In Re: LNR Property Corp. Shareholders Litigation, download file. This is a purported class action against a Delaware corporation, its former directors and its former controlling shareholder alleging breach of fiduciary duty in connection with a cash out merger pursuant to which the controlling stockholder and other members of management exercise the right to purchase a 25% equity stake in the surviving entity. Specifically, the complaint alleged that the directors breached their fiduciary duties when they allowed the controlling shareholder to negotiate (and later vote to authorize) the merger on terms that were inadequate and unfair to the public stockholders. The principal issue addressed by the court in a Motion to Dismiss by the defendant directors was the proper standard of the court’s review in examining the complaint. The defendants argued that the deferential standard of the Business Judgment Rule should apply as opposed to the more intrusive close scrutiny of the entire fairness standard. The court determined that despite the bare-bones facts in the complaint, in light of the standard on a Motion to Dismiss under Rule 12(b)(6) which requires the court to ignore most sources of information other than the complaint, the court found that there was a reasonable inference that the controlling stockholder had a disabling conflict and in essence, stood on both sides of the transaction, and therefore the entire fairness standard would likely apply. The court noted that the BJR does not protect the board’s decision to approve a merger, even where a majority of the directors are independent and disinterested–where a controlling shareholder has a conflicting self interest. Instead, Delaware law imposes an entire fairness burden when the fiduciary charged with protecting a minority and the sale of the company does not have an undivided interest to extract the highest value for the shareholders. The court distinguished Orman v. Cullman as a recent decision where the mere fact that a controlling shareholder has or may be acquiring some interest in the buyer does not automatically trigger entire fairness review.