A preliminary injunction will not issue unless the complainant satisfies the court that there is at least a reasonable probability of ultimate success upon a final hearing. This rule applies not only in cases where the probability of ultimate success is because of a question of law but as well where it appears from an examination of evidence upon a disputed question of fact.
Plaintiff stockholder Gimbel brought an action against The Signal Companies, Inc.’s seeking injunctive relief to prevent the consummation of the pending sale of all of the outstanding capital stock of Signal Cos.’ oil company subsidiary. Gimbel contended that the meeting of The Signal Companies, Inc.’s board of director's in which the sale was decided was not properly noticed and that the agreed upon price was recklessly inadequate.
Is the plaintiff stockholder entitled to a preliminary injunction?
The court found that the sale of the oil company stock did not constitute the sale of all or substantially all of The Signal Companies, Inc.’s assets and therefore, plaintiff's argument that the sale violated Del. Code Ann. tit. 8, § 271(a), had no reasonable probability of success on the merits. However, the court also found that plaintiff had a reasonable prospect of success on the merits since the record indicated a gross disparity between the fair market value and the agreed upon sale price. The court determined that while the circumstances under which defendant had made the sale decision were not enough to raise a reasonable probability that plaintiff would be able to pierce the business judgment standard, the discrepancies in the values of the company asserted by the parties were so great that an immediate comprehensive investigation into fair value was warranted and that denial of an injunction would probably dispose of the case. Gimbel was ordered to post a bond in the event The Signal Companies, Inc.’s was found to be wrongfully enjoined.