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CHAFFIN v. GNI GROUP, INC.

Court of Chancery of Delaware, New Castle County
Sep 3, 1999
C.A. No. 16211-NC (Del. Ch. Sep. 3, 1999)

Summary

holding father-son relationship was sufficient to rebut presumption of independence; "Inherent in the parental relationship is the parent's natural desire to help his or her child succeed . . . [M]ost parents would find it highly difficult, if not impossible, to maintain a completely neutral, disinterested position on an issue, where his or her own child would benefit substantially if the parent decides the issue a certain way."

Summary of this case from Frederick Hsu Living Tr. v. ODN Holding Corp.

Opinion

C.A. No. 16211-NC.

Date Submitted: April 6, 1999.

Date Decided: September 3, 1999.

Norman M. Monhait and Carmella P. Keener, Esquires, of ROSENTHAL MONHAIT GROSS GODDESS, P.A., Wilmington, Delaware; GOODKIND LABATON RUDOFF SUCHAROW, LLP, New York, New York; and HANZMAN CRIDEN KORGE CHAYKIN PONCE HEISE, P.A., Miami, Florida; Attorneys for Plaintiffs.

Robert K. Payson and Michael A. Pittenger, Esquires, of POTTER ANDERSON CORROON, LLP, Wilmington, Delaware, Attorneys for Defendants.


MEMORANDUM OPINION


In this class action brought by former shareholders of GNI Group, Inc. ("GNI"), the defendants, who are GNI's former directors, are charged with having breached their fiduciary duties of care and loyalty to the shareholder class, by negotiating and approving a merger in 1998 that uniquely benefitted one director and the son of another to the exclusion of GNI stockholders generally.

The defendants have moved under Court of Chancery Rule 12(b)(6) to dismiss the second amended complaint ("Complaint") for failure to state a claim upon which relief can be granted. The defendants contend that (i) the plaintiffs have not alleged any cognizable breach of duty of loyalty claims; (ii) the exculpatory clause in GNI's charter bars plaintiffs from recovering money damages for duty of care claims; (iii) rescission is not legally available to remedy the plaintiffs' duty of care claims; and (iv) all claims, which are derivative, were extinguished in the merger, and in any event, the complaint must be dismissed for failure to satisfy the demand requirement of Rule 23.1.

I find, for the reasons next discussed, that these arguments lack merit except in one particular. Accordingly the motion to dismiss will be granted in part and denied in part.

I. BACKGROUND

The pertinent facts are derived from the Complaint under challenge. GNI, a Delaware corporation headquartered in Deer Park, Texas, is a waste management services company that is engaged (through subsidiaries) in the treatment, storage, transportation, and disposal of hazardous and non-hazardous liquid and solid industrial waste and by-product streams. As of February 1, 1998, GNI had outstanding 6,634,525 shares of common stock that were owned by approximately 370 shareholders of record located throughout the United States. Before the merger, GNI's common stock was traded on the NASDAQ National Market.

GNI had a five person Board of Directors, that consisted of defendants Carl V. Rush ("Rush"), Titus H. Harris, Jr. ("Harris Jr."), Newton E. Dudney, M.D. ("Dudney"), G. Stacy Smith ("Smith"), and John W. Lyons, Jr. ("Lyons"), who is not named as a defendant. Rush and Harris Jr. were also GNI officers, Rush being GNI's President and CEO, and Harris Jr. serving as Chairman of the Board. Also named as defendants are two other GNI senior officers who were not directors — Titus H. Harris, III ("Harris III"), Harris Jr.'s son, who was GNI's Executive Vice President, CFO, and Secretary; and Donna L. Ratliff("Ratliff") who was GNI's Treasurer.

On or about May 29, 1997, GNI engaged First Analysis Securities Corporation ("First Analysis"), an investment advisor, to explore potential strategic alternatives and business combinations to increase shareholder value. Of the 41 potential acquirors contacted by First Analysis, one firm, 399 Venture Partners, Inc. ("399 Venture Partners"), ultimately emerged as the highest bidder. On December 30, 1997, 399 Venture Partners sent to GNI a proposed form of letter of intent, offering to acquire GNI for $7.75 per share of GNI common stock.

On January 6, 1998, the GNI Board formed a special committee (the "Special Committee") to consider and evaluate the 399 Venture Partners proposal (or any other proposals that might emerge) for the purpose of obtaining the best available transaction for the stockholders. The Special Committee's original members were Lyons, Smith, and Harris Jr., but Harris Jr. resigned from the Special Committee on January 7, 1998 because by that point it had become likely that his son, Harris III, would continue in the management of GNI if the 399 Venture Partners transaction was consummated.

