In re Pure Resources, Inc. Shareholders Litigation

Unocal Corporation (Unocal) owned about 65 percent of Pure Resources, Inc. (Pure), whose own management held roughly a quarter to a third of Pure's stock and had incentive agreements with Unocal giving managers better terms than ordinary shareholders when tendering; Unocal also had access to Pure's nonpublic information and a business-opportunities agreement letting it compete with Pure. Unocal made a tender offer for the rest of Pure's stock, including a non-waivable majority-of-the-minority condition, a waivable 90-percent condition, and a planned short-form merger — but defined the "minority" to include shareholders affiliated with Unocal and Pure's own management. An independent special committee retained its own advisors, negotiated with Unocal, but declined to adopt aggressive defensive tactics like a poison pill; Unocal refused to raise its price, and the committee voted against the offer. Pure's minority shareholders sought a preliminary injunction, arguing entire fairness should apply because the offer was inadequate, while Unocal argued the more deferential Solomon tender-offer standard, which it claimed to satisfy, should govern instead.