Opinion ID: 1952521
Heading Depth: 1
Heading Rank: 5

Heading: Lynch's Independent Committee

Text: In the case sub judice, the Court of Chancery observed that although Alcatel did exercise control over Lynch with respect to the decisions made at the August 1, 1986 board meeting, it does not necessarily follow that Alcatel also controlled the terms of the merger and its approval. This observation is theoretically accurate, as this opinion has already stated. Weinberger v. UOP, Inc., 457 A.2d at 709-10 n. 7. However, the performance of the Independent Committee merits careful judicial scrutiny to determine whether Alcatel's demonstrated pattern of domination was effectively neutralized so that each of the contending parties had in fact exerted its bargaining power against the other at arm's length. Id. The fact that the same independent directors had submitted to Alcatel's demands on August 1, 1986 was part of the basis for the Court of Chancery's finding of Alcatel's domination of Lynch. Therefore, the Independent Committee's ability to bargain at arm's length with Alcatel was suspect from the outset. The Independent Committee's original assignment was to examine the merger with Celwave which had been proposed by Alcatel. The record reflects that the Independent Committee effectively discharged that assignment and, in fact, recommended that the Lynch board reject the merger on Alcatel's terms. Alcatel's response to the Independent Committee's adverse recommendation was not the pursuit of further negotiations regarding its Celwave proposal, but rather its response was an offer to buy Lynch. That offer was consistent with Alcatel's August 1, 1986 expressions of an intention to dominate Lynch, since an acquisition would effectively eliminate once and for all Lynch's remaining vestiges of independence. The Independent Committee's second assignment was to consider Alcatel's proposal to purchase Lynch. The Independent Committee proceeded on that task with full knowledge of Alcatel's demonstrated pattern of domination. The Independent Committee was also obviously aware of Alcatel's refusal to negotiate with it on the Celwave matter.