On January 8, 1999, the Special Committee met with 399 Venture Partners representatives and presented the Company's revised projections for the second half of 1998. Because the revised projections were lower than the Company's original projections, 399 Venture Partners informed the Special Committee that the acquisition price would likely be less than the initial proposed price of $7.75 per share.

After the January 8 meeting, the Special Committee engaged in further discussions and negotiations with 399 Venture Partners, which resulted in a downward revision in the acquisition price from $7.75 per share to $7.00 per share, and a reduction of the termination fee that would be payable to 399 Venture Partners if the Merger was not consummated.

On January 22, 1998, the Special Committee reported to the full Board on the proposed 399 Venture Partners transaction. The Special Committee informed the Board that they (the Committee) were having difficulty reaching agreement on whether to recommend that the Board accept or reject 399 Venture Partner's proposal. (Mr. Smith was in favor of pursuing the transaction; Mr. Lyons was opposed.) The Board was also told that Messrs. Rush and Harris III would continue in their management positions after the Merger and that, unlike the remaining GNI shareholders, each would have an equity interest in post-Merger GNI.

At that meeting, four members of the GNI Board voted to approve in principle the transaction with 399 Venture Partners, with Mr. Lyons voting against. The following day, January 23, 1998, GNI announced in a press release that it had entered into a letter of intent with 399 Venture Partners, whereby the latter would acquire the former in a merger all of GNI's outstanding common stock at $7.00 per share. Under the letter of intent, 399 Venture Partners would have a 60 day exclusivity period to negotiate a definitive agreement. The press release also disclosed that as part of the transaction, certain GNI Board members would continue in a management capacity with the successor enterprise.

On January 28, 1998, the Special Committee interviewed representatives from Sanders Morris Mundy Inc. ("Sanders Morris"), an investment banking firm, and recommended to the GNI Board that the Board retain Sanders Morris as the Board's financial advisors regarding the proposed Merger. The Special Committee also decided that unless another bidder emerged, there was no need for it to have any future meetings and that it should disband.

Members of GNI's management team and representatives of 399 Venture Partners then proceeded to negotiate a definitive agreement and plan of merger (the "Merger Agreement"). At a meeting held on February 10, 1998, the GNI Board approved the Merger Agreement by a four to one vote, with Mr. Lyons voting against. Mr. Lyons voted against the Merger Agreement because he believed that this was not the right time to sell GNI. On the following day, February 11, 1998, defendants Harris Jr., Dudney, Smith, Rush, and Harris III, and others, entered into a Management Voting Agreement, in which they agreed to vote their GNI stock in favor of the Merger.

On February 13, 1998, GNI announced in a press release that: (a) it had agreed to the Merger in which 399 Venture Partners, together with certain members of GNI management, would acquire GNI for $7.00 per share, and (b) certain shareholders whose stock represented 29% of the fully diluted common shares of the Company, had agreed to vote their shares in favor of the Merger. The press release also disclosed that certain members of GNI's management, including Rush and Harris III, were part of the acquiror investment group and would end up owning an equity interest in the post-Merger GNI.

Importantly, the Merger Agreement also provided that certain of the GNI shares held by Rush, Harris III, and Ratliff would not be converted to cash in the Merger, but instead, would be converted into shares of a new Class A common stock of post-Merger GNI (the "Rollover Shares"). In this connection, the Proxy Statement that was sent to GNI stockholders soliciting their approval of the Merger, disclosed that (a) Rush, who owned 278,000 shares, would receive $7.00 per share merger consideration for 241,584 of his shares, and his remaining 36,416 shares would become Rollover Shares; (b) Harris III, who owned 216,370 shares, would receive the $7.00 per share merger consideration for 179,954 of those shares, and his remaining 36,416 shares would become Rollover Shares; and (c) Ratliff, who owned 25,000 shares, would receive the $7.00 per share merger consideration for 22,327 of those shares, while her remaining 2,673 shares would become Rollover Shares.

The Proxy Statement also disclosed that after the Merger, the Rollover Shares held by Rush, Harris III, and Ratliff would represent, in the aggregate, approximately 66% of the Class A Common Stock, and 13.2% of the outstanding common stock of post-Merger GNI. After the Merger, GNI's capital structure would also include a non-voting Class B Common Stock that would be owned entirely by 399 Venture Partners, as well as a Series A Preferred Stock with limited voting rights.

