Enhanced scrutiny applies to defensive actions

• Such as a large share repurchase in response to
  an unsolicited offer
• Line of cases began with Unocal (Del 1985)

To take defensive action in response to a threatened change of control, directors must show:

• Reasonable grounds to believe threat to company existed

• Show good faith and reasonable investigation

• Defensive actions were reasonable
  in relation to the perceived threat

• Neither preclusive nor coercive

Business judgment rule presumption attaches
only after directors' burden is satisfied

• Separate approval by Board's outside, disinterested directors is persuasive 

Unocal v Mesa Petroleum (Del 1985)

• Upheld use of a discriminatory share repurchase to thwart an unsolicited two-tier tender offer

Unitrin v American General (Del 1995)

• Added a gloss to Unocal
• Defensive actions may not be coercive or preclusive

Stroud v Grace 606 A2d 75

Williams v Geier 671 A2d 1368

Gilbert v El Paso Co 575 A2d 1131

Paramount Communications Inc v Time Inc
571 A2d 1140

Shamrock Holdings Inc v Polaroid Corp 559 A2d 257

BNS Inc v Koppers Co 683 FSupp 458

AC Acquisitions Corp v Anderson Clayton & Co
519 A2d 103

Moran v Household Intl 500 A2d 1346

Revlon Inc v MacAndrews & Forbes Holdings Inc
506 A2d 173

Bolton v Tesoro Petroleum Corp 871 F2d 1266 cert denied 110 S Ct 83

Pogostin v Rice 480 A2d 619

Bennett v Propp 187 A2d 405

Air Line Pilots Assn v UAL Corp 717 FSupp 575
affd 897 F2d 1394

Cheff v Mathes 199 A2d 548

Grand Metropolitan PLC v Pillsbury Co 558 A2d 1049

Mills Acquisition Co v Macmillan Inc 559 A2d 1261

In re Desert Partners LP v USG Corp 686 FSupp 1289

Johnson v Trueblood 629 F2d 287 cert denied
450 US 999

Gilbert v El Paso Co 575 A2d 1131

In re Santa Fe Pac Shareholder Litig 669 A2d 59

Fiduciary Duties

Rights Plans