[Corporation2] case 3 - 22
3. Smith v. Gross United States Court of Appeals, Ninth Circuit, 1979.
1. Fact
The Smiths responded to Seller Gross's newsletter, enticed by promises of profitable earthworm farming with minimal effort and a buyback guarantee of $2.25 per pound. Gross assured them of easy success and the need for their help in supplying worms for the bait industry. However, the Smiths later found Gross's claims to be false, as the worms multiplied far less frequently than stated and the buyback price exceeded the market value. Additionally, they discovered a limited market for worms in the Phoenix area.
2. Issue
Whther transaction contract between Smiths and Gross was an investment contract or general contract.
3. Rule
15 U.S.C. §§ 77b(1), 78c(a)(10). In SEC v. W. J. Howey Co., 328 U.S. 293, 301, 66 S.Ct. 1100, 1104, 90 L.Ed. 1244 (1946) -"(t)he test is whether the scheme involves (1) an investment of money (2) in a common enterprise (3) with profits to come solely from the efforts of others."
4. Application
The Smiths contend that the transactions between the parties involved an investment contract type of security. The defendants argue that, unlike in Miller, here the buyers were free to resell to anyone they wanted, which they claim shows that the agreement was not a common enterprise. The defendants' argument is rejected. The Smiths argued that despite their freedom to sell their production anywhere, they could only profit if the defendants repurchased at inflated prices, which depended on securing additional investors. This intertwined their fortunes with the defendants'. Similar to Miller, where significant effort was needed from the sellers to find new investors, here the Smiths claimed minimal effort was needed to raise worms and income relied on the defendants buying their harvest. Citing Miller, the court found the Smiths' claims, if true, sufficient to establish an investment contract.
5. Conclusion
The transaction contract between Smiths and Gross was an investment contract. The judgment of the district court is reversed.
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“blue sky law” - 검색!
푸른 하늘을 팔아먹는 사람들. 구역을 정해서 . 사기꾼을 막기 위한 법. security와 관련한 사기꾼을 막기 위한 법.
이 회사에 많은 이들이 생길거다라고해서 투자자들 모아서 보니 빈껍데기....
이런 행위 막기위한 법.투자자들을 보호하기 위한 법.
1929 대공황을 미국에서 겪음. 증권의 폭락.
Smith 가 Gross(seller)에게 속아서 법원에 대한 청구취지 remedy는 무엇?
contract sign후 이행안하면 계약위반. 상대방 동의 없이 개정 안됨.
계약위반이 투자계약이 된 경우 성격이 바뀜. security act가 관련됨.
투자가 회사와 관련되면 corporation law가 involve되고
Smith는 투자자로 보호받음.
Smith가 그로스로부터 2.25에 삼. wormfarmers에게 10배로 팜(22.5달러에 삼).
wormfarmers 가 다시 팔 그 다음에 살 사람이 없음.
시장형성 안되어 있어서 스미스가 되팔 수 없음.
Smith에게 재투자 못함. wormfarmers들이 뻥튀기한 가격으로 사고, 시장형성이 안되어
Smith꺼를 살 사람이 없음. 투자자외 제3가 조금만 노력하고 profit이 오는가(조건)
investment contract.
피고의견 받아들여지지 않음 : Smith의 노력만으로 되지 않기때문에 프렌차이즈는 일반계약X
(프렌차이즈 계약은 자기가 독자적, 독립적으론 노력해야함. )
4. Stokes v. Continental Trust Co. of City of New York Court of Appeals of New York, 1906. 186 N.Y. 285, 78 N.E. 1090.
1. Fact
Continental Trust Co. of City of New York (Continental) is a New York corporation with 5,000 shares at $100 par value each, organized in 1890. Stokes, an original shareholder with 221 shares, demanded to subscribe for 221 more shares of new stock at par after Continental's stockholders agreed to double the capital stock to $1,000,000. His request was denied. The majority of stockholders voted to sell the new stock to Blair & Co., despite Stokes' opposition. The trial court ruled that Stokes had the right to subscribe for a proportional number of new shares and awarded him $99,450, the difference between the $550 market value and par value per share as of January 1902. The court of appeals reversed this decision, leading to Stokes' appeal.
2. Issue
whether according to the facts found the plaintiff had the legal right to subscribe for and take the same number of shares of the new stock that he held of the old.
3. Rule
*Gray v. Portland Bank(1807)
The court held that stockholders who held old stock had a right to subscribe for and take new stock in proportion to their respective shares.
4. Application
The action regarding the issuance of new stocks has remained unquestioned for the past 100 years and forms the foundation of a rule universally followed without exception throughout the entire country. Shareholders have the right to subscribe for and take the new stocks in proportion to their holdings of the increased capital. This right is a preemptive right recognized for nearly all stock issuances. The plaintiff vigorously opposed the issuance of the new stocks before their price was determined, claiming that as a result, he was unable to sell his portion.
In conclusion, the plaintiff's right to subscribe for the new stocks in proportion to his holdings was unlawfully denied, and the defendant sold the stocks at a price of less than $100 per share, causing the plaintiff harm.
5. Conclusion
The plaintiff had the legal right to subscribe for and take the same number of shares of the new stock that he held of the old.
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shareholder는 어떤 권리를 가지고 있는가? BoD멤버를 선출할 권리가 있다.
회사경영 : 주주가 director라면 가능하지만 일반 주주는 경영 못함.
shareholder는 voting right 있음. 경영 너무 못하면 이사진 교체 등 영향력 행사가능.
Preemptive right은 주주의 권리(voting right)에서 나옴.
voting righ을 반으로 줄어서 Preemptive right을 주어서 유지하게한다..
2배로 늘어놨는지, voting right이 반으로 줄어드는 상황이 있었는지.
1단계로 Preemptive right있는지 확인하는 건 어렵지 않음.
명백하게 표현하지 않으면 Preemptive right은 없는것.
1월 30일 450불, market value 550
450달러에 산다면 시세보다 100달러 싸게 산거니까
100곱하기 221 금액 이득 볼 수도 있었다.
우선권 행사안되어서 못샀다.
손해가 침해되지 않았을때 이익이 손해배상금액.
침해당하지 않았으면 450달러에 샀을텐데 550에 샀음. 손해액 22100달러.
5. Donahue v. Rodd Electrotype Co. Supreme Judicial Court of Massachusetts, 1975. 367 Mass. 578, 328 N.E.2d 505.
1. Fact
Harry Rodd served as the president and general manager of Rodd Electrotype Co., holding 80% of the shares. He transferred management to his sons and gifted most of his shares to them. The sons, controlling the board, had the corporation buy 45 of Harry’s shares at $800 each. When the Donahues, minority shareholders, offered to sell their shares on the same terms, the board refused. Euphemia Donahue sued for breach of fiduciary duty, asking to rescind Harry’s stock sale. The trial court upheld the transaction’s fairness, affimed by the appellate court. Euphemia Donahue applealed to the higher court.
2. Issue
Does the distribution constitute a breach of the fiduciary duty owed by the Rodds, as controlling stockholders, to her, a minority stockholder in the enterprise?
3. Rule
*F. H. O'Neal, Close Corporations: Law and Practice, § 1.02 (1971)
(1) a small number of stockholders; (2) no ready market for the corporate stock; and (3) substantial majority stockholder participation in the management, direction and operations of the corporation.
*Cardullo v. Landau, 329 Mass. 5, 8 (1952). DeCotis v. D'Antona, 350 Mass. 165, 168 (1966).
Stockholders 17 in the close corporation owe one another substantially the same fiduciary duty in the operation of the enterprise 18 that partners owe to one another. In our previous decisions, we have defined the standard of duty owed by partners to one another as the "utmost good faith and loyalty." Stockholders in close corporations must discharge their management and stockholder responsibilities in conformity with this strict good faith standard.
4. Application
Plaintiff urges that the distribution constitutes a breach of the fiduciary duty owed by the Rodds, as controlling stockholders, to her, a minority stockholder in the enterprise, because the Rodds failed to accord her an equal opportunity to sell her shares to the corporation. The defendants reply that the stock purchase was within the powers of the corporation and met the requirements of good faith and inherent fairness imposed on a fiduciary in his dealings with the corporation. They assert that there is no right to equal opportunity in corporate stock purchases for the corporate treasury. This corporation qualifies as a close corporation due to (1) a small number of stockholders; (2) no ready market for the corporate stock; and (3) substantial majority stockholder participation in the management, direction, and operations of the corporation. When the corporation reacquiring its own stock is a close corporation, the purchase is subject to the additional requirement, in the light of our holding in this opinion, that the stockholders, who, as directors or controlling stockholders, caused the corporation to enter into the stock purchase agreement, must have acted with the utmost good faith and loyalty to the other stockholders.
