Paramount Communications Inc. v. QVC Network Inc.

Revlon duties, sale of control, and board conduct when a transaction shifts control from dispersed shareholders to a controlling block.

Paramount agreed to a merger with Viacom that included defensive deal protections. QVC made a competing bid that created a live contest for control. Paramount's board continued to favor the Viacom transaction despite the competing offer and the resulting change in control structure.

The Delaware Supreme Court held that enhanced scrutiny applied and that the board had to seek the best value reasonably available for shareholders.

The court reasoned that a transaction ending the public shareholders' dispersed voting position and placing control in a single person or group presents a final-stage agency problem. Deal protections and board choices had to be reasonable in relation to the obligation to maximize shareholder value in the control transaction.

1. Which corporate actor gains authority or bears monitoring responsibility under the rule?
2. How does the rule affect agency costs without unduly impairing informed business judgment?