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I think there are some important distinctions, though. One seemingly major factor in this case was that at no point was it "unfair" to the other investors. At
by hvs 16y ago
I think there are some important distinctions, though. One seemingly major factor in this case was that at no point was it "unfair" to the other investors. At each round, all the other investors had the opportunity to participate on a pro rata basis:
The determinative factor in the entire fairness analysis was that Baker had structured the financing so that every
shareholder of Wine.com could, if it wanted to, purchase its pro rata share of the offering. In other words, the
transaction was not for the "exclusive benefit" of defendants, which under Delaware law is strong evidence of
fairness.
- muerdeme 16y agoGiving the other investors the opportunity to participate on a pro rata basis isn't per se "fair." The technique can be used to freeze out other shareholders that don't have the liquid capital to participate in the transaction.
- btilly 16y agoLegal fairness may bear little relation to what lay people consider fair. For instance as long as you and a large corporation both have lawyers, a court fight between the you is considered "fair" even though the large corporation has substantially more resources and likely has better lawyers. In this case the standard of fairness to apply is Delaware law. And under Delaware law, that was fair.
- pmccool 16y agoSure, but that analysis only matters if they'd been found to owe fiduciary duties. As I understand it, there are two distinct conclusions. One, they did not owe fiduciary duties, as discussed above. Two, even if they did owe these duties, they didn't breach them. Bear in mind, they would have won even if the court found against them on point two.