## Facts

- The Nostalgia Network, Inc. (TNN) operated a cable channel and entered severe financial distress in the late 1980s.
- Two TNN directors, Sam Oolie and Morton Salkind, personally loaned money to TNN and became substantial creditors while also serving on the board.
- Because TNN lacked cash, the board approved non-cash director compensation through warrants issued to directors.
- Independent directors negotiated terms of Oolie and Salkind’s convertible-note financing, including interest-rate adjustments and cancellation rights if outside financing became available; the board approved subsequent additional insider financing and related warrant issuances.
- In 1989 the board considered selling TNN and reviewed multiple acquisition proposals; at a December 6, 1989 meeting, all four directors (including two disinterested directors) unanimously voted to pursue the USA Network proposal, which the board viewed as offering the most value.
- The USA transaction later failed; thereafter, Gold ’N M Communications purchased Oolie and Salkind’s personally held TNN shares in a privately negotiated sale.
- Stockholders sued, asserting derivative and class claims challenging (i) warrants, (ii) insider loans, (iii) the choice to pursue the USA proposal allegedly to protect Oolie and Salkind as creditors, and (iv) the later private stock sale.

## Issues

1. Whether directors breached fiduciary duties through warrant-based compensation, insider lending arrangements, and a privately negotiated sale of directors’ personal shares.
2. Whether Oolie and Salkind’s status as director-creditors constituted disabling self-interest regarding the board’s decision to pursue a particular acquisition proposal.
3. Whether plaintiffs produced evidence creating a triable issue that the board’s pursuit of the USA proposal was disloyal, irrational, or in bad faith, sufficient to overcome the business-judgment presumption.
4. Whether plaintiffs could expand the case at the summary-judgment stage by reframing or adding new class and derivative claims after the court had narrowed the litigation to a single remaining class claim.

## Decision

- The court granted summary judgment for defendants on all remaining claims and dismissed the action.
- The court held that the remaining loyalty-based class claim failed because plaintiffs did not present evidence from which a factfinder could infer that pursuit of the USA proposal was driven by disloyalty to stockholders.
- The court found that the mere fact directors were also creditors did not, without more, establish disqualifying interest or bad faith.
- The unanimous vote to pursue the USA proposal, including approval by two disinterested directors, supported application of business-judgment protection.
- The court rejected plaintiffs’ effort to inject new claims beyond the single claim previously preserved for further discovery.

## Legal Principles

- Summary judgment is proper when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law.
- Under the business-judgment rule, courts will not impose liability for rational, good-faith board decisions absent evidence of disloyalty, bad faith, or irrationality.
- A director’s dual status as a creditor does not, standing alone, rebut the business-judgment presumption; plaintiffs must show the conflict actually distorted the decision-making process.
- Approval and support by disinterested directors is strong evidence of good faith and may defeat a loyalty claim where plaintiffs cannot show that an alternative superior transaction was realistically available and wrongfully rejected.
- After a court narrows claims for litigation, plaintiffs generally may not reframe the case at summary judgment by asserting materially new class or derivative theories inconsistent with the preserved claim.

## Conclusion

The court entered summary judgment for the directors, concluding that plaintiffs failed to produce concrete evidence that director-creditors steered TNN’s sale process for self-protection rather than corporate value, and it enforced procedural limits that confined the case to a single, defined loyalty claim.


Cooke v. Oolie, 2000 Del. Ch. LEXIS 89 (Del. Ch. 2000)