To meet this test, if the stockholder whose shares were purchased was a member of the controlling group, the controlling stockholders must cause the corporation to offer each stockholder an equal opportunity to sell a ratable number of his shares to the corporation at an identical price. However, the controlling stockholders of this corporation did not provide equal opportunities to the plaintiff. For these reasons, Supreme Judicial Court of Massachusetts agrees the plaintiff and reverse the decree of the superior court.
5. Conclusion
Reversed. (The distribution constitutes a breach of the fiduciary duty owed by the Rodds, as controlling stockholders, to her, a minority stockholder in the enterprise. )
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미국에서 차별이라고 하는것은 등급이 나뉨 (인종, 성별, 지역,국가기원 - 입증하기 어렵지는 않음. 가장 높은 등급의 차별 )
이 사건이 차별은 주주의 차별임. 낮은 등급 차별. 연방헌법이 아닌 corporation 법률을 찾아서 해결.
shareholder의 Fiduciary duty. close coporation에서 Fiduciary duty 위반하여 주식을 차별하면서 비싸게 팔았다 주장. Fiduciary duty, close coporation 하에서 shareholder의 fiduciary duty 위반인가가 이슈.
Rule : close coporation- rule써야. Fiduciary duty - rule써야.
*Partnership과의 차이점은?
A B C 3명있는경우 파트너경우 minority patner 개념 없음 1명이 file해서 disolution 가능. 파트너쉽은 주식없음. 미국 로펌은 다 LLP Limited liability partnership //
close corporation 일경우 한명이 minority shareholder는 불리한 상태에서 감수해야함. (50%넘어야하므로. )
횡포 : freeze-out : close corporation에서 director들이 횡포하기 위해 배당금 안주는것 법원이 개입하지 않음. 소액주주들이 매우 불리한 위치에 있음. 이러한 불이익을 대처하기 위해 소액주주들이 보호받는 시스템은 어떤 시스템? 자신의 몫을 찾기위해 general law의 어려운 조건에 맞아야함. 그래서 소액주주들은 fiduciary duty로 보호.
고등법원에서는 fiduciary duty 있지만 strict하지 않음. 위반 인정하지 않음.
대법원은 fiduciary duty 를 strict하게 봄. 기준이 바뀌어서 결론이 달라짐. (rule 다름)
1,2심과 대법원의 결정이 다름.
Messachusatts case만 인용하는 것은 고등법원/ 대법원은 캘리포니아 케이스 주를인용.
close corporation에서는 stockholer가 director로서 controlling stockholer로서
회사가 그 주식을 구매할 수 있도록 할 수 있다. 이때 good faith 나 fairness 필요하다.
동일한 대등한 가격으로 살 수 있도록 기회주어야.
6. Brown v. McLanahan United States Court of Appeals. Fourth Circuit, 1945. 148 F.2d 703. Before PARKER, SOPER, and DOBIE, Circuit Judges.
1. Fact
In the bankruptcy reorganization of several utility companies, Baltimore Transit Company issued debentures and preferred stock to lien holders, and common stock to previous stockholders and unsecured creditors. Voting rights were exclusively held by preferred and common stock, with preferred stockholders having the exclusive right to vote for most directors if dividends were unpaid. A ten-year voting trust was established for preferred and common stock, with trustee holding a majority of company director seats. In 1944, trustees amended the charter without notice, granting voting rights to debenture holders and diminishing preferred stockholders, filed a class action against the company, trustees, and directors, arguing against the trustee’s actions as abuses of trust. The trial court dismissed the complaint, prompting Brown’s appeal.
2. Issue
Whether the action of the voting trustees in adopting the amendment was a breach of the fiduciary duty owed to the certificate holders.
3. Rule
* King v. Richardson, 4 Cir., 136 F.2d 849, 859
It is elementary that a trustee may not exercise powers granted in a way that is detrimental to the cestuis que trustent; nor may one who is trustee for different classes favor one class at the expense of another. Such an exercise of power is in derogation of the trust and may not be upheld, even though the thing done be within the scope of powers granted to the trustees in general terms.
4. Application
Plaintiff contends that such action on the part of the trustees was invalid for three reasons. It was beyond the powers vested in the trustees to diminish the voting power, it was an abuse of trust to use the voting power which the trustees held in trust for the benefit of preferred stockholders, and it was an abuse of trust to use the voting power for their own benefit and the benefit of corporations in which they were interested and to the detriment of preferred stockholders who were beneficiaries of the trust. Defendants strongly urge that the real beneficiaries here and now are the debenture holders and not the certificate holders. The trustees' belief in the rightness of their policy does not justify infringing on voting rights, as seen in Industrial & General Trust v. Tod. Their actions, therefore, exceeded their authority, and the motion to dismiss should have been denied. The District Court's judgment is reversed, declaring the June 21, 1944 charter amendment void, with further relief left to the discretion of the District Court.
5. Conclusion
Reversed and remanded. (The action of the voting trustees in adopting the amendment was a breach of the fiduciary duty.)
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신탁재산은 trustee가 있음. trustee가 운영하고, beneficiary에게 준다.
voting trust : 의결권에 대한 신탁.
holder인 Brown= 500개주 holder가 trustee에게 위임. (대부분 5년간 행사)
위임했더니 사고침. 사고친 것을 맡긴자가 무효화할 수 있는가?
소액주주들의 결집력을 위해서.
45000주의 holder 가 주주들.
45000주의 holder들은 브라운과 같은 견해 가지고 있다.
피고가 강력하게 beneficiary가 certificate holders 아니고 dibenture holders이다라고 주장함. (신탁의 일반이론에서 나온 내용. beneficiary에게 준 것은 잘못이 아니라는 주장.) 하지만 fact finding 해보니 진정한 수익자는 dibenture holders가 아니다. (voting에 대한 의결권/혜택 포기로 나옴)
voting trust의 trustee는 beneficiary 에게 이득 주어야한다. beneficiary 가 아닌자에게 이득 주면 fiduciary duty 위반이다. voting trust holder의 권한을 빼앗았으니까
trustee 권한 남용함 (위임 받은 범위를 넘음). amendment가 무효.
7. Mickshaw v. Coca Cola Bottling Co. Superior Court of Pennsylvania, 1950. 166 Pa. Super. 148, 70 A.2d 467.
OPINION BY DITHRICH, J., January 12, 1950:
1. Fact
Plaintiff continued in defendant's employ for two years. Then in October 1942, having received notice to report for his Selective Service physical examination, he enlisted in the Coast Guard and served with that branch some 37 months. He returned from the service and resumed working for defendant in December 1945. In May 1947 he left the employ of defendant, and in September of that year first made demand for payment for those years during which he was in service. His claim was for $3,588. Upon trial the jury awarded him $1,000. From the denial of motions for a new trial and for judgment n.o.v. defendant appeals.
2. Issue
The question is whether Feinberg's proposal to pay the difference in wages was decided by the defendant's board of directors, making the defendant liable.
3. Rule
* 166 Pa. Superior Ct. 155 : The control of the business of a private corporation is vested in its board of directors.
* 166 Pa. Superior Ct. 156 : “A majority of the board[‘s conduct] was a sufficient ratification of the proposal… Where the members of the board, actually and directly, personally conduct the business…”
4. Application
The plaintiff argued that the defendant should be responsible for the pay difference promised by Feinberg. It is likely that the defendant's board of directors made decisions, with Feinberg being one of the three directors and the proposal mentioned in newspaper articles. None of the other directors disputed this. On the contrary, the defendant argued against its liability. It stated that there were no such decisions made, and the plaintiff failed to provide direct evidence like meeting minutes. The defendant asserted that the plaintiff's argument was mere speculation and did not meet the burden of proof. The court sided with the plaintiff's argument. Requiring formal records would be unfairly burdensome, especially considering that the defendant, with only a few directors, does not always adhere to the same formalities as larger companies. The court also reinforced the plaintiff's inference by referencing the testimony of another director, Myer Ackerman. Ackerman was aware of the policy when it was announced and gave his agreement. Therefore, since two out of the three directors approved Feinberg's offer, the defendant would indeed be liable.
5. Conclusion
Affirmed. (It was decided by the defendant's board of directors, making the defendant liable.)
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Director 3명중 1명이 하면 회사가 한것으로 간주하나?3명의 합의가 필요하다. BoD 멤버의 합의.
[statute 필요한 건 아래 경우들만.]
