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Chapter 38
Corporate Acquisitions and Multinational Corporations
VI. Answers to Critical Legal Thinking Cases
38.1 Shareholder Resolution
Yes, the Medical Committee’s proposed shareholder resolution could be stated in terms to meet the
requirements of Section 14(a) to be included in Dow Chemical’s proxy materials. If a shareholder meets
the ownership requirements of Section 14(a) (which the Committee met), he has a right to place a
proposal in the proxy materials of the corporation if the proposal relates to the corporation’s business,
concerns a policy issue and not the day-to–day operations of the corporation, and does not solely relate to
a social or religious purpose. In this case, Dow Chemical was manufacturing napalm, a chemical
substance that was used as a defoliant in Vietnam during the Vietnam conflict. Napalm, which was often
38.2 Dissenting Shareholder Appraisal Rights
No, John Bershad may not obtain dissenting shareholder appraisal rights. To obtain appraisal rights, a
dissenting shareholder must (1) file a written objection to the merger prior to the vote of shareholders, (2)
not vote in favor of the proposed merger, and (3) make a written demand for payment of his shares.
38.3 Tender Offer
Mobil Corporation wins. The court held that Marathon Oil Company had violated Section 14(e) of the
Williams Act. Section 14(e) prohibits fraudulent, deceptive, and manipulative practices in connection
with tender offers. The court held that both the stock option and Yates Field option that Marathon granted
to U.S. Steel was a fraudulent, deceptive, and manipulative practice in violation of Section 14(e). First,
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Marathon’s interest in Yates Field for $2.8 billion if a third party gained control of Marathon violated
Section 14(e). This was because the fair market value of Marathon’s interest in the Yates Field was worth
up to $3.6 billion. This is called selling the “crown jewel” because Marathon was selling one of the most
important assets that attracted Mobil to make the tender offer for Marathon’s share in the first place. The
38.4 State Antitakeover Statute
The court held that Wisconsin’s antitakeover statute was lawful and did not conflict with the federal
Williams Act or violate the Commerce Clause of the U.S. Constitution. The Court of Appeals reached this
decision by applying the reasoning used by the U.S. Supreme Court in upholding a state antitakeover
statute in CTS Corporation v. Dynamics Corporation of America, 481 U.S. 69, 107 S. Ct. 1637 (1987).
The court in the present case held that the Williams Act regulates the process of tender offers, i.e., timing,
VII. Answer to Ethics Case
38.5 Ethics Case
Yes, the actions of Fruehauf’s management violated the business judgment rule. The business judgment
rule requires management of a company to act in good faith and in the best interests of the corporation’s
business rule in the following respects:
1. The payment of a breakup fee to Merrill Lynch—which was payable even if the management-led
2. The “no shop” agreement violated Fruehauf management’s responsibility to shareholders to find
3. Fruehauf management’s continued preference for their own bid over that of the Edelman group
4. Granting such lucrative “golden parachutes” to themselves, which would be triggered by their
unquestionable unethical conduct.
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Appeals for the Sixth Circuit)