Kahn v. Lynch Communication Sys., Inc. (Lynch II)

In an earlier appeal (Lynch I), the court sent this case back to the Court of Chancery to reexamine, with the burden on Alcatel U.S.A. Corp. (defendant), Lynch's controlling shareholder, to prove its cash-out merger of Lynch Communication Systems, Inc. (defendant) was entirely fair to the minority shareholders led by Alan Kahn (plaintiff). On remand, the Chancery Court found the process was fair dealing: facing a technology gap, Lynch was choosing between a proposed merger with Celwave and Alcatel's competing cash-out offer, and Alcatel vetoed acquiring a third company, Telco, as unprofitable. Though the independent committee negotiating with Alcatel felt coercive pressure, it still pushed the price up from $14 to $15.50 per share, and every shareholder was cashed out on the same terms. On price, the court accepted Alcatel's investment banker's valuation of $15.50-$16.00 (based on market price plus a merger premium) and gave weight to the independent committee's bankers' valuations of $16.50-$17.50, while rejecting Kahn's expert's $18.25 figure as methodologically flawed. The Chancery Court held Alcatel had proven entire fairness, and Kahn appealed again.