## Facts

- Unocal Corporation owned approximately 96% of Unocal Exploration Corporation (UXC), exceeding the 90% threshold for a DGCL § 253 short-form merger.
- Unocal effected a § 253 short-form merger to cash out and eliminate UXC’s minority shareholders without a stockholder vote.
- Minority shareholders filed a class action alleging the parent and related directors breached fiduciary duties by not satisfying the “entire fairness” standard in the merger.
- Although not required by § 253, Unocal formed a special negotiating committee of outside directors and used a process resembling a long-form freeze-out merger.
- The Court of Chancery entered judgment for defendants, rejecting the claim that the parent must prove entire fairness in a § 253 merger, and plaintiffs appealed.

## Issues

1. In a DGCL § 253 short-form merger, what fiduciary-duty protections are owed by a controlling parent to the subsidiary’s minority stockholders?
2. Must a controlling parent prove “entire fairness” (fair dealing and fair price) in a § 253 short-form merger, or is appraisal the exclusive remedy absent fraud or illegality?

## Decision

- The Delaware Supreme Court affirmed.
- A controlling parent in a DGCL § 253 short-form merger is not required to establish “entire fairness” as in a negotiated, long-form controller freeze-out.
- Absent fraud or illegality, a minority stockholder’s sole remedy for dissatisfaction with the merger consideration is statutory appraisal.

## Legal Principles

- DGCL § 253 authorizes a summary parent-subsidiary merger that eliminates minority stockholders without the procedural features associated with “fair dealing.”
- Imposing full “entire fairness” review on a properly executed § 253 short-form merger would conflict with the statute’s design; the parent cannot be required to supply process the statute does not contemplate.
- Fiduciary-duty litigation challenging a § 253 short-form merger is limited to claims of fraud or illegality; disputes over price are channeled to appraisal.
- Voluntary procedural protections (e.g., special committee negotiations) are not required to validate a § 253 short-form merger and do not expand the statutory remedial scheme.

## Conclusion

The court held that DGCL § 253 limits minority stockholder protections in short-form mergers by making appraisal the exclusive remedy for price complaints, while allowing plenary claims only where the merger is fraudulent or illegal.


Glassman v. Unocal Expl. Corp., 777 A.2d 242 (Del. 2001)