Court Opinion

ID: 4948636
Source: CourtListenerOpinion
Date Created: 2021-09-24 12:41:45.15051+00
Date Added: 2024-06-11T08:15:12.396271
License: Public Domain

DUFFY, Retired Justice,
dissenting in part:
I concur in that part of the judgment of the Court which determines that American General has standing as a stockholder to sue Continental for alleged breaches of fiduciary duty. And, while I agree that American General has established its right to relief based on § 3.8 of the Stock Warrants, in my view, it cannot now be determined as a matter of law on unquestioned facts, that American General is entitled to exchange rights for Texas Air stock.
A.
This is an interlocutory appeal from an order of the Court of Chancery ruling on cross motions for (partial) summary judgment. The case arises from a dispute between the parties over their respective rights in a contract (which was divided into 5 separate documents) between them.
Continental and the other defendants (defendants) sought a summary judgment on the ground that they were entitled to it as a matter of law based on their reading of the contract, particularly the Stock Warrants (one of the 5 documents) held by American General and the related plaintiff (plaintiffs). A majority of the Court affirms the Vice Chancellor’s order denying Continental’s motion for summary judgment and I agree with that conclusion.1 In *1170brief, defendants are not entitled to judgment because the specific language of the Warrants gives plaintiffs the right to acquire, after merger, the quantum of “stock, securities or property” given in the merger in exchange for the number of shares to which American General had a right, had the Warrants been exercised immediately prior to merger. And so plaintiffs are entitled to obtain that aggregate, whatever it may be.
The same provision of § 3.8 which bars judgment to defendants applies to plaintiffs’ claim and, under that language, plaintiffs have shown their right to relief. In sum, by proving the Warrants and the merger and that consideration (“property”) had been given in exchange for Continental stock, plaintiffs have established the liability of defendants and their right to a judgment. Compare Gamble v. Penn Valley Crude Oil Corp., Del.Ch., 104 A.2d 257 (1954) (in which a corporation had outstanding a valid option to buy its shares at the time when it voluntarily filed a certificate of dissolution).
But are plaintiffs entitled to a summary judgment determining now that they are entitled to exchange rights for Texas Air stock? That is the inquiry before the Court and it invokes familiar and settled rules of procedure.
B.
Rule 56(c) of the Court of Chancery provides that a summary judgment sought shall be rendered forthwith, if the pleadings and affidavits (and other documents) “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law”.
The case law applying Rule 56(c) is well known and citation thereof seems superfluous. But I list some of the cases, not because the law is uncertain but because, in my view, the majority has ignored the black letter law recited time and again in the decisions. Thus, a party moving for a summary judgment has the burden to prove, clearly, the absence of any genuine issue of fact and any doubt must be resolved against the moving party. Brown v. Ocean Drilling & Exploration Company, Del.Supr., 403 A.2d 1114, 1115 (1979). And, a motion for summary judgment “must be denied if there is any reasonable hypothesis by which the opposing party may recover, or if there is a dispute as to a material fact or the inferences to be drawn therefrom.” Bershad v. Curtiss-Wright Corp., Del.Supr., 535 A.2d 840, 844 (1987), quoting Vanaman v. Milford Memorial Hospital, Inc., Del.Supr., 272 A.2d 718, 720 (1970). In considering a motion for summary judgment the Court does not weigh evidence presented by either party. Empire of America v. Commercial Credit, Del.Supr., 551 A.2d 433, 435 (1988), citing Continental Oil Co. v. Pauley Petroleum, Inc., Del.Supr., 251 A.2d 824, 826 (1969). And the Court views all facts in the light most favorable to the non-moving party. Baylis v. Wilmington Center, Inc., Del. Supr., 477 A.2d 1051, 1057 (1984).
C.
The majority acknowledges the general rule that, on cross-motions for summary judgment, the Court is not obliged to give judgment for either party but, rather, the Court’s duty is to independently determine whether there is a genuine issue of material fact. The majority excuses itself from performing that duty by saying that defendants had said that all issues presented are issues of law and defendants cannot now raise a question of fact.2 (At 1164).
*1171There is a certain irony to that ruling because, after refusing to consider defendants’ argument as to a fact issue, the majority immediately examines the “surrounding circumstances” (At 1165) — all of them factual — and then reaches a conclusion from those circumstances, particularly with respect to what Texas Air intended in granting the Employee Stock Option. And the majority in so doing, not only failed to give defendants (as the parties opposing plaintiffs’ motion) the benefit of construing ambiguities in their favor (contrary to Va-naman, Ocean Drilling, Bershad, and many others) but, moreover, did not even consider defendants’ affidavit.
The merger agreement does not refer in any way to the Option offered by Texas Air to former employees of Continental. The issue then is whether the record as to the “surrounding circumstances” (At 1165) shows on unquestioned facts that Texas Air intended to make the Option “merger consideration”. That term is not defined in the Court’s opinion, but I take it to mean an option (to buy %o share of Texas Air’s stock for $16.50) given in exchange for Continental shares after the merger.
The terms of merger were agreed upon in December, 1986, and the merger was consummated on February 6, 1987. The majority opinion acknowledges that Texas Air’s first Option plan was withdrawn and that the plan executed in 1987 had additional requirements — “qualifying Continental employee-shareholders would receive options to purchase Texas Air common stock — exercisable eighteen months after the merger” (At 1163). And yet to prove that Texas Air intended to make that Option “merger consideration” the majority relies on a 1985 letter written by Texas Air counsel; a June, 1986 memorandum of counsel; and a September, 1986 bulletin to employees — all of them predating December, 1986 and all of them ambiguous3 as to whether they show that, in February, 1987, Texas Air gave the Option in exchange for Continental shares to a special class of stockholders. And the same uncertainty appears in the only record reference by Texas Air on the date of the merger.
The majority does not consider an affidavit, dated January 21, 1987, by a Texas Air Senior Vice President and Corporate Treasurer, stating that the exchange Option was originally proposed to be a part of the merger transaction but the
transaction was changed so all Continental stockholders, including employees, will get exactly the same merger consideration, i.e., $16.50 cash per share. Texas Air will then grant each employee an option which will require the employee to continue in the employ of Continental for eighteen months following the merger date. The option will allow the employee to purchase, for $16.50, eight-tenths of a share of Texas Air common stock for every share of Continental common stock owned by that employee on October 31, 1985 and on the merger date. Texas Air views this option as an employee benefit and incentive.
D.
The majority of the Court does not argue that, as a matter of law, defendants were unable to amend or withdraw the first Option plan. It is undisputed that they did so. And the Court does not say that Texas Air was unable to adopt an Option plan without making it merger consideration. The case thus centers on the Option plan, whatever it in fact was, when the merger was made in February, 1987. As I have said, the majority does not analyze or demonstrate from the sparse and ambiguous record what the facts were. Indeed, the closest it comes to so doing is found in a footnote referring to corporate insiders. (At 1162). With some emphasis, the majority criticizes the first plan, but without noting whether the offending provisions were repeated in the amended Option plan which is the one now before the Court. Although I have no desire to defend - either plan, it may be pertinent to note that the Vice Chancellor *1172did not find that either plan was a sham or a fraud, nor do plaintiffs now argue that it or they were.
My difference with the majority may arise because it seems to confuse the intention of the parties in agreeing to the terms of § 3.8 of the Stock Warrants with the intention of Continental in granting the Stock Option to employees. Thus the Court, after reciting the several memos to which I have referred, said that the Employee Option was issued in exchange for Continental stock and "[tjhis construction of § 3.8 is clearly supported by the intentions of the parties.” (Ante, at 1166). That begs the critical question — which is, did Continental intend to and did it in fact make it merger consideration? If it did so, then it was “property” under § 3.8 and American General is entitled to it. If it did not, then the option is not merger consideration. The difference is crucial and the material facts and inferences therefrom are in dispute in the record now before us.4
I concede that, after a final hearing, plaintiffs might prove that the Employee-Option was, in fact, merger consideration and that the “two-step” transaction argued by defendants was only an attempt to disguise a benefit for Continental/Texas Air insiders. But what Texas Air intended in granting the option (and what the true facts were with respect to it) are at the core of the conflict and, summary judgment is ordinarily inappropriate when intent of a party is at issue. Continental Oil Company v. Pauley Petroleum, Inc., Del.Supr., 251 A.2d 824, 826 (1969). And it seems to me that, on the present record, it is inappropriate here.
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Respectfully, I dissent.

