Solar Cells, Inc. v. True North Partners, LLC
Court of Chancery of Delaware
2002 WL 749163
First Solar, LLC is a manager-managed Delaware LLC. First Solar’s two members, Solar Cells, Inc. (plaintiff) and True North Partners, LLC (True North) (defendant), each initially held 4,500 of First Solar’s voting membership units. According to First Solar’s operating agreement, True North had the right to appoint three of First Solar’s managers, while Solar Cells appointed two. First Solar began facing financial difficulty and exploring a possible restructuring around 2001. On March 7, 2002, the True North managers (defendants) unilaterally issued a document approving the merger of First Solar into First Solar Operating, LLC (FSO), a Delaware LLC wholly owned by True North. The day before this consent was executed, on March 6, a meeting of the full board of managers of First Solar was held, and the True North managers made no mention of the impending merger. The Solar Cells managers received notice of the merger by fax on March 8. It was presented as a fait accompli, set to close on March 15. By the terms of the merger, Solar Cells’ interest in the surviving company would be reduced from 50 percent to five percent. Further, the price terms were based on a valuation that was significantly lower than prior valuations. On March 13, Solar Cells filed for a preliminary injunction blocking the merger, which they allege was negotiated in bad faith and falls short of the entire fairness standard.
Rule of Law
Holding and Reasoning (Chandler, J.)