Roland International Corporation v. Najjar

Supreme Court of Delaware · 1979 · Corporations

407 A.2d 1032 (1979)

Updated August 22, 2026

CorporationsShort-form mergerFreeze-out mergerFiduciary dutyDelaware§ 253§ 251cash-out

Facts

Hyatt Corporation, certain individuals, and others collectively owned 97.6% of Roland International Corporation, a Delaware corporation. They formed Landro Corporation, contributed their Roland shares to Landro, and thereby made Landro the owner of the 97.6% block; Landro's directors were also Roland's directors. Landro then completed the statutory steps for a short-form merger and cashed out Roland's public shareholders at $5.25 per share, which eliminated all 329 public shareholders from any further participation in Roland or Landro and was alleged to be the sole purpose of the merger. Plaintiff, a minority stockholder, sued for damages alleging breach of fiduciary duty and unfairness.

Issue

Do the fiduciary-duty principles announced in Singer v. Magnavox Co. and Tanzer v. International General Industries, Inc. for mergers under 8 Del. C. § 251 also apply to a short-form merger under 8 Del. C. § 253? If so, does a complaint alleging that the sole purpose of the short-form merger was to eliminate minority shareholders and that the price was grossly inadequate state a claim for breach of fiduciary duty?

Rule

The fiduciary duty owed by majority stockholders to minority stockholders applies to short-form mergers under 8 Del. C. § 253 just as it does to long-form mergers under § 251. Full compliance with statutory merger procedures and the availability of appraisal do not eliminate that duty. In a cash-out merger, the majority must establish a proper purpose as a threshold requirement, and the transaction remains subject to judicial review for entire fairness as to all aspects.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeview Holdings, a Delaware corporation based in Chicago, owns 92% of Prairie Devices, also a Delaware corporation. Lakeview uses the Delaware short-form merger statute to cash out Prairie's remaining shareholders for $8 per share, fully complies with the statute, and tells the minority that appraisal is available.

If minority shareholders sue for breach of fiduciary duty, which argument by Lakeview is least likely to defeat the claim at the pleading stage?

Explanation. The controlling rule is that fiduciary duties apply to short-form mergers just as they do to long-form mergers. Compliance with statutory procedures and the existence of appraisal do not eliminate the majority's equitable duty to the minority. Thus, a parent cannot defeat a fiduciary-duty claim merely by pointing to statutory compliance and appraisal rights.