Sinclair Oil Corp. v. Levien case brief

Sinclair Oil Corp. v. Levien (Del.1971)

-Sinclair owned 97% of stock in subsidiary Sinven. Plaintiff was minority
shareholder. Sinclair decided to drain Sinven of assets by announcing huge
dividends.
-Plaintiff objected that Sinclair drained Sinven of cash to such an extent that it could
not expand.
-In case of parent/subsidiary transactions (where there are minority shareholders), the
proper test of board behavior is one of intrinsic fairness.
-Court said the holding company was not ‘self-dealing’ because it paid equal
dividends to minority shareholders.
-However, a contract between Sinclair and Sinven, which fixed price of oil Sinven
would sell to Sinclair, was self-dealing. And Sinclair broke the contract, which
would make it liable for a derivative suit from the minority shareholders ex rel
Sinven.
-This may not be good law, even in Delaware.