Page 168 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

Kahn v. Lynch Communication Systems, Inc.

638 A.2d 1110 (Del.1994)

HOLLAND, Justice:

This is an appeal by the plaintiff-appellant, Alan R. Kahn ("Kahn"), from a final
judgment of the Court of Chancery which was entered after a trial. The action, instituted
by Kahn in 1986, originally sought to enjoin the acquisition of the defendant-appellee,
Lynch Communication Systems, Inc. ("Lynch"), by the defendant-appellee, Alcatel U.S.A.
Corporation ("Alcatel"), pursuant to a tender offer and cash-out merger. * * *

. . . Kahn alleged that Alcatel was a controlling shareholder of Lynch and breached
its fiduciary duties to Lynch and its shareholders. According to Kahn, Alcatel dictated the
terms of the merger; made false, misleading, and inadequate disclosures; and paid an
unfair price.

The Court of Chancery concluded that Alcatel was, in fact, a controlling
shareholder that owed fiduciary duties to Lynch and its shareholders. It also concluded
that Alcatel had not breached those fiduciary duties. Accordingly, the Court of Chancery
entered judgment in favor of the defendants.

Kahn has raised three contentions ‘in this appeal. Kahn’s first contention is that
the Court of Chancery erred by finding that "the tender offer and merger were negotiated
by an independent committee," and then placing the burden of persuasion on the
plaintiff, Kahn. Kahn asserts the uncontradicted testimony in the record demonstrated
that the committee could not and did not bargain at arm’s length with Alcatel. . . .

***

This Court has concluded that the record supports the Court of Chancery’s finding
that Alcatel was a controlling shareholder. However, the record does not support the
conclusion that the burden of persuasion shifted to Kahn. Therefore, the burden of
proving the entire fairness of the merger transaction remained on Alcatel, the controlling
shareholder. Accordingly, the judgment of the Court of Chancery is reversed. The matter
is remanded for further proceedings in accordance with this opinion.

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