## Facts

- DeKalb Genetics Corporation had a dual-class structure in which Class A shares carried voting rights and Class B shares generally did not.
- Members of the Roberts family held a substantial block of DeKalb’s voting (Class A) stock; one family member, Thomas H. Roberts III, served as a director and officer.
- The Roberts family sought liquidity and to reduce or end its involvement with DeKalb.
- DeKalb’s board approved a corporation-financed repurchase of a significant number of the Roberts family’s Class A shares.
- The repurchase did not require a stockholder vote or other stockholder action.
- After completing the repurchase, the board sent a letter to stockholders describing the transaction.
- A stockholder, Alan Kahn, brought a derivative action alleging the directors breached fiduciary duties by approving the repurchase and by providing materially incomplete or misleading disclosures, including alleged omissions about the reasons for the repurchase and the debt incurred to finance it.
- The Court of Chancery granted summary judgment for defendants, applying the business judgment rule (not Unocal) and rejecting the disclosure claim; Kahn appealed.

## Issues

1. Whether a board-approved repurchase of a large stock block from an allegedly threatening stockholder triggers Unocal enhanced scrutiny or is reviewed under the business judgment rule.
2. Whether alleged omissions in a board communication to stockholders about a repurchase are actionable as fiduciary disclosure violations when no stockholder action is requested or required.
3. Whether the allegedly omitted information was material.

## Decision

- The Delaware Supreme Court affirmed summary judgment for the defendants.
- The court held Unocal enhanced scrutiny did not apply because the repurchase was not a defensive response to a cognizable threat to corporate control.
- The court rejected the disclosure claim because the alleged omissions were immaterial.
- The court did not decide the broader question of the scope of any disclosure duty in voluntary communications where no stockholder action is implicated.

## Legal Principles

- Unocal enhanced scrutiny applies when directors adopt defensive measures in response to a perceived threat to corporate control; absent such a threat, transactions are generally reviewed under the business judgment rule.
- Under the business judgment rule, directors are presumed to act on an informed basis, in good faith, and in the corporation’s best interests; a plaintiff must plead and prove facts sufficient to rebut that presumption.
- Fiduciary disclosure liability requires a material misstatement or omission; immaterial omissions do not support recovery.
- Materiality turns on whether there is a substantial likelihood a reasonable stockholder would consider the information important in deciding how to act.

## Conclusion

The Delaware Supreme Court upheld a board-approved repurchase of a significant voting block under business judgment review, not Unocal, and dismissed disclosure-based fiduciary claims because the allegedly omitted information was not material, while leaving open the precise scope of any disclosure duty when no stockholder action is sought.


Kahn v. Roberts, 679 A.2d 460 (Del. 1996)