In re Emerging Communications, Inc. Shareholders Litigation

Emerging Communications (ECM) (defendant) chairman and CEO Jeffrey Prosser (defendant), who controlled 52% of ECM's stock, sought to take ECM private via a two-step merger; a lender using more positive June 1998 projections valued ECM stock at roughly $28 per share, but Prosser withheld those June projections from ECM's special committee, which instead negotiated using weaker March 1998 figures and raised Prosser's initial $9.125-per-share offer only to $10.25, at which point Prosser said financing constraints prevented him from going higher. The committee's hired financial consultant, also lacking the June projections, opined $10.25 was fair, and the full board (whose members were personally financially dependent on Prosser and well-compensated for board service) approved the deal without the June data too; dissenting shareholders (plaintiffs) sued for appraisal and breach of fiduciary duty, and ECM's charter exculpated directors from ordinary duty-of-care liability.