Opinion ID: 1934995
Heading Depth: 1
Heading Rank: 54

Heading: Remand to Chancery

Text: In this case, the Court of Chancery erred by substituting its judgment, that the Repurchase Program was unnecessary, for that of the Board. The Unitrin Board had the power and the duty, upon reasonable investigation, to protect Unitrin's shareholders from what it perceived to be the threat from American General's inadequate all-cash for all-shares Offer. Unocal, 493 A.2d at 958. The adoption of the poison pill and the limited Repurchase Program was not coercive and the Repurchase Program may not be preclusive. Although each made a takeover more difficult, individually and collectively, if they were not coercive or preclusive the Court of Chancery must determine whether they were within the range of reasonable defensive measures available to the Board. Accord Cheff v. Mathes, Del.Supr., 199 A.2d 548, 554-56 (1964). If the Court of Chancery concludes that individually and collectively the poison pill and the Repurchase Program were proportionate to the threat the Board believed American General posed, the Unitrin Board's adoption of the Repurchase Program and the poison pill is entitled to review under the traditional business judgment rule. The burden will then shift back to the plaintiffs who have the ultimate burden of persuasion [in a preliminary injunction proceeding] to show a breach of the directors' fiduciary duties. Moran v. Household Int'l, Inc., Del.Supr., 500 A.2d 1346, 1356 (1985) ( citing Unocal, 493 A.2d at 958). In order to rebut the protection of the business judgment rule, the burden on the plaintiffs will be to demonstrate, by a preponderance of the evidence that the directors' decisions were primarily based on [(1)] perpetuating themselves in office or [(2)] some other breach of fiduciary duty such as fraud, overreaching, lack of good faith, or [(3)] being uninformed. Unocal, 493 A.2d at 958 (emphasis added).