. Specifically, § 3.8 of the Warrants permits a merger by Continental and, after merger, the Warrant holder has
"the right to purchase ... upon the basis and upon the terms ... specified in this Warrant and in lieu of the shares of the Common Stock ... immediately theretofore purchasable ... upon the exercise of the rights represented hereby, such shares of stock, securities or property as may be issued ... in exchange for a number of outstanding shares of such Common Stock equal to the number of shares ... purchasable ... upon the exercise of the rights represented hereby immediately prior to such ... merger_”
The Warrants were, of course, a contract binding upon the corporation surviving the merger. *11708 Del.C. § 259; Fitzsimmons v. Western Airlines, Inc., Del.Ch., 290 A.2d 682, 685, 689 (1972).

. At oral argument defendants’ counsel (in a colloquy with the Court regarding defendants’ intent as to the Stock Option) said flatly that
"I never conceded that there was not a fact issue of intent ... there has never been a concession that I know of that the issue of , intent would not be relevant in resisting his [i.e., plaintiffs'] summary judgment motion” (Emphasis added).
And defendants' counsel specifically invited opposing counsel to cite the record where any such a concession had been made. Plaintiffs have not done so, nor has a majority of the Court.

. For example, the phrase "in connection with” (At 1171-1172), which is in two of the documents, may be construed to mean a joining or linking, or only as "an accompanying or associated feature”. The Random House Dictionary (2d ed.) p. 431.

. The majority dresses down Texas Air for an attempt to "manipulate the Delaware courts." (At 1169) I find no such attempt. Texas Air was sued, it had a right to defend itself, and before a decision was made by the Court of Chancery on the motions for summary judgment, it apparently took action to vacate the entire Option plan, if it lost the suit. In doing that I find nothing sinful in law nor disrespectful of our Courts. The issue is simply whether Texas Air’s action was legally effective, the majority concludes that it was not and I agree, once it is determined that the Option was merger consideration, or that Texas Air is estopped from denying that on the basis of a prior representation to the Court of Chancery.