Opinion ID: 2308864
Heading Depth: 1
Heading Rank: 6

Heading: The Sony Merger

Text: On September 27, 1989, during the pendency of this lawsuit, Sony and Coca-Cola executed a merger agreement whereby Sony Company (Sony Acquisition) made a tender offer for all of Tri-Star's outstanding shares at $27 cash per share. The tender offer was to be followed by a cash out merger for all untendered shares. At the time of the tender offer, Tri-Star stock had been trading in a range from $7.25 to $16 per share. Upon completion of the tender offer, Sony Acquisition was merged into Tri-Star and each remaining stockholder was cashed out at $27 per share. The Sony merger was implemented on November 6, 1989, and Tri-Star became a wholly-owned subsidiary of Sony.
The Complaint, filed on December 15, 1987, and amended on April 5, 1988, alleged numerous violations of Delaware law including breaches of fiduciary duty, inadequate and misleading disclosures, and illegal by-law amendments, all of which arose out of the Combination. We address only those portions of the Amended Complaint that are pertinent here. Count I is based on alleged breaches of the fiduciary duty of loyalty in that the Combination involved self-dealing, constructive fraud, and did not meet the test of entire fairness that Coca-Cola, as the controlling stockholder, owed the minority. Count II alleges breaches of the duty of disclosure. Count III challenges the validity of certain charter amendments, including Article Sixth thereof. Count V charges manipulation of control to benefit Coca-Cola to the improper detriment of the minority. Count VII charges conspiracy in that Coca-Cola aided and abetted Tri-Star directors in their breaches of fiduciary duty. [8] Plaintiffs began discovery in early January, 1988, but at defendants' behest all discovery was stayed. Defendants moved to dismiss the Amended Complaint, charging that the claims were derivative and that the plaintiffs failed to comply with the demand requirements of Chancery Rule 23.1. Finding that demand was excused, the trial court declined to decide whether plaintiffs' Amended Complaint stated any individual or class claims. Siegman v. Tri-Star Pictures, Inc., Del.Ch., C.A. No. 9477, Jacobs, V.C., slip op. at 26, 33, 1989 WL 48746 (May 5, 1989, revised May 30, 1989) ( Tri-Star I ). However, the court dismissed two of the plaintiffs' challenges to the Tri-Star certificate amendments (under Count III) and the entire complaint against HBO. Between May and October of 1989 plaintiffs took some discovery by propounding interrogatories and seeking document production. They then moved for partial summary judgment under Count III, challenging the validity of Article Sixth of Tri-Star's charter. Thereafter, on November 6, 1989, the Sony-Tri-Star merger was consummated and Article Sixth was not retained in Tri-Star's Amended Certificate of Incorporation. On December 1, 1989, defendants filed their second motion to dismiss on new grounds that the merger had eliminated plaintiffs' standing to maintain derivative claims on behalf of Tri-Star. In re Tri-Star Pictures, Inc., Del.Ch., C.A. No. 9477 (Consolidated), Jacobs, V.C., slip op. 1990 WL 82734 (June 14, 1990) ( Tri-Star II ). As a result, the Court of Chancery dismissed all but two of plaintiffs' claims on the grounds that the Article Sixth cause of action (under Count III) was moot, that the common law fraud claim (Count IV) failed to allege reliance, and that the remaining claims were solely derivative. The court declined to dismiss plaintiffs' other claims relating to inadequate disclosure in the proxy materials and allowed them to proceed on plaintiffs' compensatory damages claim for the wrongful deprivation of the right to vote. Following additional discovery, defendants moved for summary judgment on the ground that the plaintiffs' theory and evidence of damages were inadequate as a matter of law, since, defendants claim, damages are an indispensable element of the plaintiffs' cause of action. On January 7, 1991, two days before oral argument on that motion, the plaintiffs filed a further response to defendants' interrogatories, reducing their initial $25 per share claim to $4 per share. On February 21, 1992, the Court of Chancery granted defendants' motion for summary judgment, dismissing all of the plaintiffs' remaining claims on the basis that the plaintiffs had not shown, and could not show, sufficient individual injury to support any award of damages by the court. The plaintiffs appeal on several fronts. They challenge the trial court's February 21, 1992 opinion granting summary judgment and those portions of the May 5, 1989 (revised May 30, 1989) and June 14, 1990 opinions that granted defendants' motions to dismiss.