Opinion ID: 1497598
Heading Depth: 1
Heading Rank: 21

Heading: Disclosure to Shareholders

Text: Another well-recognized aspect of fair dealing is the board of directors' duty of disclosure to the shareholders. Weinberger v. UOP, Inc., 457 A.2d at 711. In its original post-trial personal liability opinion, the Court of Chancery concluded there was no merit in any of Cinerama's disclosure claims. With one variation, this Court affirmed that ruling. Cede II, 636 A.2d at 956-57. The variation was that this Court, while affirming the ruling that Ryan's undisclosed and assumed interest was not material for disclosure purposes pursuant to the holding in Rosenblatt, directed the Court of Chancery to consider Ryan's assumed interest in the context of Technicolor's charter requirement of director unanimity. Id. As to that limited disclosure issue, the Court of Chancery held on remand that the unanimity requirement in Technicolor's charter was unaffected by director interest in the absence of fraud or mutual mistake. Cinerama, 663 A.2d at 1155. Thus, it concluded that no disclosure violation could be based on Sullivan's disclosed interest, and that Ryan's undisclosed but assumed interest was immaterial. The Court of Chancery's conclusion that the directors had complied with the disclosure duty is not, in and of itself, determinative of entire fairness, but it does have persuasive substantive significance. See Rabkin v. Philip A. Hunt Chem. Corp., Del.Supr., 498 A.2d 1099, 1104-05 (1985). First, it removes this case from the virtual per se rule of damages for breach of the fiduciary duty of disclosure this Court recognized in In re Tri-Star Pictures, Inc. Litig., Del.Supr., 634 A.2d 319, 333 (1993). Second, it bears directly upon how the approval of the ... stockholders [was] obtained. Weinberger v. UOP, Inc., 457 A.2d at 711. Third, it places this case into the category of a non-fraudulent transaction, wherein this Court recognizes that price may be the preponderant consideration outweighing other features of the merger. Id.