Brief Fact Summary. Plaintiff, William Weinberger, brought this action to challenge the shareholder vote for a cash-out merger between Defendant, UOP, Inc., and the Defendant majority shareholder, The Signal Companies, Inc. Plaintiff asserted that Signal breached their fiduciary duty to the minority shareholders by withholding relevant information and not disclosing conflicts of interest.
Synopsis of Rule of Law. A majority shareholder owes a fiduciary duty to minority shareholders to provide all relevant information that would pertain to a proposed cash-out merger.
The Court may consider proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court.View Full Point of Law
Issue. The issue is whether the majority shareholder breached their fiduciary duty to the minority shareholders by withholding relevant information from non-Signal UOP directors and minority shareholders.
Held. The Supreme Court of Delaware held that the shareholder vote was not an informed vote and that Signal breached their duty as a majority shareholder to the minority shareholders. Therefore the minority shareholders are entitled to a greater value (to be determined by weighing all relevant factors such as the Arledge-Chitiea study value). The evidence indicated a lack of fair dealing by the majority, such as withholding the Arledge-Chitiea report from the UOP board and the shareholders. The only information the outside directors of UOP had at their disposal was a hurried fairness opinion by an arguably interested party. The board members that served with Signal and UOP breached their duty as UOP directors as well by not providing Arledge-Chitiea study. They are not exempt from their duties because the entities are a parent and a subsidiary.
Discussion. The court places the same burden on majority shareholders for mergers as they would place on them for inside information. A majority shareholder can not gain in a purchase by withholding information to a party whom they owe a fiduciary duty.