining fairness and credibility would not be disturbed.
-If a shareholder plaintiff fails to meet its evidentiary burden, the business-judgment rule attaches to protect corporate officers and directors and the decisions they make, and Delaware courts will not second-guess these business judgments. If the rule is rebutted, the burden shifts to the defendant directors, the proponents of the challenged transaction, to prove to the trier of fact the "entire fairness" of the transaction to the shareholder plaintiff
-The concept of fairness has two basic aspects: fair dealing and fair price. The former embraces questions of when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained. The latter aspect of fairness relates to the economic and financial considerations of the proposed merger, including all relevant factors: assets, market value, earnings, future prospects, and any other elements that affect the intrinsic or inherent value of a company's stock.
OUTCOME: The court affirmed the chancery court's denial of recessionary damages.
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