Marriage
Year (1년이상)
L(부동산)
E(executory 유언집행)
G (500달러 이상의 제품 매매계약)
S(제3자를 위한 채무보증)
director의 management control에 관한 rule. 신문기사에 문서로 난 것이 입증되고 있음.
fiduciary duty의무있고 회사에 피해를 주면 fiduciary duty위반이 되지 않았더라면 발생하지 않았을 손해를 배상해야. BoD는 경영권이다.
officer는 누구인가?BoD의 명령을 받는 직원들
CEO : Chief Executive Officer
동시에 Director인 경우도 있음.
충실의무 있음. 보고의무 있음.
8. J.I. Case Co. v. Borak Supreme Court of the United States, 1964. 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423.MR. JUSTICE CLARK delivered the opinion of the Court.
1. Fact
Supporters of the merger between J.I. Case Company and American Tractor Corporation circulated a proxy statement for a shareholder vote. Case shareholder Borak filed suit to block the merger, alleging the proxy statement violated Section 14(a) of the Securities and Exchange Act of 1934 with false information. Borak argued the merger relied on these false statements for approval. The trial court could only provide prospective relief, not rescind the merger. However, the court of appeals reversed this decision. The case reached the United States Supreme Court through certiorari.
2. Issue
Whether § 27 of the Act authorizes a federal cause of action for rescission or damages to a corporate stockholder with respect to a consummated merger which was authorized pursuant to the use of a proxy statement alleged to contain false and misleading statements violative of § 14(a) of the Act.
3. Rule
*Section 14(a) of the Securities Exchange Act of 1934, 48 Stat. 895, 15 U.S.C. § 78n(a):"It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce or of any facility of any national securities exchange or otherwise to solicit or to permit the use of his name to solicit any proxy or consent.
*Section 27 of the Act, 48 Stat. 902 903, 15 U.S.C. § 78aa : "The district courts of the United States, the Supreme Court of the District of Columbia, and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have exclusive jurisdiction of violations of this title or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this title or the rules and regulations thereunder.
4. Application
The Supreme Court focused solely on whether Section 27 of the Act allows a federal cause of action for a stockholder in a completed merger based on a proxy statement alleged to contain false statements violating Section 14(a) of the Act. It did not consider other questions raised. Respondent, the owner of 2,000 shares, sought to enjoin a merger between Case and ATC, citing breach of fiduciary duties and misleading proxy material. The Court found jurisdiction limited to declaratory relief for private suits alleging Section 14(a) violations. Private parties can sue for such violations under Section 27, despite no specific mention in Section 14(a). The purpose of Section 14(a) is to prevent deceptive proxy disclosures for corporate actions, aiming to protect investors. Federal courts have the power to provide necessary remedies to enforce federal rights, including rescission and damages, with the specific relief to be determined later in the trial.
5. Conclusion
Affirmed.(§ 27 of the Act authorizes a federal cause of action for rescission or damages to a corporate stockholder with respect to a consummated merger which was authorized pursuant to the use of a proxy statement alleged to contain false and misleading statements violative of § 14(a) of the Act.)
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count - 청구원인 : 1.director fiduciary duty 위반 2. 거래법 14(a) 위반
corporation법은 state law이지만 Securities Exchange Act 14(a) -연방법 ,diversity 문제라 연방법원에서 다룸.
주 사건인데 원, 피고 주소지가 달라서 연방법원으로 간다면 법은 주법을 적용함.
diversity 에 근거 - count1 : 주법이 적용되는 것이 원칙
count2 - Securities Exchange Act 14(a) 연방법이므로 연방법적용.
주주가 회사의 합병을 무효로 해달라고 하는 소송 : shareholders derivative suit
proxy solicitation : 위임을 권유해서 정족수를 획득하기 위한 것.
판단 전에 이 소송에서 소송비용 공탁금을 내라고 함. Wisconsin 주법.count 1 은 주법 적용.
연방대법원의 결론은? 손해배상결정할 수 있고, affirm이라 Wisconsin 주법 적용X
27조 : 27조 연방법. 개별 주주가 회사를 상대로 소송을 제기할 수 있는 근거를 마련해준다. 연방법에 의해 소송가능하면 주법 적용하지 않아도 된다는 것을 말함. 따라서 공탁금 안내도 됨.
14조 a의 목적은 주된 목적은 투자자 보호. injury? - 금액 안나옴. 1심에서 정하는 것임.
count1 공탁금 안내서 각하된것 1심에서 다시 심사하라고 함.
9. Virginia Bankshares, Inc. v. Sandberg 501 U.S. 1083, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991). JUSTICE SOUTER delivered the opinion of the Court.
1. Fact
First American Bankshares, Inc. merged First American Bank of Virginia with Virginia Bankshares, Inc. (VBI), where VBI owned 85% of the Virginia bank's stock, leaving 15% for minority shareholders. VBI offered to buy the minority shares at $42 per share, stated as a premium, after an independent valuation supported this price. The minority shareholders, including Sandberg, challenged this valuation, resulting in a district court ruling in favor of Sandberg. VBI appealed, and the Court of Appeals partially affirmed, partially vacated, and remanded the decision. Subsequently, VBI sought certiorari from the United States Supreme Court.
2. Issue
Whether a minority shareholder can sue under Securities Exchange Act § 14(a) and SEC Rule 14a-9 for fabricated explanations by the corporate board, even if those explanations were vague or conclusory.
3. Rule
* Section 14 (a) of the Securities Exchange Act of 1934 : "It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 781 of this title." 15 U.S.C. 78n(a).
* 17 CFR 240.14a-9 (1990). :"No solicitation subject to this regulation shall be made by means of any proxy statement . . . containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading. . . ."
4. Application
A minority shareholder claiming that the corporate board provided fabricated explanations for endorsing specific actions asserts a private cause of action under Securities Exchange Act §14(a) and SEC rule 14a-9, despite the statements being conclusory. Shareholders rely on director’s expertise, expecting precise statements based on factual foundations during proxy solicitations. In this case, the statement of a “fair” and “high” offer to monority shareholders was disproven by the “fair” and “high” offer to minority shareholders was disproven by the bank’s true value and real estate worth. While Sandberg and other minority shareholders may have viable claims under §14(a), Sandberg lacks evidence linking the proxy statement to the merger proposal and necessary causation. Since the proxy solicitation wasn’t legally required, and minority approval wasn’t the sole protection against post-merger conflicts, a private remedy under §14(a) lacks clear congressional intent favoring theoretical assertions over minority rights.
5. Conclusion
Reversed. (A minority shareholder can sue under Securities Exchange Act § 14(a) and SEC Rule 14a-9 for fabricated explanations by the corporate board, even if those explanations were vague or conclusory.)
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모의법정
Fiduciary duty가 director에게 있는 것은 회사의 이익과 상반되는 행위를 해서는 안된다는 것이고,
개인적인 이득을 위해 회사에 손해를 끼쳐서는 안된다.
이 사건에서 소수 주주자들의 투표는 필요 없는 사건임.
false or misleading statement라도 opinion이면 괜찮다.
BoD가 42달러가 매우 낮은 금액이라는 것을알면서 정했다면?
악의적: BoD 로저에 의한 결정은 무효~
피고측은 42달러는 외부기관에서 정한것이라고 항변.
60달러는 적정가격이라고 알려졌지만 합병시점에 적절한 금액은 42달러라고 항변.
원고측 closing. 피고측 closing. 모의법정에서 원고 승소.
10. Gall v. Exxon Corp United States District Court, Southern District of New York, 1976. 418 F. Supp. 508. ROBERT L. CARTER, District Judge.
1. Fact
In 1975, Exxon Corporation's board of directors formed a special committee to investigate allegations of $59 million in corporate funds being used for bribes or political payments in Italy. The committee found millions in secret payments and political contributions. They unanimously decided it wasn't in Exxon's or its shareholders' interest to pursue legal action against current or former directors. The committee authorized Exxon officers to seek dismissal of shareholder derivative actions. In the current case with shareholder Gall suing Exxon, the company seeks summary judgment dismissal based on the special committee's decision.
2. Issue
Whether it is possible to adjudicate exceptionally in court in connection with Bod's illegal activities.
3. Rule
*In Swanson v. Traer, 354 U.S. 114, 116, 77 S.Ct. 1116, 1 L.Ed.2d 1221 (1957), the classical description of those situations where a shareholder may sue on behalf of his corporation was contained in Hawes v. Oakland, supra. The Swanson court quoted Hawes as follows: "Some action or threatened action of the managing board of directors or trustees of the corporation which is beyond the authority conferred on them by their charter or other source of organization; "Or such a fraudulent transaction completed or contemplated by the acting managers, in connection with some other party, or among themselves, or with other shareholders as will result in serious injury to the corporation, or to the interests of the other shareholders; "Or where the board of directors, or a majority of them, are acting for their own interest, in a manner destructive of the corporation itself, or of the rights of the other shareholders; "Or where the majority of shareholders themselves are oppressively and illegally pursuing a course in the name of the corporation, which is in violation of the rights of the other shareholders, and which can only be restrained by the aid of a court of equity."
