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The concept of entire fairness has two components: fair dealing and fair price. These prongs are not independent, and a court does not focus on each of them individually. Rather, the court determines entire fairness based on all aspects of the entire transaction. Fair dealing involves 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. Fair price involves questions of 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.
Plaintiff minority shareholders filed a class action against defendants, a controlling shareholder, a corporation, and its directors, seeking damages for an allegedly inadequate price paid for publicly held shares. Plaintiffs also asserted a claim against defendants, an acquisition and a merger company, for aiding and abetting a breach of fiduciary duty. Plaintiffs contended that the controlling shareholder breached his fiduciary duties by negotiating benefits for himself that were not shared with the plaintiffs, and that the directors breached their fiduciary duties by allowing the merger to be negotiated through an allegedly deficient process and voting to approve the merger. Defendants contended that in reviewing the case, the business judgment standard of review was appropriate. The parties filed cross-motions for summary judgment.
2) Yes, but only with respect to plaintiffs’ disclosure claims.
The court concluded that the entire fairness or business judgment standard of review was appropriate since the transaction was recommended by a disinterested and independent special committee, and approved by stockholders in a non-waivable vote of the majority of all the minority stockholders. The court further concluded that the factual and legal disputes regarding the persuasive value of the financial advisor's opinion on the issue of fair price precluded entry of summary judgment on that issue. Nor was summary judgment proper on the issue of fair dealing, as the parties disputed whether the share price was depressed as a result of the controlling shareholder's self-dealing transactions or lack of control premium attributable to a minority position in the company. As for the disclosure claims, defendants were entitled to summary judgment on one disclosure claim, as the proxy statement was not required, under Delaware law, to include the MS's characterization of the special committee process.