Ivanhoe Partners v. Newmont Mining Corp. - 535 A.2d 1334 (Del. 1987)

Rule:

The board of directors has the ultimate responsibility for managing the business and affairs of a corporation. Del. Code Ann. tit. 8, § 141(a) (1983). In meeting this responsibility the board is charged with fiduciary obligations of care and loyalty. Under the business judgment rule, directors' decisions are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.

Facts:

In an attempt to block a hostile tender offer by Ivanhoe Partners and Ivanhoe Acquisition Corporation (collectively "Ivanhoe"), Newmont declared a $33 per share dividend to all its stockholders, which helped its largest shareholder, Consolidated Gold Fields PLC ("Gold Fields"), to engage in a "street sweep" of Newmont stock, thereby increasing Gold Field's ownership of Newmont from 26% to 49.7%. Ivanhoe sought to enjoin the foregoing maneuvers as inequitable entrenchment devices violative of Newmont's and Gold Fields' fiduciary duties to Newmont shareholders under Delaware law. The Court of Chancery granted a temporary restraining order enjoining the consummation of Gold Fields' street sweep pending determination of Ivanhoe's motion for a preliminary injunction. However, after a subsequent hearing, the court vacated the temporary restraining order and denied Ivanhoe's motion for a preliminary injunction, ruling that any breach of fiduciary duty, which may have existed prior to the temporary restraining order, had been rectified by a subsequent amendment to the standstill agreement between Newmont and Gold Fields. Ivanhoe challenged the judgment in an interlocutory appeal.

Issue:

Were the maneuvers taken by Newmont inequitable entrenchment devices, thereby allowing Ivanhoe to enjoin the same?

Answer:

No.

Conclusion:

On appeal, the Court held that Newmont had both a duty and responsibility to oppose threats presented by Ivanhoe and the defendants' largest stockholder, and that the actions taken were reasonable in relation to the threats posed. According to the Court, the board's actions taken by a majority of independent directors were entitled to the protection of the business judgment rule. As plaintiffs failed to demonstrate that the directors were motivated solely by entrenchment concerns, or a breach of duty of loyalty or care, the Court would not substitute its judgment for that of the board.