In re Wheelabrator Technologies, Inc. Shareholders Litigation

Facts

Defendant corporation was in the waste management field, specifically in the refuse-to-energy field. This field was shared in part by Waste Management. At one point, Waste management became the largest stockholder of Defendant, and they were eager to streamline both companies through a merger. Waste Management offered to pay a ten percent premium to acquire 55% of Defendant’s shares. Defendant directors (which did not include directors appointed by Waste Management) voted to accept the offer. A majority of shareholders other than Waste Management voted in favor of the merger as well. Plaintiffs accused Defendant directors of breaching a fiduciary duty when they withheld pertinent information regarding a merger of Defendant target corporation Wheelabrator into Waste Management. Plaintiffs also accused Defendant directors of breach of loyalty and care in negotiating the merger by misrepresenting the time the directors took to deliberate about the merger. Defendants claim that the shareholders, by voting for the merger, ratified the decision, thereby extinguishing any duty of loyalty claims. Plaintiffs countered that at most the shareholder vote only turned the burden of proof on to Plaintiffs under an entire fairness standard.