4. Application
The complainants are entitled to seek equitable relief if they can show a breach of trust or duty involved in injuries and illegal actions, without needing to prove that the transaction was beyond the corporation's authority. The illegality may arise from dealing with parties lacking lawful authority, such as yielding to unlawful governmental demands. Stockholders have the right to seek relief when corporate boards fail to resist unconstitutional tax collection or other illegal actions. Mere belief in corporate illegality does not grant stockholders greater rights than other citizens; the responsibility to guard against illegal acts lies with public officials. The defendants' motion for summary judgment is denied, allowing the plaintiff 60 days for discovery to present significant evidence supporting their case. This decision is made without prejudice, meaning the motion can be renewed later if needed.
5. Conclusion
SO ORDERED. It is possible to adjudicate exceptionally in court in connection with Bod's illegal activities.
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5900만불 9년동안 줌. Exxon 의 director들에게 뇌물 줌.
주주는 디렉터에게 소송제기가능하다.
director가 fiduciary duty 위반하면 배상해야한다.
뉴저지 대법원 판사를 스페셜 카운슬러로 해서 결론 내림.
소액주주가 넥슨 회사에 소송제기했을때
회사 이익을 위해서는 소송을 제기하지 않는게 낫다라는 말함.
어떤 경우에는 법원이 관여할 수 있다. director의 misconduct, 주주의 투표에 의해서 instruction이 없다면 간섭못하니까 있으면 간섭할 수 있음.
회사 내부문제에 대해서 법원이 자중함. 정치적인 문제도 자중함. 가정문제 이혼등에는 관여함. 회사 내부 문제는 BoD에게 맡김.
summary judgement를 deny 시킴. Exxon이 소송 재판에 가지말고 기각시켜달라고 함.
business judgement rule 이 있지만 BoD의 불법행위 관련될 떄에는 예외적으로 법원에서 심사가능.
11. Aronson v. Lewis Supreme Court of Delaware, 1984. 473 A.2d 805.
Before McNEILLY, MOORE and CHRISTIE, JJ.
1. Fact
Harry Lewis, a stockholder in Meyers Parking System, Inc., sued the corporation and its directors, alleging that lucrative employment agreements and interest-free loans to director Leo Fink were approved without business purpose and wasted corporate assets. Lewis did not make a demand to the board due to allegations of their participation in the wrongdoings, Fink’s control over the board, and the futility of directors suing themselves. The court of Chancery denied Meyers’s motion to dismiss, finding that the complaint raised doubts about the directors’ protection under the business-judgement rule and their ability to impartially consider a demand. Meyers and its directors appealed interlocutorily.
2. Issue
Is there a legal basis for the plaintiff, a shareholder in this case, not making a demand to the Board of Directors before filing the lawsuit
3. Rule
* Del.Ch.Ct.R. 23.1 : In a derivative action brought by 1 or more shareholders or members to enforce a right of a corporation or of an unincorporated association, the corporation or association having failed to enforce a right which may properly be asserted by it, the complaint shall allege that the plaintiff was a shareholder or member at the time of the transaction of which he complains or that his share of membership thereafter devolved on him by operation of law. The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority and the reasons for his failure to obtain the action or for not making the effort.
4. Application
The plaintiff must present specific facts to raise doubt that directors’ actions are protected under the business judgment rule, showing they are not disinterested or independent and that the transaction lacked valid business judgment. Allegations of Fink’s control due to stock ownership and director selection are insufficient to prove lack of independence Claiming the employment agreement was a waste of assets also falls short in challenging the business judgment. The argument that demanding action would require directors to sue themselves lacks factual support to overcome presumed independence and proper judgment. The Court of Chancery’s decision is overturned due to the plaintiff’s failure to make a prior demand to the defendant directors before initiating the derivative suit, without showing this demand would been futile.
5. Conclusion
REVERSED AND REMANDED. (There is no legal basis for the plaintiff, a shareholder in this case, not making a demand to the Board of Directors before filing the lawsuit)
* Feedback
demand futility?
demand 해봤자 BoD가 관련되었기 떄문에 소용없다.
주주가 demand 안하고 derivative action 할 수 있다. demand 했는데 BoD가 reject하면 주주가 derivative action 소송 할 수 있다.
이 사건은 demand가 excuse된 경우임.
demand futility 주장하는 쪽은 누구? 원고: shareholder
BoD 멤버 결정에는 법원은 원칙적으로 관여하지 않는다.
원고들이 Footnote 35!에 해당하는 비오디의 부당행위를 입증하면 디멘드 안하고 소제기 가능.
원고는 어떤 문제가 있는지 구체적으로 입증하지 않음.
Fink가 지명하는것은 관례다... disinterest되었다는 것을 입증하는 것 아님.
챕터 C disinterest..관련된것. 원고들의 allegation 배척한 이유는 적용 안하고 결론만 이야기하고 있어서. interest되어있다고만하고.. 왜 intereest되어있는지 이야기를 안함. 이익을 주고 있다고만 이야기함. 결론만 이야기함. 결론이야기하는 것은 입증한 것이 아님.
12. Weinberger v. UOP, Inc. Supreme Court of Delaware, 1983. 457 A.2d 701
Before HERRMANN, C.J., McNEILLY, QUILLEN, HORSEY and MOORE, JJ., constituting the Court en Banc.
1. Fact
Signal Companies, Inc. acquired 50.5% of UOP, Inc.’s stock, electing six memebers to UOP’s board, five of whom were Signal’s directors or employees. Signal, with excess cash, considered buying the remaining 49.5% of UOP. Signal officers conducted a study, recommending a $21 per share purchase price despite knowing $24 per share would yield more for UOP minority shareholders approved the merger. Plaintiffs, UOP minority shareholders, sued, but the Delaware Court of Chancery sided with the defendants.
2. Issue
Whether the defendant acted in accordance with the duty of loyalty to both companies as a simultaneous director during the merger.
3. Rule
* 8 Del.C. § 262(h) : The concept of fairness has two basic aspects: fair dealing and fair price. The former embraces questions of when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained. The latter aspect of fairness relates to the economic and financial considerations of the proposed merger, including all relevant factors: assets, market value, earnings, future prospects, and any other elements that affect the intrinsic or inherent value of a company's stock. Moore, The "Interested" Director or Officer Transaction,
4. Application
In this case, directors were found to have breached the duty of loyalty due to several reasons. Firstly, they withheld crucial information, such as the Arledge-Chitiea report, from the UOP board and minority shareholders, leading to an uninformed vote. Secondly, the directors rushed the initiation and structuring of the merger, creating a lack of fair dealing. Thirdly, they failed to engage in adequate negotiation efforts, further compromising the fairness of the process. Fourthly, conflicts of interest were evident, particularly in the preparation of the feasibility study for Signal's benefit. Fifthly, the directors did not uphold the duty of candor, misleading minority shareholders by not disclosing pertinent information. Lastly, the $21 per share price was deemed unfair, warranting further examination based on all relevant factors, including potential rescissory damages.
5. Conclusion
Reversed and remanded. (The directors (The defendants) breached their duty of loyalty.)
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director’s duty of loyalty : 양다리 걸친 director가 등장.
변호인은 양 당사자 둘을 위한 변호 안됨.
director는 됨. 우호적인 합병이기 때문. (적대적인 관계에서는 안됨)
Merger 이 케이스에서는 fair dealing과 fair price가 기준이 됨.
두회사의 디렉터일때 한 회사의 이익에 반할때는 duty of loyalty의 문제이고 fidyciary duty위반은 아님(한회사 전속전제)
duty of loyalty위반이면 unfair하다.
fair dealing과 fair price 아닐경우 fair하지 않아 손해배상해야한다.
이 케이스의 핵심적인 부분에 집중.
fact 가 바뀌면 fair price일수도 있음. duty of loyaty (회사에게 injury가지 않도록, 기술과 능력활용하여 회사에게 이익가도록,이기지 않고, 자신의 파워를 합리적으로 행사) , fair dealing, fair price설명해줘야 함.
