by Matt Albaugh , Jason Asmus , Julie Crocker , William Doyle and Chris Brown
Earlier this week, the Delaware Court of Chancery ruled that AT&T breached its duty of loyalty by engaging in an unfair and self-interested transaction as part of a minority-partner freeze-out.
In In re Cellular Telephone Partnership Litigation, (C.A. No. 6885-VCL) (Del. Ch. March 9, 2022), Vice Chancellor Laster issued a detailed, 134-page opinion following a five-day trial last year. The decision was a bellwether for 12 other similar freeze-out transactions that AT&T performed around the country.
AT&T's partnerships originated in the 1980s as part of the Federal Communications Commission's (FCC) lottery system for awarding cellular telephone networks in various geographic areas. At the time, lottery participants would commonly enter into arrangements similar to an office pool - if one of the pool participants won the FCC's lottery, the winner received a 50.01% partnership interest and the others received shares of the remaining 49.99% interest. A pool participant for the Salem, Ore. area won and promptly sold its controlling partnership interest to AT&T.