Gatz Props., LLC v. Auriga Capital Corp.
Supreme Court of Delaware
59 A.3d 1206 (Del. 2012)
Gatz (defendant), manager of Peconic Bay LLC, learned that prospective buyer Galvin was willing to pay north of $6 million for the company's golf course, but never disclosed this to Peconic Bay's minority members and never followed up with Galvin for a firm price range. Instead, Gatz commissioned a rushed auction without contacting any actual golf course managers or operators, then was the sole bidder, buying the course himself for just $50,000 cash plus assumption of $5.4 million in debt — well below the $8.9 million value the plaintiffs' expert later estimated. Minority members (plaintiffs) sued in Delaware Chancery Court, which ruled in their favor, and Gatz appealed.
Whether a transaction satisfies the entire fairness standard when it did not result from fair dealing and did not achieve a fair price.