Partnership Valuation Rejected as Unfair by Delaware Chancery Court


In this coordinated action involving 13 partnerships that were involved in freeze-out transactions by AT&T of minority shareholders, Delaware Chancery Court held that AT&T breached its fiduciary duties and effectuated the freeze-out through an unfair process and by paying an unfair price. While AT&T bore the burden of proving that the freeze-out was entirely fair to the minority partners, it failed in that and did not employ any procedures that insured fairness to the minority partners. The lead partner of the valuation firm had a long-standing relationship with AT&T, and internal AT&T personnel influenced the outcome of the valuation. The court determined the fair value of the interest as a remedy to the situation.


As to the Court’s fair price analysis, AT&T utilized an expert witness, rather than its valuation firm, to show that the deal was fair. In rejecting the expert's opinion, the Court noted the expert's valuation methods were unpersuasive, and the Court highlight many indicia of unfairness, not the least of which was that the transaction was self-interested.


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See In re Cellular Telephone Partnership Litigation, C.A. No. 6885-VCL (Del. Ch. March 9, 2022)

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