The Mysteries of Corporate Law: A Response to Brudney and Chirelstein

Abstract

In 1974, Professors Victor Brudney and Marvin Chirelstein published an article that suggested formulae for deciding whether minority shareholders of a subsidary receive fair treatment in a controlled merger. In 1977, in Mills v. Electric Auto-Lite Co., the Seventh Circuit relied on that article in concluding that the merger terms being reviewed were fair. As Professor Simon Lorne pointed out recently, "it is clear from the Seventh Circuit decision in Mills that the court did not fully understand the concepts set forth in the Brudney & Chirelstein article." "A least in stock mergers," he explained, the Brudney & Chirelstein approach yielded an ascertainable, satisfying and simple solution. . . . In the context of non-stock mergers the advantages of certainty and simplicity are lost, and the intrinsic appeal of the analysis disappears. Thus, the value of the Brudney & Chirelstein approach may lie more in what it has provoked than in the solution it proposed—but the value of provocation is not inconsiderable.