Sunday, November 24, 2013

Katz v. Oak Industries, Inc. case brief

Katz v. Oak Industries, Inc. case brief summary
508 A.2d 873 (Del. 1986)

CASE SYNOPSIS
Plaintiff securities holders filed an application for a preliminary injunction in their action, alleging that an exchange offer and consent solicitation made by defendant company to holders of various classes of its long-term debt was coercive and constituted a breach of contract.

CASE FACTS
The company entered into acquisition and stock purchase agreements with an interested buyer. The stock purchase agreement was conditioned on the tender and exchange of at least 85 percent of the principal amount of the company's debt securities. Accordingly, the company extended exchange offers to the holders of its long-term debt securities. The offers provided for an exchange of the securities for either common stock or cash. The securities holders sought to enjoin the consummation of the exchange offers, contending that they benefitted the common stockholders at the expense of the debt securities holders, forced the exchange of the debt instruments at an unfair price, and forced the debt holders to consent to the elimination of certain protective covenants.

HOLDING
  • The court held: 
  • (1) the company did not breach the implied covenant of good faith because its conduct did not violate the reasonable expectations of those who negotiated the indentures on behalf of the securities holders, and 
  • (2) injunctive relief was inappropriate because the securities holders failed to demonstrate a likelihood of success on the merits and the company was in perilous financial condition.

CONCLUSION
The court denied the securities holders' application for a preliminary injunction.

Recommended Supplements for Corporations and Business Associations Law

No comments:

Post a Comment

The Ins and Outs of Class Action Lawsuits: A Comprehensive Guide

Sometimes, you may buy a product only to find it defective. To make it worse, your search for the product reveals mass complaints. You can ...