Solomon v. Pathe

672 A.2d 35 (Del. Supr.1996)

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Nature of the Case

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Facts

Credit Lyonnais Banque Nederland N.V. ('CLBN'), a Netherlands corporation. purchased MGM/UA Communications Corporation ('MGM'). The purchase was funded by loans from CLBN totaling approximately one billion dollars. CLBN took a perfected security interest in eighty-nine percent of Pathe's stock and ninety-eight percent of MGM's stock. CLBN acquired the right, under two voting trust agreements, to vote 89.5 % of Pathe's shares and substantially all of MGM's shares. CLBN removed Parretti, the CEO and three other directors from the MGM and Pathe boards. The Court of Chancery held that the removal of these individuals was proper. Parretti then obtained an Italian court order contradicting the Court of Chancery's decision. CLBN foreclosed on the stock of both corporations. CLBN offered to make a tender offer for an unspecified number of Pathe's publicly held shares of common stock. Pathe appointed a special committee to review the proposal with the assistance of its own legal and financial advisers. On May 1, 1992, Pathe and CLBN executed an agreement in which Pathe agreed not to delay the foreclosure. CLBN agreed to make a public tender offer of $1.50 per share for up to 5.8 million of Pathe's publicly held shares. One day prior to the announcement of the tender offer, P filed the present action. P amended his complaint to assert a purported class action claiming that tender offer was unfair to all shareholders. P claimed that the tender offer price was 'coercive' and amounted to a breach of loyalty by CLBN as controlling shareholder of Pathe and MGM. CLBN moved under Chancery Rule 12(b) to dismiss the suit, arguing that (1) the complaint failed to state a claim upon which relief could be granted; (2) the Court of Chancery lacked personal jurisdiction over CLBN; and, (3) service of process upon CLBN was ineffective. The other Ds moved to dismiss only on the grounds that the complaint failed to state a claim under Rule 12(b)(6). The Court of Chancery granted the motion to dismiss for failure to state a claim under Chancery Rule 12(b)(6). P appealed.