13. Klinicki v. Lundgren Supreme Court of Oregon, 1985. 298 Or. 662, 695 P.2d 906. JONES, Justice.
1. Fact
F.R Klinicki and Kim Lundgren, both pilots stationed in West Germany, formed Berlinair, Inc. in April 1997 to start an air-transportation business in Berlin. Klinicki owned 33% of Berlinair. They aimed to pursue a contract with Berliner Flug Ring (BFR). Lundgren, handling Berlinair’s operarions learned in June 1978 that the contract might be available, but former his own company. Air Berlin Charter Company(ABC), and obtained the BFR contract for ABC. Klinicki, a minority shareholder, sued ABC for usurping a corporate opportunity and Lundgren for breaching fiduciary duty. The trial court ruled in Klinicki’s favor.
2. Issue
Whether ABC usurped a corporate opportunity of Berlinair.
3. Rule
* 94 Harv L Rev at 1011 : The authors then suggest guidelines for the taking of business opportunities by participants in closely held corporations: "(1) If the disputed opportunity is functionally related to the corporation's business, then, whether or not it is `necessary' or of `special value,' individual participants may not take it. (footnote omitted).
*The comment to Section 5.12(a) reads : "Section 5.12(a) sets forth the general rule requiring a director or principal senior executive to first offer an opportunity to the corporation before taking it for himself. If the opportunity is not offered to the corporation, the director or principal senior executive will have violated § 5.12(a). "Section 5.12(a) contemplates that a corporate opportunity will be promptly offered to the corporation, and that the corporation will promptly accept or reject the opportunity. Failure to accept the opportunity promptly will be considered tantamount to a rejection. * * *" and that ” Rejection in the context of § 5.12(a)(2) may be based on one or more of a number of factors, such as lack of interest of the corporation in the opportunity, its financial inability to acquire the opportunity, legal restrictions on its ability to accept the opportunity, or unwillingness of a third party to deal with the corporation. * * *"
4. Application
ABC claimed that the concealment and diversion of the BFR contract did not amount to usurping a corporate opportunity, The Court recognized the corporate opportunity doctrine, preventing corporate fiduciaries from seizing business opportunities belonging to the corporation. ABC agreed that unless Berlinair's financial incapacity changed the situation, the BFR contract was indeed a corporate opportunity of Berlinair. The Court found that financial ability is a crucial aspect of establishing a corporate opportunity.The Court concluded that financial capacity should be considered in determining if a business opportunity is also a "corporate" opportunity. Ultimately, the Court found that Lundgren, as director of Berlinair, breached his fiduciary duty by forming ABC to take advantage of the BFR contract without offering it to Berlinair. Berlinair never rejected or ratified the appropriation, leading to the conclusion that Lundgren, through ABC, misappropriated the contract..the Court held that Lundgren's actions constituted a breach of fiduciary duty and misappropriation of a corporate opportunity, regardless of Berlinair's financial situation.
5. Conclusion
Affirmed. ( ABC usurped a corporate opportunity of Berlinair.)
* Feedback
coporate oppotunity이론이 무엇인가?
duty of layalty, fiduciary duty, corporation opportunity는 관련이 있다.
법원의 입장은?
(financial ability가 개입되어 있음. )
ALI rule 강행법규 아니지만 이 상황에 적합한 법.
이 사안이 corporate opportunity.
ALI rule에는 financial ability에 대한 내용은 없음.
강행법규 다 reject함.
강행법규 아닌 ALI 선택( 이 법을 선택한 logical reasoning은 충분하지 않음)
회사에게 이익이 생길것이다라는 기대에도 불구하고 알리지 않은것..
알리겠지라고 하는 것이 corporate opportunity라고 한다.
14. United States v. Chestman United States Court of Appeals, Second Circuit, 1991. 947 F.2d 551, cert. denied,_ U.S._, 112 S.Ct. 1759, 118 L.Ed.2d 1759 (1992)
1. Fact
Ira Waldbaum, the majority shareholder of Waldbaum, Inc., agreed to sell the company. He informed family members, including his sister Shirley Witkin, about the sale on the condition of confidentiality. Shirley shared the information with her daughter Susan Loeb, instructing her to keep it secret. Susan, in turn, told her husband Keith Loeb, emphasizing the need for secrecy. Loeb then contacted broker Chestman, informing him of the impending sale at a higher price than the market value. Chestman purchased stock for himself and Loeb. The U.S. government sued Chestman, convicting him of aiding Loeb's misuse of confidential information, but the Second Circuit Court of Appeals overturned the conviction.
2. Issue
The issue is whether there was enough trust between Keith Loeb and the Waldbaum family or his wife Susan to make Keith legally responsible as a "misappropriator" under Rule 10b-5, and if so, whether Chestman could be held liable for aiding Keith's stock purchase.
3. Rule
* Carpenter, 791 F.2d at 1028-29 : a person violates Rule 10b-5 when he misappropriates material nonpublic information in breach of a fiduciary duty or similar relationship of trust and confidence and uses that information in a securities transaction.
4. Application
To be liable for aiding and abetting under 10b-5, it must be proven that Keith breached a duty to the Waldbaum family or his wife, based on trust, and Chestman knew of this breach. While a fiduciary relationship doesn't automatically arise from sharing confidential information, frequent discussions of business among family can create such a relationship for 10b-5 liability. Here, there was no evidence of frequent business disclosures or reliance on confidentiality between Keith and the Waldbaum family. Without a fiduciary relationship, Keith cannot be liable as a misappropriator under Rule 10b-5, making Chestman not liable for aiding and abetting. The Rule 14e-3a conviction stands, while perjury and mail fraud convictions are unwarranted.
5. Conclusion
No. Reversed the Rule 10(b)-5.
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breach the fiduciary duty - insider training he made.
Chestman 은 outsider . Keith가 Chesman에게 정보를 줌.
Keith(fiduciary duty 위반한 사람- 위반하여 outsider 정보줌)가Chestman에서 정보줌.
Keith는 무슨죄? [반대 의견은Keith가 죄가 안됨. 아웃사이더 Chestman도 죄가 안됨.
mailing fraud도 안됨. 14만 됨. (insider trading)]
원고 패소.
원고와 피고는 케이스를 근거로 해석을 통해서 fiduciary duty 있는지 없는지 주장함.
(상대편 attack 할 때에는 구체적인 케이스 이름 필요/
부부사이- confidential relationship, fiduciary duty위반 여부에 대한 논의 많음.)
15. Gollust v. Mendell Supreme Court of the United States, 1991.
1. Fact
Ira L. Mendell, a shareholder of Viacom International.Inc. (Viacom), alleged that partnerships and corporations (Gollust) effectively functioned as a single entity, owning over 10 % of International’s stock ans profiting $11million from illegal short-swing trading. When International’s boarding declined to sue, Mendell filed a derivative suit in the Southern District of New York. After Arsenal Acquiring Corp. acquired International, Mendell and other shareholders received cash and Viacom stock, rendering Mendell no longer an owner of International shares. Mendell later amended the lawsuit to include Viacom. The defendants argued that Mendell lacked standing since he no longer held shares from the “issuer.” initially granted but later overtunred by the Second Circuit Court of Appeals. Following this, Gollust petitioned the U.S. Supreme Court.
2. Issue
The issue is whether Mendell maintained standing to sue after the M&A occurred.
3. Rule
* SEA Section 16(b) imposes liability on any "beneficial owner, director, or officer" of a corporation for "any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of [an] issuer . . . within any period of less than six months." 15 U.S.C. § 78p(b)
*Foremost-McKesson, Inc. v. Provident Securities Co., supra, 423 U.S., at 251, 96 S.Ct., at 519, the statutory definitions identifying the class of plaintiffs (other than the issuer) who may bring suit indicate that Congress intended to grant enforcement standing of considerable breadth. The only textual restrictions on the standing of a party to bring suit under § 16(b) are that the plaintiff must be the "owner of [a] security" of the "issuer" at the time the suit is "instituted."
*15 U.S.C. § 78p(b) : Any security" will suffice,
*The terms of § 16(b), read in context, thus provide standing of signal breadth, expressly limited only by conditions existing at the time an action is begun.
4. Application
The court applied the rule because, under § 16(b), there is no explicit prohibition against former shareholders continuing such lawsuits, aligning with the statute's aim to prevent insider trading abuses. Additionally, the court determined that maintaining the suit was in line with the objectives of the statute, which seeks to deter unfair use of privileged information by insiders, thereby supporting the respondent's standing to proceed with the case.The court emphasized that § 16(b) does not explicitly bar former shareholders from maintaining such suits, and the remedial purposes of the statute support allowing the claim to proceed. The majority found that allowing the respondent to maintain the § 16(b) suit was consistent with statutory objectives and not precluded by the language of the statute or existing case law. As a result, the summary judgment for the petitioners was reversed, affirming the judgment of the Court of Appeals.
5. Conclusion
Affirmed. (Mendell maintained standing to sue after the M&A occurred.)
