Case Study Ethics Ethics Christopher Melony Xie and Ruth form iNet com LLC law homework help

There are 2 different case study that need to be read, and the question that’s in the bullet point needs to be answer in one paragraph for each. Please, keep the case study and answers together. Thank you

“Case 30.8 – Ethics” Please respond to the following:

• As the defense attorney for Melony, prepare a legal memorandum concerning how you defend Melony. Be sure to consider how the precepts of the limited license company affect the defense.

Case 30.8 – Ethics: Christopher, Melony, Xie, and Ruth form iNet.com, LLC, a limited liability company. The four members are all Ph.D. scientists who have been working together in a backyard garage to develop a handheld wireless device that lets you receive and send e-mail, surf the Internet, use a word processing program that can print to any printer in the world, view cable television stations, and keep track of anyone you want anywhere in the world as well as zoom in on the person being tracked without that person knowing you are doing so. This new device, called Eros, costs only $29 but makes the owners $25 profit per unit sold. The owners agree that they will buy a manufacturing plant and start producing the unit in six months. Melony, who owns a one-quarter interest in iNet.com, LLC, decides she wants “more of the action” and soon, so she secretly sells the plans and drawings for the new Eros unit to a competitor for $100 million. The competitor comes month and beats iNet.com, LLC, to market. The LLC, which later finds out about Melony’s action. 

“Case 28.2 – Duty of Care” Please respond to the following:

• After reading this case, analyze how the Board of Directors could have avoided the lawsuit by exercising the proper duty of care.

Case 28.2 – Duty of Care; Smith v. Van Gorkom; 488 A.2d 858, Web 1985 Del, Lexis 421; Supreme Court of Delaware

“In the specific context of a proposed merger of a domestic corporation, a director has a duty, along with his fellow directors, to act in an informed and deliberate manner in determining whether to approve an agreement of merger.” – Judge Horsey

Facts: Trans Union Corporation (Trans Union) was a publicly traded, diversified holding company that was incorporated in Delaware. Its principal earnings were generated by its railcar leasing business. Jerome W. Van Gorkom was a Trans Union officer for more than twenty-four years, its CEO for more than seventeen years, and the chairman of the board of directors for two years. Van Gorkom, a lawyer and certified public accountant, owned 75,000 shares of Trans Union. He was approaching 65 years of age and retirement. Trans Union’s board of directors was composed of ten members – five inside directors and five outside directors.

Van Gorkom decided to meet with Jay A. Pritzker, a well-known corporate takeover specialist and a social acquaintance of Van Gorkom’s, to discuss the possible sale of Trans Union to Pritzker. Van Gorkom met Pritzker at Pritzker’s home on Saturday. He did so without consulting Trans Union’s board of directors. At this meeting, Van Gorkom proposed a sale of Trans Union to Pritzker at a price of $55 per share. The stock was trading at about $38 in the market. On Monday, Pritzker notified Van Gorkom that he was interested in the $55 cash-out merger proposal. Van Gorkom, along with two inside directors, privately met with Pritzker on Tuesday and Wednesday. After meeting with Van Gorkom on Thursday, Pritzker notified his attorney to begin drafting the merger documents.

On Friday, Van Gorkom called a special meeting of Trans Union’s board of directors for the following day. The board members were not told the purpose of the meeting. At the meeting, Van Gorkom disclosed the Pritzker offer and described its terms in a twenty-minute presentation. Neither the merger agreement nor a written summary of the terms of agreement was furnished to the directors. No valuation study as to the value of Trans Union was prepared for the meeting. After two hours, the board voted in favor of the cash-out merger with Pritzker’s company at $55 per share for Trans Union’s stock. The board also voted not to solicit other offers. The merger agreement was executed by Van Gorkom during Saturday evening at a formal social event he hosted for the opening of the Chicago Lyric Opera’s season. Neither he nor any other director read the agreement prior to its signing and delivery to Pritzker.

Trans Union’s board of directors recommended that the merger be approved by its shareholders and distributed proxy materials to the shareholders, stating that the $55 per share price for their stock was fair. In the meantime, Trans Union’s board of directors took steps to dissuade two other possible suitors who showed an interest in purchasing Trans Union. Eventually, 69.9 percent of the shares of Trans Union stock were voted in favor of the merger. The merger was consummated.

Alden Smith and other Trans Union shareholders sued Van Gorkorm and the other directors for damages, alleging that the defendants were negligent in their conduct in selling Trans Union to Pritzker. The Delaware court of chancery held in favor of the defendants. The plaintiffs appealed.

Language of the Court: Without any documents before them concerning the proposed transaction, the members of the board were required to rely entirely upon Van Gorkom’s 20-minute oral presentation of the proposal. No written summary of the terms of the merger was presented; the directors were given no documentation to support the adequacy of $55 price per share for sale of the company; and the board had before it nothing more than Van Gorkom’s statement of his understanding of the substance of an agreement that he admittedly had never read or that any member of the board had ever seen.

Thus, the record compels the conclusion that the board lacked valuation information to reach an informed business judgment as to the fairness of $55 per share for sale of the company. We conclude that Trans Union was grossly negligent in that in that it failed to act with informed reasonable deliberation in agreeing to the Pritzker merger proposal.

Decision: The Supreme Court of Delaware held that the defendant directors had breached their duty of care. The supreme court reversed the judgement of the court of chancery and remanded the case to the court of chancery to conduct an evidentiary hearing to determine the fair value of the shares represented by the plaintiff’s case. If that value was higher than $55 per share, the difference was to be awarded to the plaintiffs as damages.

 

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