305 F.2d 572
SYNOPSIS: Defendant appealed grant of summary judgment to United States Court of Appeals Second Circuit in claim of illegal sale of corporate stock.
FACTS: Plaintiff corporation purchased controlling shares in stock of company from defendant pursuant to contract allowing defendant to retain certificates as security and that gave plaintiff right to demand resignation and replacement of majority of purchased company's board of directors. Lower court found agreement invalid.
Court disagreed because though agreement to sell control of management of corporation by itself is invalid, plaintiff was actually buying substantial percentage of company's stock.
It was not improper for defendant to derive premium from sale of controlling block of stock. There was no suggestion that transfer of control carried any threat to interests of company or its shareholders. Because contract was for ownership of majority of stock and because it was permissible for seller to choose to facilitate immediate transfer of majority control, contract was permissible.
OUTCOME: Reversed and remanded grant of summary judgment as it was not improper for defendant to derive premium from sale of controlling block of stock, plaintiff was buying substantial percentage of stock, and it was permissible for seller to choose to facilitate immediate transfer of management control.
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?