* Feedback
10% 이상 주식 소유한 사람 : insider
Corporation 2 에서 Securities Exchang Act 중요, 더 중요한 것은? 퍈례(Case)
SEA16 (b) 만으로 해결안되니 case적용.
10 % 이상 주주 소유한 자는 6개월 내에 주식을 사고 파는 것을 금함.
Insider들이 정보 들어서 시세차익보는것 금함. (16 b)이때 시세차익보면 다른 개미들은 손해를 봄.
corporation이 profit을 회사에게 다시 돌려주어라라고 소제기하고 이는 소액주주에게 이득이 됨.
->이것에 대해서 director등이 summary judgement 내면서 반박,
1심에서는 summary judgement 인정. 항소심과 대법원에서는 .Mendell 이김
M&A이후 원고적격에 대한 언급이 16b에 없어 입법목적으로 파악. 단타매매 금지
합병후 주식이 팔려서 owner로서 지위상실함. 주식이 팔렸지만 소송이 제기된 상태임.
financial interest (피해)가 있는 상황인데 소가 중단되어야하는 상황이라면controversy가 있는데도 소제기 못하는 사항이므로 연방헌법 issue가 제기될 수 있다. 그래서 합병 후에도 원고적격 유지되어야한다.
어느정도의 의무를 부과하나? Strict (엄격하게~) : 과실이 없어도 책임을 부과함. 법원이 해석기준을 적용하고 있음.
법원에서는 이중잣대쓰지 않음.
insider에게 엄격적용, 피해자들 구제하기 위한 소제기자들에게는 완화된 기준으로 .
duty는 엄격 기준 적용. duty위반으로 피해입은 자를구제하기 위한 소제기자들은 완화된 기준.
16b를 위반하면 issuer가 먼저 소송제기, issuer가 소제가 안하면 security holder가 소제기한다.
어떤 seucurity 종류에 대해 완화된 기준 적용 : Any security will suffice.
16. Perlman v. Feldmann United States Court of Appeals, Second Circuit, 1955. 219 F.2d 173. CLARK, Chief Judge.
1. Fact
Russell Feldmann, the majority shareholder of Newport Steel Corporation (Newport), capitalized on the severe steel shortage during the Korean War by selling his controlling interest to Wilport Company at an inflated price. Newport's shareholders subsequently filed a derivative suit against Feldmann, seeking an account of his gains and restitution. They argued that the premium paid by Wilport included a valuable corporate asset—control over steel production during the scarcity. Plaintiffs contended that Feldmann, as a fiduciary of Newport, held this power in trust for the corporation.
2. Issue
The issue is whether the minority stockholders of Newport Steel Corporation are entitled to accounting for and restitution of alleged illegal gains resulting from the sale of the corporation's controlling interest by C. Russell Feldmann to Wilport Company.
3. Rule
* Restatement, Restitution §§ 190 “”Duty to Account for Benefits Derived from Breach of Fiduciary Duty"
-A person who is required by law to act for the benefit of another as to matters within the scope of the relation between them is under a duty to give to him any profit which he has made by the transaction, whether the profit results from the making of the contract or from the management of the affairs of the other, and whether from the use of the other's property or from his own act or property, or from any cause.
4. Application
Selling the controlling interest to Wilport Company during a time of steel scarcity, Feldmann allegedly included in the price compensation for a corporate asset—the control over steel production—that he held in trust for the corporation.The court determined that the price paid included a premium, but without the ability to control steel distribution, the true value of the stock was uncertain. Feldmann's actions were seen as falling short of the required standard of undivided loyalty owed to the corporation and its minority shareholders. Therefore, the court held Feldmann accountable to the minority shareholders for any additional benefit derived from the sale, emphasizing that Feldmann did not act in the best interests of the company or its shareholders. Moreover, the court noted that Feldmann failed to consider the interests of the minority shareholders and pursued his own gain, depriving the company and its shareholders of potential benefits during a critical time. This breach of fiduciary duty, coupled with the failure to share the value of the premium with the corporation and its shareholders, led the court to conclude that Feldmann should be held liable.
5. Conclusion
The judgment is reversed and the action remanded for further proceedings pursuant to this opinion.
(The minority stockholders of Newport Steel Corporation are entitled to accounting for and restitution of alleged illegal gains resulting from the sale of the corporation's controlling interest by C. Russell Feldmann to Wilport Company.)
* Feedback
fiduciary duty위반. case에 근거있음. (MBCA 강행법규 아님. 언급이 안되어있음.)
SEA언급 안된 이유? SEA는 주식사고파는것을 규제.
일반적인 회사 관련 규정 및 fiduciary duty에 관한 규정은 corporation act 혹은 case에 나옴.
SEA가 적용되나, MBCA가 적용되나 아니면 case찾는다.
주식을 $20에 팜. 최저가는 $12. ( 회사의 이익을 위해야하고, 충성의무가 있는데 개인의 이익을 추구)
12달러인것을 20달러에 팔면 회사에 어떤 손해? 회사를 방어하는 주식percent가 모자를 수 있음.
1심에서 원고 패소. 입증 못했고, 지배주주가 이익추구하는게 나쁜것 없다고 봄.
director의무를 rule로 강조 (의무 위반여부 가리기위해) 여기에서 사기등 없음.
법원에서는 높은 director의무 준수한것이 없다고 보아 fraud필요없다.
회사에게 기회제공하면 회사에서 회의할 것이다. 그냥 팔면 기회독차지 한것이다. 고지의무있음.
17. McCullough v. Fidelity & Deposit Co. United States Court of Appeals, Fifth Circuit, 1993. 2 F.3d 110. W. EUGENE DAVIS, Circuit Judge:
1. Fact
Fidelity and Deposit Company of Maryland (F&D) issued directors' and officers' (D&O) liability policies to affiliate banks, including Harris County Bankshares, Inc. and its subsidiaries. The policies required notice of claims during the policy period. F&D received reports detailing increasing loan losses and a cease and desist order from the Office of the Comptroller of the Currency (OCC) to one subsidiary. Despite expressing concern and requesting more information, F&D informed the banks of policy cancellation in September 1985. After the banks' insolvency and FDIC becoming Receiver, FDIC sued the directors and officers. F&D denied coverage, leading to FDIC's declaratory judgment action seeking coverage under the D&O policies. The district court, after a motion for reconsideration, found F&D did not receive written notice of a potential claim as required by the policy, granting final judgment to F&D on appeal.
2. Issue
Whether the policy requires notice of "specified Wrongful Acts" or allows notice in the broader form of "any act, error, or omission" that may give rise to a claim for specified wrongful acts and Whether the insureds provided adequate notice of specified wrongful acts as required by the policy.
3. Rule
* American Casualty Co. v. FDIC, 944 F.2d 455, 460 (8th Cir. 1991) : Notice of an institution's worsening financial condition is not notice of an officer's or director's act, error, or omission.
* Section 6 of the policy : (a) If during the policy period, or during the extended discovery period if the right is exercised by the Bank or the Directors and Officers in accordance with Clause 2, the Bank or the Directors and Officers shall:(2) become aware of any act, error, or omission which may subsequently give rise to a claim being made against the Directors and Officers, or any of them, for a specified Wrongful Act; and shall during such period give written notice thereof to the Company as soon as practicable and prior to the date of termination of the policy, then any claim which may subsequently be made against the Directors and Officers arising out of such Wrongful Act shall, for the purpose of this policy, be treated as a claim made during the Policy Year or the extended discovery period in which such notice was first given.
4. Application
Notice in a "claims made policy" is crucial as it triggers coverage, unlike the preventive notice required in an "occurrence policy." Relaxing the notice requirement for specified wrongful acts would expand policy coverage. The policy mandates notice of specified wrongful acts to trigger coverage, not a broader notice of any potential claim-triggering acts. In this case, the insureds did not provide adequate notice of specific wrongful acts to the insurer. A deteriorating financial condition of the institution does not suffice as notice of an officer's or director's potential wrongful acts. Thus, rising delinquencies and bad loan portfolios alone do not constitute adequate notice.
5. Conclusion
AFFIRMED. (The policy requires notice of "specified Wrongful Acts" and does not allow notice in the broader form of "any act, error, or omission" that may give rise to a claim for specified wrongful acts. The insureds did not provide sufficient notice of specified wrongful acts as required by the policy.)
* Feedback
마지막 케이스에서 F D에게 보험금지급해달라고 청구. 어떤 보험금을 누가 든것인가.
director나 officer 잘못한 것에 대해서 보험금 받을 수 있는데
specific한 보고 해야함.
뭔가 문제가 있다고 정도만 보고했고, 이정도로는 안됨.
보고를 할 때에는 specific하게 해야함.
