Smith Vs Van Gorkom

V.

The defendants rely on the stockholder vote for exoneration. They contend that the stockholders' majority vote approving the Pritzker Merger Agreement had the legal effect of curing any failure of the Board to reach an informed business judgment in its approval of the merger. Both parties agree that if the Board made an uninformed judgment in approving the merger, then it should be voidable; but, if the shareholders were informed when voting then it can be sustained. The disagreement between the parties arises over: (1) the Board's burden of disclosing to the shareholders all relevant and material information; and (2) the sufficiency of the evidence as to whether the Board satisfied that burden.

On this issue the Trial Court summarily concluded "that the stockholders of Trans Union were fairly informed as to the pending merger..." The plaintiffs contend that the Court committed error when deeming the proxy materials "adequate" and not "complete". The plaintiffs also argue that the both the Board's original and supplemental proxy statements were incomplete in various material respects. Finally, the plaintiffs assert that Management's supplemental statement was untimely either as a matter of law or untimely as a matter of equity and the requirements of complete candor and fair disclosure. The defendants deny that the Court made any error.

The following are the deficiencies found in the proxy materials:

1. Neither the Proxy Statement nor the Supplemental Proxy Statement disclosed the fact that the Board had no reasonably adequate information indicative of the intrinsic value of the Company, other than a concededly depressed market price. Rather, both documents create the impression that the Board knew the intrinsic worth of the Company.

2. The Board's characterization of the Romans report in the Supplemental Proxy Statement was found false and misleading, as it did not specify that Mr. Romans's preliminary report was not indicating that the company should be valued at $55; it, in turn, reflected that the value of the Company was in the range of $55 to $65 per share. Such information would have been material to a reasonable shareholder because it tended to invalidate the fairness of the merger price of $55.

3. The Board's