Kahn v. Tremont Corp.
Delaware Supreme Court
694 A.2d 422 (1997)
The Harold C. Simmons family trust (Simmons) owned 90 percent of the stock in Valhi, Inc. (Valhi). Valhi was a majority owner of NL Industries, Inc. (NL) and owned a controlling share of Tremont Corporation (Tremont) (defendant). Tremont’s individual board members (defendants) served in high-ranking positions of Simmons’ other entities. NL’s board authorized a repurchase program and a Dutch auction self-tender to buy back outstanding stock, including nearly 11 million shares owned by Valhi. Valhi realized it could gain tax and other benefits if it sold another 7.8 million shares. Valhi began negotiations to sell the shares to Tremont. Tremont director Michael A. Snetzer believed that Valhi could sell the shares at a higher price, and Tremont would subject itself to less risk than an outside buyer. Tremont President and CEO Landis Martin asked three outside directors to form a Special Committee to evaluate the offer. All three members had numerous prior dealings with Simmons. Avy Stein, the de facto leader of the committee, had engaged in many lucrative dealings with Martin and Simmons. The committee appointed a financial advisor that Stein was involved with and a legal advisor recommended by general counsel to Tremont and NL. Not all members attended meetings, and the committee negotiated and recommended the purchase before receiving an outside report. Tremont’s board approved the purchase negotiated by the committee. Tremont shareholder Alan R. Kahn (plaintiff) sued Tremont in the Court of Chancery arguing that Simmons used the repurchase program and Dutch auction to inflate NL share prices so that Simmons could then sell his NL stock to Tremont at an unfair price. The court determined that the entire fairness standard applied to the deal because of Simmons’ controlling interest in the entities, but that the use of the Special Committee shifted the burden of proof back to Kahn. The court found that Kahn did not meet the burden of showing the transaction was unfair. Kahn appealed to the Delaware Supreme Court.
Rule of Law
Holding and Reasoning (Walsh, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 159,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 13,700 briefs, keyed to 186 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.