Anti-Takeover Measures in Ebay v. Craigslist

The courts have sought to create a level playing field for such disputes, emphasizing that “a corporation does not have unbridled discretion to defeat any perceived threat.” Unocal Corp. v. Mesa Petroleum Co., 493 A. 2d 946, 955 (Del. 1985). Defensive measures must be reasonable in relation to the threat posed and cannot have as their sole or primary purpose the entrenchment of management. Id. However, what happens when the majority shareholders interest is so large as to make entrenchment and self-interest an academic issue? How far can the majority shareholders of a closely held company go to repel, and further insulate their company from, the perceived threat of a predatory minority stakeholder? By what standard will the majority shareholder's conduct be measured? Will the business judgment rule apply, or will entire fairness be required in defense of the measures implemented by the majority?

These are only some of the issues tried in the early weeks of December before the Honorable William B. Chandler, III, Chancellor of Delaware's Court of Chancery, in eBay Domestic Holdings, Inc. v. Craigslist, Inc., et al., C.A. No. 3705-CC.