18. CTS Corp. v. Dynamics Corp. of America Supreme Court of the United States. 1987. 481 U.S. 69, 107 S.Ct. 1637, 95 L.Ed.2d 67.
1. Fact
Indiana enacted a statute (Indiana Act) requiring a majority vote of impartial shareholders in a company to grant voting rights to an entity acquiring "control shares" that would exceed 20, 33 1/3, or 50 percent ownership. This allowed minority shareholders to collectively assess the fairness of a tender offer within 50 days. Dynamics Corporation of America (Dynamics) owned 9.6 percent of CTS Corporation (CTS) when it proposed a tender offer for an additional million CTS shares, crossing the 20 percent threshold. Dynamics sued, claiming the Indiana Act was preempted by the federal Williams Act and violated the Commerce Clause. The Williams Act aimed to regulate hostile tender offers, safeguarding minority shareholders' interests. Dynamics argued the 50-day timeframe of the Indiana Act clashed with the Williams Act's 20-day requirement. The district court found the Williams Act preempted the Indiana Act, later affirmed by the appeals court, leading to CTS's appeal.
2. Issue
The issues are whether the Williams Act pre-empts the Indiana Act and whether Indiana Act violates the Commerce Clause.
3. Rule
* 15 U.S.C. § 78n(d)(5); 17 CFR § 240.14d-7(a)(1) (1986) as amended, 51 Fed.Reg. 25873 (1986) : stockholders who tender their shares may withdraw them while the offer remains open, and, if the offeror has not purchased their shares, any time after 60 days from commencement of the offer.
* 17 CFR § 240.14e-1(a) (1986) : The offer must remain open for at least 20 business days.
* The Indiana Act provides that full voting rights will be vested—if this eventually is to occur—within 50 days
4. Application
The williams Act does not pre-empt the Indiana Act because both laws can be followed simultaneously without conflicting with the federal law’s objectives. The Indiana Act, aiming to protect shareholders from coercive offers, aligns with the federal goal of investor protection without unreasonably delaying tender offers. Stockholders under the Williams Act can withdraw their shares at any time during the open offer period or after 60 days if the offeror hasn't purchased them, while the Indiana Act grants full voting rights within 50 days, still within the 60-day withdrawal period set by the Williams Act.Additionally, the Indiana Act does not unfairly burden out-of-state offerors or discriminate against interstate commerce. It ensures fair treatment of shareholders in Indiana corporations while maintaing consistency with the Williams Act’s purposes. The Indiana Act’s regulation of control share acquisitions is within the state’s right to define corporate attributes and safeguard shareholders, as recognized by Congress and the Constitution. Thus, the Court overtunred the Court of Appeals’ judgment, concluding that the Indiana Act is not preempted by federal law and does not violate the Commerce Clause.
5. Conclusion
Reversed. (The Williams Act does not pre-empts the Indiana Act and Indiana Act does not violates the Commerce Clause.)
* Feedback
. Dynamics가 27.5 % 주식사서 voting right행사 하려고 했는데
새로 개정된 법에 따르면 voting right 행사하기 어렵되었다.
Williams Act는 hostile tender offer를(적대적 합병을) 해결하기 위해 규정된 법.
의회가 의도했다면 법규정에 있을 것이다. 안써있으면 의도하지 않은것이다.
voting right에 대해 준다 안준다 Williams Act에 안쓰여져있음.
Indiana Act이 여기에 위배되는 것 아님.
Williams Act의 목적은 투자자를 오히려 보호.
Indiana Act이 투자자를 보호한다고 법원은 봄.
연방대법원은? 주의 이익을 주기 위한 경우에 burden 괜찮다.
tender offer 무슨의미?
경영권을 획득 위한 것 . 꼭 그런 문구나 언급이 있어야하는 것은 아님.
19. BBC Acquisition v. Durr-Fillauer Medical Court of Chancery of Delaware, 1992. 623 A.2d 85. JACOBS, Vice Chancellor.
1. Fact
BBC Acquisition Corp., a subsidiary of Bergen Brunswig Corporation, sought to acquire Durr-Fillauer Medical, Inc. in competition with Cardinal Distribution, Inc. Durr initially favored Cardinal's bid but faced a legal challenge from Bergen alleging breach of fiduciary duty. Bergen demanded access to Durr's confidential information provided to Cardinal, crucial for evaluating its bid. Durr refused, leading to a legal dispute under § 220. Meanwhile, Durr negotiated an improved merger deal with Cardinal, prompting BBC to seek legal recourse for access to essential information.
2. Issue
Whether BBC has established a proper purpose to seek legal recourse for access to essential information.
3. Rule
* 8 Del.C. § 220(b) : A stockholder is entitled to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder....
* CM & M Group, Inc. v. Carroll, Del.Supr., 453 A.2d 788, 792 (1982); Since such a shareholder will often have more than one purpose, that requirement has been construed to mean that the shareholder's primary purpose must be proper; any secondary purpose, whether proper or not, is irrelevant.
4. Application
BBC's characterization of its purpose as being one of valuing its interest in Durr obscures what truly is going on here. To repeat, BBC is not seeking to value its 100 shares of Durr, but Durr as a whole. For purposes of § 220, the chasm between those two purposes is fatally unbridgeable: valuing a stockholder's interest in the corporation is a proper purpose. Valuing the corporation for the sole purpose of acquiring it, unrelated and without regard to the acquiror's particular and pre-existing investment in the corporation, is not. In terms of the present case, that latter purpose relates only to BBC's status as a bidder for Durr, not to its status as a Durr stockholder. Section 220 is intended to serve shareholders whose need for inspection is truly related to their stock interest. BBC is not such a stockholder.
5. Conclusion
ORDERED. BBC has not established a proper purpose.
* Feedback
BBC가 corporate books and records에 inspect 요청
BBC가 corporate books records에 inspect 요청 근거
common law- MBCA, 각주의 corporation law에 있음.
share-holder- owner/corporate books records- management documents
간접경영에 참여한는 것은 어떤 배경에서 가능하게 했는가?
owner는 principal이고 회사는 agent로 보기 때문에.
(이사는 servant 다라는 개념깔려있음.. 간접적으로 관여가능).
소유와 경영은 분리다 - corporation 기본적인 틀
corporate books records에 inspect 어떤 경우 가능?
Delaware주 220조 formal demand + proper purpose 있어야.
proper purpose : primary와 secondary 모두 충족해야하나? secondary는 충족하지 않아도 됨.
회사크기 상관없이 corporate books records open 요구가능.
어떤 주에서는 percentage 충족되는 주주만 자료공개 요구가능. 퍼센트 정해지지 않은경우는
proper purpose입증해서 자료공개 요구. 2개 주식만 가진 자가 요구하는 경우 proper purpose입증 어려움.
BBC사건에서 proper purpose입증 못해서 자료공개 인정 안됨!
20. Parsons v. Jefferson-Pilot Corp. Supreme Court of North Carolina, 1993. 333 N.C. 420, 426 S.E.2d 685. MITCHELL, Justice.
1. Fact
Louise Price Parsons, a shareholder in Jefferson-Pilot Corporation, requested access to various records from Jefferson to investigate potential mismanagement. Jefferson declined to provide Parsons with a list of beneficial owners or access to accounting records, citing legal limitations. Parsons sued to compel inspection of the records. The trial court ruled in Parsons' favor regarding certain records but denied access to the list of beneficial owners. The appeals court upheld the denial of the list but reversed the decision on accounting records. Both parties sought review of the appeals court's ruling.
2. Issue
The issue is whether that common law right to inspect accounting records has been abrogated by N.C.G.S. § 55-16-02(b) or, to the contrary, has been preserved by N.C.G.S. § 55-16-02(e)(2).
3. Rule
* N.C.G.S. § 55-16-02(b) (Supp.1992) : The North Carolina Business Corporation Act, inter alia, provides shareholders certain rights of inspection of corporate records which did not exist under the common law. For example, the Act provides shareholders of corporations other than "public corporations" a new right to an expedited inspection of a corporation's accounting records within five business days after making a proper demand.
* N.C.G.S. § 55-16-02(b)(3) (1990) : A qualified shareholder has a statutory right to inspect a "record of shareholders."
4. Application
The North Carolina Business Corporation Act was intended to effectively preserve the customary right of inspection existing in North Carolina, a fact confirmed by a broad range of North Carolina cases. As accounting records reflect a company's financial transactions and status, they are deemed essential for shareholders to understand and assess the company's management. We conclude that N.C.G.S. § 55-16-02(e)(2) preserves shareholders' customary inspection rights, including the right to reasonably examine the accounting records of a public corporation for proper purposes. Therefore, we reverse part of the appellate court's opinion, which concluded that the plaintiff in this case did not retain these customary rights after the adoption of the North Carolina Business Corporation Act.And The defendant corporation is not required to furnish the plaintiff shareholder with a NOBO list, as it lacks the necessary information for its creation and does not utilize it in shareholder communication. The appellate court's rulings regarding the plaintiff's entitlement to a NOBO list and the specificity of her request were affirmed, but their determination that the plaintiff lacks a common law right to inspect the defendant's accounting records was reversed, prompting a remand for further proceedings consistent with this decision.
