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Cede & Co. v. Technicolor

Supreme Court of Delaware

June 22, 1992, Submitted ; October 22, 1993, Decided

No. 336, 1991 (Consolidated), No. 337, 1991 (Consolidated)


 [*349]  Horsey, Justice:

Nature of Case

Prior Proceedings

Summary of Principal Holdings

This appeal from final judgment of the Court of Chancery encompasses consolidated suits: a first-filed Delaware statutory appraisal proceeding (the "appraisal action"), and a later-filed shareholders' individual suit for rescissory damages for "fraud" and unfair dealing (the "personal liability action") brought by plaintiffs, Cinerama, Inc. ("Cinerama"), a New York corporation, and Cede & Co. ("Cede"), the owner of record. The actions stem from a 1982-83 cash-out merger in which Technicolor, Incorporated ("Technicolor"), a Delaware corporation, was acquired by MacAndrews & Forbes Group, Incorporated ("MAF"), a Delaware corporation, through a merger with Macanfor Corporation ("Macanfor"), a wholly-owned subsidiary of MAF. 1 Under the terms of the tender offer and later cash-out merger, each shareholder of Technicolor (excluding MAF and its subsidiaries) was offered $ 23 cash per share.

 [**3]  Plaintiff Cinerama was at all times the owner of 201,200 shares of the common stock of Technicolor, representing 4.405 percent of the total shares outstanding. Cinerama did not tender its stock in the first leg of the MAF acquisition commencing November 4, 1982; and Cinerama dissented from the second stage merger, which was completed on January 24, 1983. After dissenting, Cinerama, in March 1983, petitioned the Court of Chancery for appraisal of its shares pursuant to 8 Del. C. §  262. In pretrial discovery during the appraisal proceedings, Cinerama obtained testimony leading it to believe that director misconduct had occurred in the sale of the company. In January 1986, Cinerama filed a second suit in the Court of Chancery  [*350]  against Technicolor, seven of the nine members of the Technicolor board at the time of the merger, MAF, Macanfor and Ronald O. Perelman ("Perelman"), MAF's Chairman and controlling shareholder. Cinerama's personal liability action encompassed claims for fraud, breach of fiduciary duty and unfair dealing, and included a claim for rescissory damages, among other relief. Cinerama also claimed that the merger was void ab initio for lack of unanimous director [**4]  approval of repeal of a supermajority provision of Technicolor's charter.

The defendants in the personal liability action moved to dismiss the action, arguing that Cinerama had no standing to pursue such a claim after petitioning for appraisal of its shares. The Chancellor denied the motion but ruled that after discovery was completed, Cinerama would have to elect which cause of action it wished to pursue. Cinerama filed an interlocutory appeal to this Court and we reversed. Cede & Co. v. Technicolor, Inc., Del. Supr., 542 A.2d 1182 (1988) ("Cede I"). In Cede I this Court found the Chancellor to have committed legal error in requiring plaintiff to make an election of remedies before trial. We held that the plaintiff shareholder was entitled to pursue concurrently, through trial, its appraisal action and its personal liability action. We then remanded the case for trial of the consolidated appraisal and personal liability actions.

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634 A.2d 345 *; 1993 Del. LEXIS 398 **; Fed. Sec. L. Rep. (CCH) P97,811

CEDE & CO. and CINERAMA, INC., Petitioners Below, Appellants/Cross-Appellees, v. TECHNICOLOR, INC., Respondent Below, Appellee/Cross-Appellant. CINERAMA, INC., a New York corporation, Plaintiff Below, Appellant/Cross-Appellee, v. TECHNICOLOR, INC., a Delaware corporation, MORTON KAMERMAN, ARTHUR N. RYAN, FRED R. SULLIVAN, GUY M. BJORKMAN, GEORGE LEWIS, JONATHAN T. ISHAM, MACANDREWS & FORBES GROUP, INCORPORATED, a Delaware corporation, MACANFOR CORPORATION, and RONALD O. PERELMAN, Defendants Below, Appellees/Cross-Appellants.

Subsequent History: As Revised November 1, 1993. Final Mandate, Case Closed January 18, 1994. Second Revision January 18, 1994. Mandate issued January 19, 1994. Mandate withdrawn January 24, 1994. Motion for reargument filed January 24, 1994. Third Revision February 24, 1994. Reargument denied February 24, 1994. Reported at: 1994 Del. LEXIS 414.

Memorandum Opinion of October 6, 1994: Reported at: 1994 Del. Ch. LEXIS 178.

Modified by, On rehearing at, in part, Rehearing denied by, in part Cede & Co. v. Technicolor, 636 A.2d 956, 1994 Del. LEXIS 414 (Del., 1994)

Dismissed by, On remand at, Sub nomine at Cinerama, Inc. v. Technicolor, 663 A.2d 1134, 1994 Del. Ch. LEXIS 178 (Del. Ch., 1994)

Prior History:  [**1]  Court Below: Court of Chancery of the State of Delaware in and for New Castle County. C.A. No. 7129. C.A. No. 8358

Cinerama, Inc. v. Technicolor, Inc., 1991 Del. Ch. LEXIS 105 (Del. Ch., June 21, 1991)

Disposition: Affirmed in part; Reversed in Part, and Remanded. The court affirmed the order in part on the ground that there was no error in the chancellor's reformulation of materiality test for determining director self-interest; the order was reversed in part on ground that the chancellor erred as matter of law in requiring plaintiff to show injury to rebut business judgment presumption of care. The court remanded the cause for further proceedings.


shareholder, merger, self-interest, duty of care, stock, duty of loyalty, rebut, personal liability, business judgment rule, business judgment, sale of a company, due care, unanimity, breached, per share, appraisal, loyalty, shares, standard of review, breach of duty, burden of proof, approving, duty of disclosure, fiduciary duty, matter of law, trial court, stockholders, rescissory, purposes, damages

Civil Procedure, Appeals, Standards of Review, Clearly Erroneous Review, Torts, Proof, Custom, Business Customs, Business & Corporate Law, Directors & Officers, Management Duties & Liabilities, General Overview, De Novo Review, Governments, Fiduciaries, Mergers & Acquisitions Law, Mergers, Duties & Liabilities of Directors & Officers, Fiduciary Duties, Scope of Authority, Corporate Existence, Powers & Purpose, Powers, Business Judgment Rule, Causes of Action, Self-Dealing, Evidence, Inferences & Presumptions, Presumptions, Creation, Defenses, Duty of Loyalty, Duty, Affirmative Duty to Act, Takeovers & Tender Offers, Trials, Jury Trials, Province of Court & Jury, Duty of Care, Duties & Liabilities of Shareholders, Pretrial Judgments, Nonsuits, Burdens of Proof, Criminal Law & Procedure, Abuse of Public Office, Neglect of Office, Elements, Rebuttal of Presumptions, Meetings & Voting, Special Meetings, Fundamental Changes