## Facts

- MacAndrews & Forbes Group, Inc. (MAF) agreed to acquire Technicolor, Inc. in a two-step tender offer and cash-out merger for $23 per share in cash.
- The tender offer began on November 4, 1982, and the second-step merger closed on January 24, 1983.
- Cinerama, Inc., a minority shareholder owning about 4.405% of Technicolor’s stock, did not tender into the first-step offer and dissented from the second-step merger.
- In March 1983, Cinerama filed an appraisal petition under 8 Del. C. § 262 seeking a judicial determination of fair value.
- Discovery in the appraisal proceeding led Cinerama to believe Technicolor’s directors breached fiduciary duties in negotiating and approving the sale.
- In January 1986, Cinerama filed a separate action alleging fraud, breach of fiduciary duty, and unfair dealing against Technicolor, seven directors, MAF, an acquisition vehicle, and MAF’s controlling stockholder; it sought rescissory damages and other relief.
- Cinerama also asserted the merger was void based on an alleged failure to comply with a charter supermajority voting provision.
- After prior appellate rulings in related proceedings, the Court of Chancery conducted a full trial on remand, applied entire fairness review, and entered judgment for defendants, finding the transaction entirely fair as to both process and price.

## Issues

1. Whether the Court of Chancery correctly applied entire fairness review and allocated the burden of proof after the business judgment presumption was rebutted.
2. Whether Technicolor’s directors were materially interested or lacked independence, including whether any conflicted director dominated or controlled the board’s decision-making.
3. Whether the merger satisfied the entire fairness standard in fair dealing and fair price, despite asserted process deficiencies.
4. Whether alleged charter or statutory defects rendered the merger void or otherwise invalid.
5. Whether Cinerama proved entitlement to damages, including rescissory damages, based on any fiduciary breach and resulting injury.

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery’s post-remand judgment for all defendants.
- The Court held that entire fairness was the governing standard on the record and that the Court of Chancery used the correct burden-shifting framework.
- The Court upheld factual findings that a majority of the board was disinterested and independent and that any interested director did not dominate or manipulate the board’s consideration of the transaction.
- The Court agreed that, considering the totality of process and economic terms, the $23-per-share transaction was entirely fair to Technicolor’s stockholders.
- The Court rejected claims that the merger was void due to the asserted supermajority charter provision or other alleged statutory noncompliance.
- Because no actionable breach producing cognizable harm was established, the Court affirmed the denial of rescissory and other damages.

## Legal Principles

- When the business judgment presumption is rebutted by proof of material director interest or lack of independence, defendants bear the burden to prove the transaction was entirely fair.
- Entire fairness is a unitary standard requiring consideration of both fair dealing (process) and fair price (economic terms), evaluated together in light of all relevant circumstances.
- Determinations of director interest and independence are director-specific and fact-intensive; the presence of a conflicted director does not alone establish liability absent domination or control over the board’s decision.
- Process flaws do not automatically defeat entire fairness; the court assesses whether the overall approval and negotiation were sufficiently fair when weighed alongside the consideration received.
- Rescissory damages and related equitable remedies require a proven fiduciary breach and resulting injury; absent liability and harm, such remedies are unavailable.
- Appellate review defers to trial-court factual findings supported by the record and not clearly erroneous, including findings on fairness and valuation grounded in competent evidence.

## Conclusion

The Delaware Supreme Court affirmed that Technicolor’s cash-out sale for $23 per share satisfied entire fairness despite identified procedural shortcomings, rejected challenges premised on alleged charter invalidity, and held that the absence of a proven fiduciary breach and injury foreclosed rescissory or compensatory relief.


Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995)