Opinion ID: 1934995
Heading Depth: 1
Heading Rank: 12

Heading: Determines Judicial Review

Text: In this case, before the Court of Chancery could evaluate the reasonable probability of the plaintiffs' success on the merits, it had to determine the nature of the proceeding. When shareholders challenge directors' actions, usually one of three levels of judicial review is applied: the traditional business judgment rule, the Unocal standard of enhanced judicial scrutiny, or the entire fairness analysis. [7] Because the effect of the proper invocation of the business judgment rule is so powerful and the standard of entire fairness so exacting, the determination of the appropriate standard of judicial review frequently is determinative of the outcome of [the] litigation. Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d at 1279 ( citing AC Acquisitions Corp. v. Anderson, Clayton & Co., Del.Ch., 519 A.2d 103, 111 (1986)). The plaintiffs initially argued that Unitrin's Board put the corporation up for sale by implementing the Repurchase Program. See Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d at 182. The Court of Chancery ruled, however, that the plaintiffs had not established with reasonable probability that the Repurchase Program constituted a change of control from Unitrin's public stockholders to the stockholder directors. See Paramount Communications, Inc. v. QVC Network, Inc., Del.Supr., 637 A.2d 34 (1994). The ruling is not at issue in this interlocutory appeal. The plaintiffs alternatively argued that the conduct of the Unitrin Board should be examined under the entire fairness standard. The Court of Chancery concluded that the Board's implementation of the poison pill and the Repurchase Program, in response to American General's Offer, did not constitute self-dealing that would require the Unitrin Board to demonstrate entire fairness. See Nixon v. Blackwell, Del.Supr., 626 A.2d 1366, 1376 (1993); Weinberger v. UOP, Inc., Del. Supr., 457 A.2d 701, 710 (1983). Consequently, the Court of Chancery addressed the plaintiffs' third alternative argument, that the Unitrin Board's actions should be examined under the standard of enhanced judicial scrutiny this Court set forth in Unocal.