Hi-Cal, Inc. is a Delaware corporation and one of America's largest makers of candies. Hi-Cal is publicly traded, has 5 million shares of common stock outstanding and no single shareholder owns more than 5% of its stock. Charles Chocolate is the Chief Executive Officer and Chairman of the 9-member board of directors.

A few months ago, Fred Food, Chairman of the Board of Foodstore, a large grocery chain, began talking to Charles about the possibility of a merger between the two companies. Charles and Fred knew each other because Charles is also a Foodstore board member. Foodstore is publicly traded, has 10 million shares of common stock outstanding and its largest shareholder, Sam Shareholder, owns 30% of its stock. Sam Shareholder does not own any Hi-Cal stock.

Over the next few weeks, Charles and Fred negotiated a proposed merger whereby Foodstore would acquire Hi-Cal in a stock-for-stock merger transaction pursuant to which each share of Hi-Cal stock would be exchanged for two shares of Foodstore stock. In addition, if the merger were consummated, Charles would become president of the combined entity.

After reaching agreement with Fred, Charles called a meeting of the Hi-Cal board to be held the next day. All board members received notice of the meeting as required by the bylaws. Five board members, including Charles, attended. Charles orally presented the merger proposal to the board members present and disclosed his membership on the Foodstore board and his anticipated role in the combined entity. Charles said that the transaction was worth $75 per share, although he had not sought any legal opinion or valuation opinion. After a twenty minute discussion, the merger was approved by vote of three of the directors, including Charles. One director, Carol Content, abstained and another voted against the merger.

A week later, Gail Grocery, Chairman of Groceryland, a competitor of Foodstore, approached Charles and proposed a transaction whereby Groceryland would acquire Hi-Cal for $80 per share cash

Charles called a meeting of the Hi-Cal board to discuss the higher Groceryland offer. After careful deliberation, the board unanimously voted to reject the offer on the basis that Foodstore would be a better long-term strategic fit with Hi-Cal. The board then adopted an amendment to the Hi-Cal bylaws which eliminated the personal liability of Hi-Cal directors for monetary damages for breaches of their fiduciary duties.

On March 10, Hi-Cal mailed out a proxy statement to Hi-Cal shareholders of record as of March 15 soliciting votes in favor of the merger with Foodstore. The statement fully disclosed the terms of the Foodstore and Groceryland offers and bylaw amendment. It also disclosed that the Hi-Cal board had approved the Foodstore merger, but failed to disclose the details of the vote, Charles's membership on the Foodstore board and his future position in the combined entity. The statement further announced that a shareholders' meeting would be held on June 15 to vote on the merger. At the meeting, a majority of Hi-Cal shareholders voted to approve the merger.

Thereafter, Ivanna Investor, a shareholder of record of Hi-Cal at the time the merger was approved, filed a complaint in the Delaware Court of Chancery. The complaint challenged the validity of the merger and the shareholder vote and asserted breaches of fiduciary duty against the Hi-Cal directors. The board members dispute each of the claims and also argue that: (1) the shareholder vote ratified all of their actions, and (2) the amendment to the bylaws eliminated any personal liability of the Hi-Cal directors for monetary damages.

Identify and explain each claim that Investor could bring and discuss and evaluate the board's defenses to each claim. Explain how the Delaware Court of Chancery would likely resolve each of the claims and defenses.