Use this button to switch between dark and light mode.

Experience a New Era in Legal Research with Free Access to Lexis+

Orman v. Cullman

Court of Chancery of Delaware, New Castle

December 21, 2001, Submitted ; February 26, 2002, Decided

Civil Action No. 18039

Opinion

 [*13]  CHANDLER, Chancellor

This purported class action involves alleged breaches of fiduciary duty in connection with the cash-out merger of the public shareholders ("Unaffiliated Shareholders" or "Public Shareholders") of General Cigar Holdings, Inc. ("General Cigar" or the "Company"). According to the complaint, plaintiff Joseph Orman ("Orman") is and was the owner of General Cigar Class A common stock at all times relevant to this litigation. Orman brings this suit on behalf of himself and the Public Shareholders [**2]  of General Cigar Class A common stock against General Cigar and its eleven-member board of directors (collectively the "Board"). 1

 [*14]  On January 19, 2000 the Board unanimously approved a merger agreement pursuant to which a subsidiary of an unaffiliated third party, Swedish Match AB ("Swedish Match"), would purchase the shares [**3]  owned by the Unaffiliated Shareholders of General Cigar. 2 On April 10, 2000 the Company filed with the Securities and Exchange Commission an amended proxy statement ("Proxy Statement") relating to this proposed merger.

The complaint first alleges breaches of fiduciary duty with respect to the Board's approval of (and the fairness of) the proposed merger. Orman contends [**4]  that Board approval of the merger was ineffective and improper because a majority of the defendant directors was not independent and/or disinterested. He further alleges that the defendant directors violated their fiduciary duty of loyalty 3 by entering into a transaction that was unfair to the Public Shareholders of General Cigar and usurped for themselves corporate opportunities rightfully belonging to all General Cigar shareholders.

 [**5]  Orman also asserts that the Board breached its duty of disclosure. Specifically, he alleges that the Proxy Statement soliciting shareholder approval of the proposed merger omitted material facts necessary for the Public Shareholders to make a fully informed decision with regard to their vote for or against the merger.

Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.

794 A.2d 5 *; 2002 Del. Ch. LEXIS 18 **; 2002 WL 356156

JOSEPH ORMAN, Plaintiff, v. EDGAR M. CULLMAN, SR., EDGAR M. CULLMAN, JR., SUSAN R. CULLMAN, JOHN L. ERNST, PETER J. SOLOMON, BRUCE A. BARNET, JOHN L. BERNBACH, THOMAS C. ISRAEL, DAN W. LUFKIN, GRAHAM V. SHERREN, FRANCES T. VINCENT, JR. and GENERAL CIGAR HOLDINGS, INC., Defendants.

Subsequent History:  [**1]  Date Revised March 1, 2002. Released for Publication March 6, 2002.

Motion denied by, Sub nomine at Orman v. General Cigar Holdings, 2002 Del. Ch. LEXIS 137 (Del. Ch., Nov. 13, 2002)

Judgment entered by Orman v. Cullman, 2004 Del. Ch. LEXIS 150 (Del. Ch., Oct. 20, 2004)

Disposition: Defendants' motion to dismiss fiduciary duty claims asserted in plaintiff's complaint was denied. Defendants' motion to dismiss the disclosure claims asserted in plaintiff's complaint was granted with respect to all such disclosure claims except a claimed omission.

CORE TERMS

Cigar, shareholders, proxy statement, merger, disclosure, allegations, motion to dismiss, surviving, stock, special committee, Unaffiliated, headquarters, exculpatory provision, matter of law, disinterested, omission, defendants', asserts, shares, fair market value, negotiations, fiduciary duty, rebut, pled, business judgment rule, duty of loyalty, disclose, loyalty, consulting contract, business judgment

Business & Corporate Law, Directors & Officers, Management Duties & Liabilities, General Overview, Governments, Fiduciaries, Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Dismissal, Involuntary Dismissals, Failure to State Claims, Fiduciary Duties, Business Judgment Rule, Defenses, Scope of Authority, Shareholder Duties & Liabilities, Controlling Shareholders, Causes of Action, Justiciability, Standing, Burdens of Proof, Meetings & Voting, Special Meetings, Fundamental Changes, Evidence, Burdens of Proof, Allocation, Burden Shifting, Mergers & Acquisitions Law, Takeovers & Tender Offers, Duties & Liabilities of Directors & Officers, Mergers, Summary Judgment, Administrative Law, Judicial Review, Reviewability, Factual Determinations, Corporate Governance, Shareholders, Causes of Action, Self-Dealing, Pleadings, Amendment of Pleadings, Duty of Loyalty, Torts, Intentional Torts, Breach of Fiduciary Duty, Elements, Transportation Law, Carrier Duties & Liabilities, Embargos, Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Exculpatory Clauses, Supporting Materials, Exculpatory Clauses, Entitlement as Matter of Law, Discovery & Disclosure