Tuesday, February 26, 2013

Kahn. v. Lynch Communications Systems, Inc. case brief

Kahn. v. Lynch Communications Systems, Inc. case brief summary
638 A.2d 1110

The Plaintiff shareholders had appealed judgment from the Chancery Court in Delaware.
The Chancery Court entered judgment that was in favor of defendants, the corporation, its directors, as well as its controlling shareholder, in a class action suit which alleged that the defendants breached their duties to the shareholders during a merger transaction.

-The plaintiffs argued that the defendants' fiduciary duties to the shareholders were breached in a merger transaction.
-The plaintiffs also argued that the chancery court erred when it found that the tender offer and merger were negotiated by an independent committee and then placed the burden of persuasion onto the  plaintiffs.
-The plaintiffs alleged that the merger price was unfair and the controlling shareholder's offer to purchase the stock was both false and misleading.

The court held that defendant controlling shareholder did control the corporation.
Further, the court stated that the record did not support shifting the burden to the plaintiff.

-Therefore, the burden of proving the entire fairness of the merger transaction remained on the defendant controlling shareholder.
-The court reversed judgment and remanded the case for further proceedings.

OUTCOME: The court reversed the judgment from the chancery court that held in favor of defendants, because the defendant controlling shareholder, not hte plaintiff, had the burden of proving the entire fairness of the merger transaction.

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