The Series A Preferred Stock's voting rights were limited to extraordinary corporate events, including an amendment to the charter or by-laws.

The GNI shareholders voted to approve the Merger, which was consummated on July 28, 1998. This lawsuit followed.

II. THE CONTENTIONS

The plaintiffs claim that in negotiating and approving the Merger the defendants breached fiduciary duties that they owed to the GNI shareholders. These claims are premised on allegations that Rush, Harris, and Ratliff obtained for themselves financial and voting interests in the Merger that were not shared by the other stockholders generally. More specifically, Rush, Harris III and Ratliff obtained voting control of GNI after the Merger, as well as certain financial benefits to the exclusion of the other shareholders. Those benefits were that, subject to the approval of 399 Venture Partners, (i) the GNI Board of Directors would forgive certain promissory notes of Rush and Harris III and would also reimburse them for any federal income tax liability they incurred by reason of the loan forgiveness; (ii) Rush and Harris III would receive cash bonuses; and (iii) Rush, Harris III, and Ratliff would become entitled to purchase 1,791.35 and 131.7 shares, respectively, of post-merger GNI's Series A Preferred Stock for $100 per share. The Complaint further alleges that the directors agreed to an excessively high ($4 million) termination fee provision in the Merger Agreement to discourage competing bids that might not afford such favorable benefits to Rush, Harris III, and Ratliff.

The GNI Board of Directors agreed to forgive promissory notes from Rush and Harris III in the amounts of $350,000 and $300,000, respectively. The Board also agreed to reimburse Rush and Harris III $215,000 and $185,000, respectively, for federal income taxes owing on the loan forgiveness.

On this motion the defendants seek dismissal of the Complaint on four separate grounds. First, they contend that the plaintiffs have not stated any duty of loyalty claims that would survive business judgment review. Second, they argue that the exculpatory clause in GNI's charter bars any money damages recovery on the plaintiffs' duty of care claims. Third, the defendants assert that rescission is unavailable as a remedy for any adjudicated duty of care violations, because that remedy is not feasible as a matter of law. Fourth, the defendants assert that to the extent the plaintiffs' claims are derivative in character, they must be dismissed because the plaintiffs lost standing to pursue those claims as a result of the Merger, and, also because the plaintiffs failed to make the pre-suit demand required by Rule 23.1.

These contentions generate four issues that must be addressed. (1) Have the plaintiffs stated cognizable claims for breach of duty of loyalty? (2) Are the plaintiffs' duty of care claims barred by the exculpatory charter provision? (3) Would plaintiffs be entitled to rescission of the Merger if they were to prevail on their duty of care claims? (4) Are the plaintiffs' claims derivative? These issues are now considered.

III. ANALYSIS

The standard governing a motion to dismiss under Rule 12(b)(6) is well-established. A claim will be dismissed where it is clear from the allegations of the complaint that the plaintiffs would not be entitled to relief under any set of facts that could be proven to support the claim. All well-pleaded facts alleged in the complaint will be accepted as true, but inferences and conclusions that are unsupported by specific factual allegations will not be accepted as true. In this regard the Court will consider on a Rule 12(b)(6) motion any documents that are incorporated into the complaint by reference.

In re Tri-Star Pictures, Inc. Litig., Del. Supr., 634 A.2d 319, 326 (1993); see also Loudon v. Archer-Daniels-Midland Co., Del. Supr., 700 A.2d 135, 140 (1997).

See supra note 3; see also In re Wheelabrator Technologies Inc. Shareholders Litig., Del. Ch. , C.A. No. 11495, mem. op. at 4, Jacobs, V.C. (Sept. 1, 1992) (citing Grobow v. Perot, Del. Supr., 539 A.2d 180, 187 n. 6 (1988)); Weinberger v. UOP, Inc., Del. Ch. , 409 A.2d 1262, 1264 (1979).

See Vanderbilt Income and Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., Del. Supr., 691 A.2d 609, 613 (1996).

A. THE DUTY OF LOYALTY CLAIMS

The defendants first attack the legal sufficiency of the shareholder plaintiffs' claim that in negotiating and voting for the Merger, the defendant directors breached their duty of loyalty owed to GNI stockholders. Specifically, they claim that Rush had a conflicting self interest because of the substantial benefits he stood to receive under the Merger Agreement, and that Harris Jr. had a conflicting interest because his son, Harris III, would reap substantial economic and career benefits in the Merger. Because of those conflicts, the plaintiffs contend the Merger was not approved by a disinterested board, that it must be reviewed under the entire fairness standard, and, that the pleaded facts state a claim that the Merger was not fair.

