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Taylor v. LSI Logic Corporation8/25/1998
Submitted: July 21, 1998
Upon appeal from Court of Chancery:
AFFIRMED.
In this appeal we consider whether the Court of Chancery has subject matter jurisdiction to adjudicate a claim predicated upon Section 241 of the Canada Business Corporations Act ("the Canadian Act"). We hold that the equitable relief sought in the complaint may be granted only in the courts of Canada as those courts are defined in Section 2 of the Canadian Act. We, therefore, affirm the Court of Chancery's dismissal of the suit, albeit on different grounds. We disagree with the Court of Chancery that the doctrine of comity dictates dismissal of this suit and we find that its holding that it had concurrent jurisdiction to hear this suit was incorrect.
Facts and Procedural History
The pertinent facts are outlined in detail in this Court's 1997 decision involving this suit. In summary, Ethel Taylor, a citizen of Toronto, Canada, alleges that she formerly owned shares of common stock of LSI Logic of Canada ("LSI Canada"). LSI Canada, a Canadian Corporation chartered under the Canada Business Corporations Act, designed computer systems for its Canadian customers. LSI Logic Corporation ("Logic-Delaware"), a Delaware Corporation, designs and manufactures computer systems for corporate customers around the world and was LSI ("Canada's sole supplier. Logic-Delaware would manufacture and sell computers to LSI Canada's specification that LSI Canada resold to its customers.
In November 1994, Logic-Delaware, which owned 55 % of LSI Canada's common stock, announced its intention to take LSI Canada private through an offer to purchase all of LSI Canada's issued and outstanding publicly traded common shares at $3.30 per share. The remaining 45 % of LSI Canada's common stock was publicly traded and was widely held by citizens of the United States and Canada. In connection with the offer, LSI Canada's independent directors hired Scotia McLeod, an investment banking firm, which estimated the value of LSI Canada's issued and outstanding common shares to be $4.80 to $5.60 per share. Logic-Delaware subsequently withdrew its offer rather than increase its price.
Approximately six months later, Logic-Delaware announced another offer to buy the outstanding common stock of LSI Canada for $4 per share. In its offering circular, Logic-Delaware revealed that it proposed to increase intercompany transfer prices with LSI Canada to reflect Logic-Delaware's high risk, capital intensive operations. Logic-Delaware recognized that these increases would have a materially adverse affect on LSI Canada's profitability, and, therefore, considered it appropriate to make an offer to purchase all the outstanding shares.
At the independent directors' request, Scotia McLeod, again, valued LSI Canada's common shares, estimating the value of the shares to be approximately $4.90 to $5.70 per share. The independent directors, never-theless, recommended to the minority shareholders that they "seriously consider accepting" Logic-Delaware's $4 per share offer. In the independent directors' opinion, LSI Canada would have increasing difficulty in resisting Logic-Delaware's proposed changes to LSI Canada's business that would ultimately "... materially reduce the profitability of LSI Canada ......".
The minority shareholders, including Plaintiff Taylor, subsequently tendered approximately 10.1 million shares, leaving fewer than 1.7 million shares not tendered. On September 8, 1995, LSI Canada, at Logic-Delaware's behest, implemented a reverse stock split that cashed out the remaining public shares at the same $4 per share price.
Taylor, despite tendering all her s
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