## Facts

- Technicolor, Inc., a Delaware corporation, agreed to a two-step acquisition by MacAndrews & Forbes Group, Inc. (MAF), using a merger subsidiary.
- MAF launched a cash tender offer at $23 per share in November 1982 and acquired about 82% of Technicolor’s shares by the end of that month.
- In January 1983, a second-step cash-out merger eliminated the remaining public shares at $23 per share.
- A stockholder (through the record holder Cede & Co.) did not tender, dissented from the merger, and pursued both a statutory appraisal under 8 Del. C. § 262 and a separate action seeking damages for alleged unfair dealing and fiduciary breaches by Technicolor’s directors and the acquiror group.
- After a trial in the Court of Chancery addressing both the appraisal action and the fiduciary-duty action, the case returned to the Delaware Supreme Court on appeal regarding, among other things, the standard of review, burden allocation, and the effect of alleged process defects in the board’s approval of the transaction.

## Issues

1. What showing is sufficient to rebut the business judgment rule presumption in a board-approved sale-of-control transaction, particularly as to directors’ duty of care and the adequacy of their decision-making process?
2. If the business judgment presumption is rebutted, whether and how the burden shifts to directors to prove the transaction’s entire fairness (fair dealing and fair price).
3. Whether statutory appraisal is the exclusive remedy for a stockholder cashed out in a merger, or may be pursued alongside fiduciary-duty claims for monetary or equitable relief.

## Decision

- The Delaware Supreme Court held that plaintiffs may rebut the business judgment rule presumption by showing directors were grossly negligent in becoming informed, even absent proof of self-dealing.
- Once rebutted, the burden shifts to the director defendants to prove the transaction was entirely fair to the corporation and its stockholders.
- The Court concluded the trial court misapplied burden-shifting and aspects of the fairness analysis by not requiring defendants to carry the entire fairness burden after the business judgment presumption was rebutted.
- The judgment was affirmed in part, reversed in part, and remanded for further proceedings consistent with the clarified standard of review and burden allocation.

## Legal Principles

- The business judgment rule presumes directors acted on an informed basis, in good faith, and in the corporation’s best interests; the presumption can be overcome by a showing of gross negligence in the directors’ decision-making process.
- When the business judgment rule presumption is rebutted, the standard becomes entire fairness, requiring proof of both fair dealing (process) and fair price (economic terms) as integrated components.
- Upon rebuttal of the business judgment presumption, directors bear the burden of proving entire fairness to the trier of fact.
- Statutory appraisal is not an exclusive remedy for cashed-out stockholders; appraisal and fiduciary-duty claims may proceed in parallel, with any election between inconsistent remedies addressed at the remedy stage rather than before adjudication.

## Conclusion

The decision established that serious due-care failures in how directors inform themselves can remove business judgment deference and shift the burden to directors to prove an acquisition’s entire fairness, while also confirming that appraisal and fiduciary-duty litigation may coexist for stockholders cashed out in a merger.


Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993)