The defendants argue that these facts do not state a legally sufficient duty of loyalty claim. They concede that Rush was an interested director who voted for the Merger, but they insist that Harris Jr. was not, because he did not stand to benefit personally from the Merger in any way different from the shareholders generally. Therefore, defendants argue, the Merger was approved by a majority (i.e. three) disinterested and independent directors. For that reason the business judgment standard, under that standard the directors are presumed to have been disinterested and independent and to have exercised due care, is applicable. That presumption, unless rebutted, protects the transaction and shields the directors who approved it from liability. The defendants maintain that to overcome that presumption for purposes of this motion, the Complaint must — but does not — allege facts that would establish that Rush — who was the sole interested director — dominated or controlled the remaining directors. Therefore, defendants conclude, no duty of loyalty claim is stated.

Whether or not a legally sufficient duty of loyalty claim is stated against Harris Jr. turns on whether the Complaint supports an inference that Harris Jr., as a director, must be deemed "interested" in a transaction from which his child stood to benefit substantially in career and economic terms. In this case that issue is pivotal, because if Harris Jr. (the father) may be deemed interested on that basis, then two of the four directors who approved the Merger were conflicted, and as a result, the Merger would not have been approved by a majority of disinterested directors, and the entire fairness standard would apply. If, on the other hand, this circumstance is not sufficient to cause Harris Jr. to be interested, then a majority of independent directors would have approved the Merger, which would be protected under the business judgment standard.

I conclude that the Complaint in this case states a cognizable duty of loyalty claim. In a cash-out merger that amounts to a sale of the company, the duty of the acquired company's board is to obtain the best value reasonably available for the stockholders. To establish a breach of duty of loyalty, the plaintiff must show that the directors either stood on both sides of the transaction and dictated its terms in a self-dealing way, or that the directors received in the transaction a personal benefit that was not enjoyed by the shareholders generally. To be considered disinterested, "the director's decision [must be] based entirely on the corporate merits of the transaction and [not be] influenced by personal or extraneous considerations." Thus, a director who stands to receive a substantial benefit in a transaction that he votes to approve, cannot objectively be viewed as disinterested.

Paramount Communications Inc. v. QVC Network Inc., Del. Supr., 498 A.2d 34 (1994); see also Revlon, Inc. v. MacAndrews Forbes Holdings, Inc., Del. Supr., 506 A.2d 173, 182 (1986).

Cede Co. v. Technicolor, Inc., Del. Supr., 634 A.2d 345, 361 (1988).

See id. at 362.

See id. at 361.

To overcome the presumption that directors who approve a merger exercised disinterested and independent business judgment in making their decision, the plaintiffs must show that the board's decision was not approved by a majority of independent or disinterested directors. Absent approval of the transaction by a disinterested director majority, the burden of proof falls upon the defendants to establish that the transaction was entirely fair to the shareholders.

In re Wheelabrator Tech., supra note 4, at 1205.

Cinerama, Inc. v. Technicolor, Inc., Del. Ch. 663 A.2d 1134, 1134 (1994) aff'd, Del. Supr., 663 A.2d 1156 (1995).

As to Rush, the Complaint alleges a clearly disabling conflict, because Rush stood to gain personally from the approval of the Merger by receiving benefits that would not be received by stockholders generally. Rush, together with Harris III and Ratliff, would receive a substantial benefit in the form of voting control over the post-merger GNI, forgiveness of promissory notes, and reimbursement of any resulting tax liability. Rush also would be awarded a larger cash bonus than he had received previously, as well as the right to purchase class B stock at $100 per share.

The well-pleaded allegations of the Complaint satisfy me that Harris Jr. must be also deemed interested. Inherent in the parental relationship is the parent's natural desire to help his or her child succeed. The father-son relationship here differs from the relationships involved in the cases cited by defendants, because those cases involved personal or professional relationships with other directors. Here, however, the director's relationship was filial. Harris Jr. sat on GNI's Board. His approving vote would result in economic and career benefits to his son. Harris Jr. himself acknowledged this inherent conflict by voluntarily removing himself from the Special Committee. His actions are understandable: most parents would find it highly difficult, if not impossible, to maintain a completely neutral, disinterested position on an issue, where his or her own child would benefit substantially if the parent decides the issue a certain way.

