Partial Summary Judgment Denied by Court Of Chancery On "Entire Fairness" And Disclosure Grounds
In re Tele-Communications Inc. Shareholders Litig
., C.A. No. 16470, 2005 WL 3547674 (Del. Ch. Dec. 21, 2005), opinion revised and superseded by
No. CIV. A. 16470, 2005 WL 3642727 (Del. Ch. Dec. 21, 2005), (revised Jan. 10, 2006)(Westlaw citation not available).
This summary judgment action originates from a Consolidated Amended Complaint that alleged nondisclosure of material information <and a lack of fairness of the impugned merger transaction.
Plaintiff, a TCI shareholder, brought a purported class action against its directors alleging several disclosure violations and breach of fiduciary duties in TCI's merger with AT&T's subsidiary. The merger was approved by 99.89% of TCI shareholders and challenged for fairness. The court applied the TCS >Inds. V. Northway
< materiality standard adopted by Delaware courts in assessing the disclosure claims. The court found the level of care adopted by the committee and the nondisclosure of the special (merger) committee's compensation were potentially improper, because the compensation was approved prior to the merger although the actual amount was decided after that transaction occurred.
The court found that the level of care adopted by the special committee in considering the premium for one of the two series of shares also presented triable issues. The court ruled that the mandate presented to the special committee conflicted with their required independence. The court observed that directors on the committee appeared interested through the premium-based shares they held because they were involved in recommending a value for their own holdings consisting of the same shares. The court also concluded that the committee was not fully informed and its process indicated lack of bargaining power. The court however granted summary judgment on other disclosure claims, finding those nondisclosures immaterial to its analysis under Northway
The court also found the merger presented entire fairness issues for trial because board members demonstrated lack of independence and were not disinterested.