Smith v. Van Gorkom

Facts

Trans Union had difficulty in generating sufficient taxable income to offset increasingly large investment tax credits. Van Gorkom had been an officer of Trans Union for 24 years and its CEO for more than 17 years. He assembled a proposed per share price for sale of the company, but did so without consulting either his board or any members of senior management. Pritzker advised Van Gorkom that he was interested in the $55 cash-out merger proposal and requested more information on Trans Union. Of those present at the senior management meeting, only two had prior knowledge of Pritzker’s offer. He disclose the offer and described its terms, but furnished no copies of the proposed merger agreement. Senior management’s reaction to the proposal was completely negative. At the special board meeting, Van Gorkom began with a twenty-minute oral presentation. Copies of the proposed merger agreement were delivered too late for study before or during the meeting. Under the proposed merger, Pritzker would pay $55 in cash for all outstanding shares of Trans Union stock upon completion of which Pritzker and formed to implement the merger. The merger agreement was executed by Van Gorkom. He reconvened the board and secured the directors’ approval of the proposed amendments.