Thursday, November 21, 2013

Nixon v. Blackwell case brief

Nixon v. Blackwell case brief summary
626 A.2d 1366 (1992)

Defendant directors of a closely-held corporation appealed from the decision of the Court of Chancery of the State of Delaware in and for New Castle County holding that defendants breached their fiduciary duties to plaintiffs by maintaining a discriminatory policy that unfairly favored employee stockholders over plaintiffs.

The Vice Chancellor held that defendants had treated plaintiffs unfairly by establishing employee stock ownership plan (ESOP) that favored employee, Class A stockholders, over plaintiffs, non-employee Class B stockholders.


  • The court, applying the entire fairness standard, held that the Vice Chancellor erred as a matter of law in concluding that substantially equal treatment was required as to plaintiffs, because it was well-established that stockholders need not always be treated equally for all purposes. 
  • There was support in the record for the fact that ESOP was a corporate benefit and was established to benefit the corporation. 
  • The court held that defendants had met their burden of establishing entire fairness of dealings with plaintiffs, because the record was sufficient to conclude that plaintiffs' claim that defendant directors had maintained a discriminatory policy of favoring Class A employee stockholders over Class B non-employee stockholders was without merit.

The judgment was reversed and the matter remanded for proceedings consistent with the opinion on the grounds that defendants had met their burden of establishing the entire fairness of their dealings with plaintiff non-employee Class B stockholders.

Recommended Supplements for Corporations and Business Associations Law

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