See In re Grace Energy Corp. Shareholders Litig., Del. Ch., C.A. No. 12,464, Hartnett, V.C. (June 26, 1992), Mem. Op. at 10 (holding that mere assertion of a director's personal friendship with corporation's founding family was insufficient to constitute director interest); see also In re The Walt Disney Co. Derivative Litig., Del. Ch. C.A. 15452, Chandler, C. (Oct. 7, 1998) Mem. Op. at 15 (holding that mere allegations of personal or business relationships do not overcome the presumption of independence afforded to all directors).

Because the Complaint sufficiently alleges that Rush and Harris Jr. were both interested with respect to this transaction, it follows (as a matter of pleaded fact) that the Merger was not approved by a majority of independent directors. The Board approved the Merger by a vote of four to one, with Lyons voting against. Of the four directors who voted for the Merger, two — Rush and Harris Jr. — had a disabling conflict. Thus, only two disinterested directors approved the Merger, which was one vote short of the required disinterested majority. On this basis the Complaint alleges a breach of the duty of loyalty because it pleads facts that, if established, would overcome the presumption afforded by the business judgment standard.

B. EFFECT OF EXCULPATORY CERTIFICATE PROVISION

The defendants next argue that the exculpatory clause in GNI's charter bars all of the plaintiffs' money damages claims, because all of those claims fall within the scope of the exculpatory clause. Specifically, the defendants contend that the Complaint, fairly read, alleges only duty of care claims but no duty of loyalty claims. Because the exculpatory clause bars any recovery of money damages for breaches of the duty of care, and because rescission would impracticable and therefore unavailable as a matter of law, the defendants conclude that all of the plaintiffs' claims must be dismissed.

The short answer is that the Court has previously determined that the Complaint does state cognizable claims for breach of the duty of loyalty, which are not covered by the exculpatory clause in GNI's charter. To the extent that the plaintiffs also allege breaches of the fiduciary duty of care, however, the exculpatory clause does bar a money damages remedy for those claims.

Both sides agree on the content and legal effect of the GNI exculpatory clause. Invoking the authority conferred by 8 Del. C. § 102(b)(7), the exculpatory clause found in GNI's Articles of Incorporation states:

A director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as the same exists or may hereafter be amended.

It is established that an exculpatory provision in a certificate of incorporation authorized by § 102(b)(7) shields the corporations' directors against a judgment for money damages except for judgments arising out of claims for breaches of the duty of loyalty, claims for acts constituting bad faith, and claims for the receipt of improper benefits.

See In re Dataproducts Corp. Shareholders Litig., Del. Ch., C.A. No. 11164, Jacobs, V.C. (Aug. 22, 1991), Mem. Op. at 11.

In this case, the plaintiff has stated duty of loyalty claims which, by operation of statute, are not barred by the exculpatory clause. GNI's exculpatory clause would bar the plaintiffs from recovering money damages for the plaintiffs' duty of care claims, but it would not bar any equitable remedies that would flow if those claims were to prevail. That observation leads to the third issue, which is whether any equitable remedy — in particular, rescission of the Merger — would be available if the defendants were ultimately found liable for breaching their duty of care.

C. AVAILABILITY OF RESCISSION AS A REMEDY

The defendants argue that the only available remedy for a breach of the GNI directors' duty of care would be money damages, which is barred by the exculpatory clause. The reason, they say, is that in the circumstances alleged here rescission would be unavailable as a matter of law. The basis for this argument is that given the passage of time since the Merger was consummated, and given that cash was paid to 370 persons who are not before the Court, the Merger would impossible to undo.

It is unnecessary for the Court to address that contention on this motion. On a motion to dismiss all that need be decided is whether a claim is stated upon which any relief could be granted. If that question is answered in the affirmative, the nature of that relief is not relevant and need not be addressed. In this case the defendants do not challenge the legal sufficiency of the duty of care claims, only the availability of one specific remedy. At this stage, to decide whether rescission relief is (or is not) feasible would not only go beyond the scope of a motion to dismiss, but also would be imprudent, because the issue is fact driven and cannot be decided in the absence of an evidentiary record.

