Law School Case Brief
Rabkin v. Philip A. Hunt Chem. Corp. - 498 A.2d 1099 (Del. 1985)
On a motion to dismiss for failure to state a claim it must appear with a reasonable certainty that a plaintiff would not be entitled to the relief sought under any set of facts, which could be proven to support the action.
On July 5, 1984, Philip A. Hunt Chemical Corporation (Hunt) merged with its majority stockholder, Olin Corporation (Olin) pursuant to a merger agreement that was recommended by the Hunt board of directors. On March 1, 1983, Olin bought 63.4% of the outstanding shares of Hunt's common stock from Turner and Newall Industries, Inc. (Turner & Newall) at $25 per share pursuant to a Stock Purchase Agreement (the agreement). At Turner & Newall's insistence, the agreement also required Olin to pay $25 per share if Olin acquired the remaining Hunt stock within one year thereafter. Frieda Rabkin and the other minority stockholders of Hunt challenge the proposed Olin-Hunt merger on the grounds that the price offered was grossly inadequate because Olin unfairly manipulated the timing of the merger to avoid the one year commitment, and that specific language in Olin's Schedule 13D, filed when it purchased the Hunt stock, constituted a price commitment by which Olin failed to abide, contrary to its fiduciary obligations. Hunt and Olin filed a motion to dismiss, arguing that the minority stockholders' claims were primarily directed to the issue of fair value and therefore appraisal was the only available remedy. The Vice Chancellor granted the Hunt’s and Olin’s' motion to dismiss on the ground that the Rabkin and the other minority stockholders’ complaints failed to state claims upon which relief could be granted. The court's rationale was that absent claims of fraud or deception a minority stockholder's rights in a cash-out merger were limited to an appraisal.
Did the trial court err in dismissing the minority stockholders’ claims on the ground that absent deception, the minority stockholders’ sole remedy is an appraisal?
The Court held that the facts alleged by the minority stockholders regarding the majority shareholders' avoidance of the one-year commitment supported a claim of unfair dealing that was sufficient to defeat the motion to dismiss.
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