Glassman v. Unocal Exploration Corporation

777 A.2d 242 (2001)

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Nature of the Case

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Facts

Unocal owned approximately 96% of the stock of Unocal Exploration Corporation (“UXC”), an oil and gas company operating in and around the Gulf of Mexico. In 1991, low natural gas prices caused a drop in both companies’ revenues and earnings. Unocal decided that, by eliminating the UXC minority, it would reduce taxes and overhead expenses. The boards of Unocal and UXC appointed special committees to consider a possible merger. The UXC committee consisted of three directors who, although also directors of Unocal, were not officers or employees of the parent company. The UXC committee retained financial and legal advisors and met four times before agreeing to a merger exchange ratio of .54 shares of Unocal stock for each share of UXC. Unocal and UXC announced the merger on February 24, 1992, and it was effected, pursuant to 8 Del. C. §253, on May 2, 1992. The Notice of Merger and Prospectus stated the terms of the merger and advised the former UXC stockholders of their appraisal rights. Glassman (P) filed this class action, on behalf of UXC’s minority stockholders, on the day the merger was announced. P claims that Unocal and its directors breached their fiduciary duties of entire fairness and full disclosure. The Court of Chancery conducted a two-day trial and held that: (i) the Prospectus did not contain any material misstatements or omissions; (ii) the entire fairness standard does not control in a short-form merger; and (iii) plaintiffs’ exclusive remedy, in this case, was appraisal. P appealed.