D. WHETHER PLAINTIFF HAS PLEADED DIRECT OR DERIVATIVE CLAIMS

Finally, the defendants argue that in all events, the Complaint must be dismissed because though it is styled as a class action, all of the claims alleged are derivative. The defendants rely upon Delaware cases which hold that "claims arising from transactions involving corporate assets that allegedly operate to reduce the consideration received by stockholders in a merger are, in the absence of circumstances not present here, derivative in nature." The defendants then argue that the derivative claims must be dismissed because the plaintiffs failed to satisfy the requirement of Chancery Court Rule 23.1 that plaintiffs make a demand on the board or plead facts sufficient to establish that demand would be futile. In the alternative, the defendants urge that in all events the Merger extinguished the shareholders' right to maintain any derivative claims.

See Kramer v. Western Pacific Indus. Inc., Del. Supr., 546 A.2d 348 (1988).

The plaintiffs respond that their claims are not derivative because they (i) attack the Merger itself, including its structure and the improper personal benefits obtained by GNI's officers and/or directors, and (ii) contend that these aspects of the deal improperly reduced the consideration received by GNI's public shareholders. The plaintiffs rely upon Delaware cases which hold that a claim of this kind is direct, not derivative, and will survive a consummated merger.

Rand v. Western Airlines, Inc., Del. Ch. , C.A. No. 8632, Berger, V.C. (Sept. 11, 1989).

See Cede Co. v. Technicolor, Inc., Del. Supr., 542 A.2d 1182 (1988).

The plaintiffs' position is, in my view, the correct one. In Parnes v. Bally Entertainment, our Supreme Court held that "[i]n order to state a direct claim with respect to a merger, a stockholder must challenge the validity of the merger itself, usually by charging the directors with breaches of fiduciary duty resulting in unfair dealing and/or unfair price." Here, the plaintiffs claim that the defendant directors breached their fiduciary duties of care and loyalty to GNI stockholders by approving the Merger, which conferred upon Rush, Harris III, and Ratliff substantial benefits not shared by GNI stockholders generally. The plaintiffs claim that the defendants engaged in unfair dealing, and that by negotiating and approving a merger on these unfair terms, the defendants' actions resulted in an unfairly low price to the shareholder class. These claims, in my view, constitute a challenge to the validity of the Merger itself, and, therefore, are not derivative claims.

See Del. Ch. , C.A. No. 15192, Chandler, C. at 5 (Feb. 3, 1998).

Because the plaintiffs have alleged direct claims of breach of fiduciary duty, those claims were not extinguished in the Merger, and were not subject to the demand requirements of Rule 23.1.

IV. CONCLUSION

For the foregoing reasons, the motion to dismiss is denied, except that the motion is granted to the extent the Complaint alleges claims for money damages for breach of the defendants' duty of care. IT IS SO ORDERED.


Summaries of

CHAFFIN v. GNI GROUP, INC.

Court of Chancery of Delaware, New Castle County
Sep 3, 1999
C.A. No. 16211-NC (Del. Ch. Sep. 3, 1999)

holding father-son relationship was sufficient to rebut presumption of independence; "Inherent in the parental relationship is the parent's natural desire to help his or her child succeed . . . [M]ost parents would find it highly difficult, if not impossible, to maintain a completely neutral, disinterested position on an issue, where his or her own child would benefit substantially if the parent decides the issue a certain way."

Summary of this case from Frederick Hsu Living Tr. v. ODN Holding Corp.

holding father-son relationship was sufficient to rebut presumption of independence; "Inherent in the parental relationship is the parent's natural desire to help his or her child succeed . . . [M]ost parents would find it highly difficult, if not impossible, to maintain a completely neutral, disinterested position on an issue, where his or her own child would benefit substantially if the parent decides the issue a certain way."

Summary of this case from Frederick Hsu Living Tr. v. ODN Holding Corp.

holding complaint stated individual claims where insiders were allowed to roll equity into the post-merger company in addition to receiving other benefits

Summary of this case from Carsanaro v. Bloodhound Techs., Inc.

finding that a father "must be deemed `interested' in a transaction from which his child stood to benefit substantially in career and economic terms" and that "the entire fairness standard would apply"

Summary of this case from ATR-KIM ENG FINANCIAL CORP. v. ARANETA
Case details for

CHAFFIN v. GNI GROUP, INC.

Case Details

Full title:WILLIAM CHAFFIN and MARCIA CHAFFIN, On Behalf of Themselves And All Others…

Court:Court of Chancery of Delaware, New Castle County

Date published: Sep 3, 1999

Citations

C.A. No. 16211-NC (Del. Ch. Sep. 3, 1999)

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