Friday, November 22, 2013

Sullivan v. Hammer case brief

Sullivan v. Hammer case brief summary
1990 WL 114223 (1990)

Plaintiff stockholders filed an action asserting class and derivative claims against defendants, a corporation, the board chairman, directors, and other individuals, in regard to the corporation's proposal to provide financial support for a museum. The parties presented a stipulation of settlement for the court's approval, and notice was sent giving the stockholders an opportunity to object to the settlement.

Under the proposed settlement, the museum would be named after the corporation's founder and board chairman, and the corporation would provide construction funds and charitable contributions to the museum and affiliated charities.

  • On review of the objections made by a number of stockholders, the court determined that the settlement was fair and reasonable. 
  • The court applied the business judgment rule, under which the presumption was given that the corporation's board of directors, in making the decision to support the museum, acted on an informed basis, in good faith, and in the honest belief that the action was taken in the best interests of the company. 
  • The court found that under the business judgment rule, the objecting stockholders had a very poor potential for ultimate success on the merits of their claims challenging the corporation's planned charitable gift to the museum. 
  • The court found that the corporation would receive good will from the gift and would be able to utilize the museum in the promotion of its business purposes. 
  • The court approved a portion of the counsel fees requested by the stockholders based on the benefits achieved by the litigation.

The court approved the stipulation of settlement.

Recommended Supplements for Corporations and Business Associations Law

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