## Facts

- A shareholder of American Medicorp, Inc. (Medicorp) brought a derivative action challenging Medicorp’s repurchase of its own shares.
- Medicorp faced an actual or threatened proxy contest involving corporate control.
- Medicorp agreed in 1976 to repurchase 550,000 shares of its common stock from Goldsamt, a director/officer and substantial shareholder, for $7 per share.
- The plaintiff alleged the price was unfairly high and that Goldsamt engaged in fraudulent self-dealing.
- The plaintiff also alleged the board approved the repurchase primarily to avoid a proxy fight and preserve directors’ positions rather than to further corporate interests.
- The plaintiff sought damages or rescission of the repurchase transaction.
- Defendants moved for summary judgment.

## Issues

1. Whether Medicorp’s board breached fiduciary duties by approving a stock repurchase from a director/shareholder at an allegedly premium price in the context of a threatened proxy fight, including whether an entrenchment purpose removed business-judgment protection.
2. Whether the plaintiff produced specific facts sufficient to create a genuine issue for trial on bad faith, self-dealing, domination, or unfairness, making summary judgment improper.

## Decision

- The Court of Chancery granted defendants’ motion for summary judgment and dismissed the derivative claims challenging the repurchase.
- The court held the record did not support an inference of fraud, bad faith, improper entrenchment motive, domination of the board by the selling director, or unfairness rising to waste.
- The court applied the business judgment rule, concluding plaintiff’s assertions were not supported by evidence sufficient to require a trial.

## Legal Principles

- Board decisions to repurchase shares, including in a control-contest setting, are generally protected by the business judgment rule when directors act in good faith, on an informed basis, and with a rational belief the action benefits the corporation.
- A repurchase from a director/shareholder is not automatically reviewed for entire fairness; a plaintiff must show facts indicating domination, conflicted decision-making, or unfair terms that materially harm the corporation.
- Allegations that directors acted to entrench themselves must be supported by specific, concrete facts; control effects alone do not establish improper purpose.
- To defeat summary judgment in a fiduciary-duty challenge to a repurchase, the plaintiff must present evidence creating a genuine dispute as to disloyal motive, lack of due care, or substantive unfairness (including waste).

## Conclusion

The court upheld the challenged repurchase under business judgment review and entered summary judgment for the directors because the plaintiff failed to present specific evidence that the board was dominated, acted in bad faith to entrench itself, or approved terms so unfair as to constitute a fiduciary breach.


Kaplan v. Goldsamt, 380 A.2d 556 (Del. Ch. 1977)