Sunday, November 24, 2013

Zahn v. Transamerica Corporation case brief

Zahn v. Transamerica Corporation case brief summary
162 F.2d 36 (3d Cir. 1947)


CASE SYNOPSIS
Plaintiff Class A stockholder appealed the decision of the United States District Court for the District of Delaware dismissing his class action complaint alleging breach of fiduciary duty on the part of defendant Class B stockholder in its decision to redeem Class A stock and then liquidate the company.

CASE FACTS
Plaintiff held Class A stock in a company. Defendant owned virtually all of the same company's Class B stock and dominated the management, business, and affairs of the company. Plaintiff filed a class action suit alleging that defendant caused the company to redeem its Class A stock and then liquidated the company so that defendant could acquire most of the value of the company for itself. Defendant moved to dismiss the complaint, and the court below granted the motion. Plaintiff appealed.

DISCUSSION

  • The appeals court reversed because defendant, as the board of directors of the company and as controlling stockholder, had a fiduciary duty to minority Class A stockholders that was violated if the allegations of plaintiff were true. 
  • The act of redeeming the Class Act stock was consummated at the direction of defendant, for its own profit, not for the protection of the minority stockholders' interests.

CONCLUSION
Dismissal of the complaint was reversed because defendant, as board of directors and as controlling stockholder, had a fiduciary duty to minority Class A stockholders that was violated if the act of redeeming the Class A stock was not consummated impartially, but at the direction of defendant for its own profit.

Recommended Supplements for Corporations and Business Associations Law

No comments:

Post a Comment

Search Thousands of Case Briefs and Articles.