5. Conclusion
Affirmed in part; reversed in part; and remanded. (The common law right to inspect accounting records has been preserved by N.C.G.S. § 55-16-02(e)(2), rather than abrogated by N.C.G.S. § 55-16-02(b).)
* Feedback
resonable particularity.. NOBO list 상관관계 있는가?
corporate books records 에서 요구하는 것은 discovery
공개하라. NOBO list 없다면서 어떻게 공개?
공개요구건이 여러개인데 각각에 대해 reverse와 인정이 나눠짐.
NOBO list있고, accounting records.. = corporate books records.
NOBO list 제공안해도 되고, accounting records 제공해라.
NOBO list - 호의적인 주주 리스트. 반대하지 않은 주주.
21. Bove. v. Community Hotel Corp. of Newport, Rhode Island Supreme Court of Rhode Island, 1969. 105 R.I. 36, 249 A.2d 89.
1. Fact
The case involves preferred stockholders of Community Hotel Corporation in Newport, Rhode Island, who had the right to receive unpaid dividends for 24 years before common stock dividends. Community Hotel sought to amend this right for common stock sales but required unanimous consent from preferred stockholders, which it couldn't achieve. Instead, it attempted a merger with a nominal corporation to circumvent the unanimity requirement and remove preferred stockholders' dividend rights, requiring only two-thirds approval under a different Rhode Island statute. Bove and other preferred stockholders filed suit to stop the merger, arguing its sole purpose was to evade the unanimity requirement.
2. Issue
Whether the right of a holder of cumulative preferred stock to dividend arrearages and other preferences may be cancelled by a statutory merger.
3. Rule
* Federal United Corp. v. Havender, supra : nothing within the purview of our statute forbids a merger between a parent and a subsidiary corporation even under circumstances where the merger device has been resorted to solely for the purpose of obviating the necessity for the unanimous vote which would otherwise be required in order to cancel the priorities of preferred shareholders.
*G.L. 1956 §7-5-2, : All mergers of corporations shall be approved by a majority of the directors of each of the merging corporations.
*Consolidated Film Industries, Inc. v. Johnson, 22 Del. Ch. 407, 197 A. 489 (1937)
4. Application
The court examined whether the merger legislation intended to make underlying purpose a standard for determining permissibility. It found no indication in the statute suggesting such intent and emphasized the breadth of language chosen, which implied a lack of concern with the underlying purpose of mergers. Despite potential conflicts with other sections of the corporation law, the court stressed that different sections may have independent legal significance. Moreover, it determined that the merger statute did not prohibit mergers aimed at circumventing preferred shareholders' rights, citing precedents from Delaware. The court concluded that the legislation did not constitute an improper exercise of the reserved right of amendment, particularly as dissatisfied stockholders had recourse to appraisal methods to receive fair market value for their securities. Finally, the court highlighted that unpaid dividend arrearages were considered relevant factors in appraisal, affirming the availability of appraisal as a remedy for dissenting shareholders.
5. Conclusion
The judgment appealed from is affirmed.(The right of a holder of cumulative preferred stock to dividend arrearages and other preferences may be cancelled by a statutory merger.)
* Feedback
Keller v. Wilson & Co., 21 Del. Ch. 391, 190 A. 115 (1936), Consolidated Film Industries, Inc. v. Johnson, 22 Del. Ch. 407, 197 A. 489 (1937) : 주주권리 파괴 인정하지 않음 .
Federal United Corp. v. Havender, supra 케이스에서 바뀜. 주주권리 파괴 인정
Bove case 에서는 이 주주들에게 해결책을 준다고 되어 있음. (주주의 주식가치가 떨어짐. $38 ->$21
상대편 : $7.5 ->$21로 올라감. )
법원에서는 merger반대 주주에게 해결책이 있다고 함.
적용되는 법은? section 7-5-2 / corporate chart 가 amend되는 경우..연방헌법규정이 나오는 경우 문제 제기됨. section 7-5-2 : 합병할 때 주의 전환하는 방법에 대해 규정되어있음. 기존 주주가치를 바꿀 수 있다고 해석하면 주주들의 주식 가격 바꾸는것 위법아니라고도 볼 수 있음.
법원: 7-5-2 ? 이 법에 의해 파기 가능. Havender case로 가능.
연방대법원 : 주주의 상호관게는 changed 될 수 있다.
vested property right이냐. 아니면 제3자의 contract obligation이냐?
corporation rule에 의해 안됨.. 원고의 권리가 vested property rights~? X (Bove케이스 - 원고짐)
*absolute priority : 이 rule이 여기서 왜 관련있나?
케이스에서 원고의 권리가 vested property rights 아니라고 쓰여있음. (아닌 이유는 없음)
22. Farris v. Glen Alden Corp. Supreme Court of Pennsylvania, 1958. 393 Pa. 427, 143 A.2d 25.
1. Fact
Glen Alden Corporation, a coal mining company, and List Industries Corporation, a holding company, entered into a reorganization agreement subject to stockholder approval. The agreement involved Glen Alden acquiring List's assets, issuing stock to List's shareholders, assuming List's debt, changing its name to List Alden, dissolving List, and continuing business as List Alden. However, the stock in List Alden would be valued lower than Glen Alden's stock. Farris, a Glen Alden shareholder, sued to enjoin the reorganization, claiming insufficient notice of the meeting, lack of disclosure on appraisal rights, and failure to provide required parts of the Business Corporation Law. Glen Alden admitted to the claims but argued the transaction was merely an asset purchase. The trial court disagreed, deeming it a de facto merger, and granted injunctive relief. Glen Alden appealed.
2. Issue
whether the reorganization plan between Defendant and List constitutes a de facto merger.
3. Rule
*Act of May 5, 1933, P.L. 364, 15 P.S. § 2852-908A.
"If any shareholder of a domestic corporation which becomes a party to a plan of merger 433*433 or consolidation shall object to such plan of merger or consolidation . . . such shareholder shall be entitled to . . . the fair value of his shares upon surrender of the share certificate or certificates representing his shares."
4. Application
The court case focused on whether the reorganization plan constituted a de facto merger, with the plaintiff arguing for its merger classification and the defendant opposing it. The court recognized the transformative impact of the plan, fundamentally altering Glen Alden into a diversified holding company under List's control, potentially diluting shareholders' stakes and devaluing their shares. Under Delaware law, a merger with a wholly-owned inactive subsidiary could cancel preferred stock rights without a unanimous vote, validating the merger. Thus, the court ruled that the defendant was obligated to inform shareholders of their dissent and appraisal rights. The court concluded that the reorganization agreement, though consummated by contract, constituted a merger under sections 908A and 515 of the corporation law, requiring notification of shareholders and rendering the shareholder approval invalid. The lower court's decision to enjoin the officers and directors of Glen Alden from proceeding with the agreement was affirmed.
5. Conclusion
Decree affirmed at appellants' cost. The reorganization plan between the Defendant and List constitutes a de facto merger.
(The court upheld the plaintiff's claim, emphasizing the transformative impact of the reorganization plan on the company's nature and shareholders' interests, necessitating transparency regarding dissent and appraisal rights.)
* Feedback
Pennsylvania 주 회사법 Sectoion 908조 적용.
Pennsylvania 주법에 따르면 주주는 object 할 수 있다.
Bove 케이스와 차이점은 관할권이 다름. 그래서 적용되는 주법이 다름.
법원은 merger라고 함. 이유는? merger계약서 법원에서 읽어봄.
계약서의 제목이나 이름이 중요한것이 아님. merger맞음. 908조에 의해 권리 있음.
Glen Alden은 List Alden Corporation로 바꿈.
908조 /311조 /515조 / Lauman케이스 ( 헌법이야기는 없음. 주에있는 법과 케이스면 ok )
*차이점
Bove 케이스 : 연방헌법 규정 인용. 주주권리 파괴가능하다고하면서 법과 Havender케이스 인용했는데,
연방헌법에는 vested property right은 repair 나 destroy 안된다고 하니까. 거기에 걸릴까봐 인용. .
Farris 케이스: 주주의 권리 침해할 수 없다는 연방헌법 인용할 필요없음. 주법과 케이스로 인정되고 있음.