Friday, February 15, 2013

Schreiber v. Carney case brief

Schreiber v. Carney case brief summary
447 A.2d 17

SYNOPSIS:
This case was brought for summary judgement.
A stockholder brought a derivative action.
The plaintiff alleged that there was vote buying and corporate waste of assets. 
The defendant argued that the plaintiff had no standing to bring suit. 
The defendant also argued that there was no factual basis for a waste claim.

FACTS:
-The Plaintiff brought a suit to challenge the propriety of a loan from the defendant corporation to the defendant shareholder.
-The Plaintiff alleged that the transaction constituted vote-buying and was, as a result, void.
-The Plaintiff also contended that the loan was a corporate waste.
-The Defendant argued that there was no showing of waste here, and that the plaintiff lacked standing to bring the suit because, at the time the suit was commenced, he was not a stockholder.

HOLDING:
The court held that the merger had no meaningful effect on plaintiff's ownership of the business enterprise.
The court stated, as a result, he had standing to maintain the derivative suit.

ANALYSIS:
-Additionally, the court found that vote-buying was not illegal per se. 
-If object or purpose of vote buying is to defraud or in some way disenfranchise the other stockholders, then vote buying is illegal.
-The court also found, however, that vote-buying must be viewed as a voidable transaction that is subject to a test of intrinsic fairness. 
-The court held that the issue of corporate waste was a question of fact and should be sent to trial.

OUTCOME:
-The Plaintiff's motion for summary judgment was denied.
-The transaction was permeated by vote-buying and was therefore void. 
-The Defendant's motion for summary judgment was denied (on the ground that plaintiff lacked standing to bring the suit or on the ground there was no factual basis for a waste claim).

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