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Brief Fact Summary. Saito, (Plaintiff), brought a stockholder’s derivative suit against McKesson HBOC, Inc. (Defendant). The Court of Chancery and Court of Appeals

Synopsis of Rule of Law. The source of documents and the manner in which the corporation obtains them have little or no bearing on a stockholder’s inspection rights. If activities that occurred before the purchase date are reasonably related to the stockholder’s interest as a stockholder, then the stockholder should be given access to records necessary to an understanding of those activities.

Facts. Plaintiff brought a stockholder’s derivative suit to examine the conduct of Defendant with regard to certain accounting irregularities. Plaintiff wished to investigate wrongdoing that may have occurred prior to his stock ownership. Plaintiff sought to examine documents the corporation had obtained from financial and accounting advisors and documents of its subsidiary in order to understand what the company’s directors knew and why they failed to recognize the accounting irregularities.

Issue.
Whether a stockholder may access records that predate the purchase of the stockholder’s interest.

Whether the source of the documents in a corporation’s possession should control a stockholder’s right to inspection under Section: 220.

Whether stockholders of a parent corporation are entitled to inspect a subsidiary’s books and records absent a showing of fraud or establishing that the subsidiary is actually the alter ego of the parent.

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Brief Fact Summary. Louise Parsons, (Plaintiff), brought suit against Jefferson-Pilot Corporation, (Defendant) seeking to compel Defendant to allow her to inspect its accounting records and records of shareholder and director action.

Synopsis of Rule of Law. Shareholders are entitled to the information concerning the identity of the shareholders that is possessed by the corporation in order that they may have the same opportunity as the corporation to communicate with the other shareholders. The test for whether a shareholder has described with reasonable particularity the purpose and the records s/he would like to inspect is a relative one turning on the degree of knowledge that a shareholder has about the documents requested.

Facts. Defendant refused to allow Plaintiff to inspect and copy a list of beneficial owners of its stock or accounting records so she might determine any possible mismanagement of the company or misappropriation of the company’s assets. Plaintiff then brought suit seeking an order directing Defendant to give her access to its accounting records and a list of beneficial owners of its stock. The Court of Appeals affirmed the Trial Court ruling that Defendant was not required to obtain the names of non-objecting beneficial owners (NOBO), where Defendant had neither the names nor a list of such individuals in its possession. Plaintiff’s written demands to inspect other corporate records described her purpose and the records she sought with reasonable particularity. However the Court of Appeals reversed the trial court ruling that Plaintiff had the right to inspect Defendant’s accounting records.

Issue.
Whether N.C.G.S. Section: 55-16-02(b), where it denies shareholders of public corporations from inspecting or copying accounting records of the corporation, abrogates a common law right to inspect a public corporation’s accounting records.

Whether a corporation’s shareholders should be granted the right to compel the production of a NOBO list on the same terms as the issuer of the shares.

Whether Plaintiff described her purpose and the desired records with the reasonable particularity required by the statute.

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Brief Fact Summary. The International Brotherhood of the Teamsters General Fund, (Appellees), brought suit against Fleming Companies, Inc., (Appellant) to compel Appellant to include its proxy statement in the proxy materials for the annual shareholders meetings. The district court and 10th Circuit Court of Appeals both ruled in favor of Appellees.

Synopsis of Rule of Law. Shareholders may, through proper channels of corporate governance, restrict the board of directors’ authority to implement shareholder rights plans.

Facts. Appellee owns sixty-five shares of Appellant. In 1986 Appellant implemented a shareholder’s rights plan, commonly referred to as a “poison pill” as an anti-takeover mechanism. Appellee was critical of this plan seeing it as a means of entrenching the current board of directors in the event Appellant became the target of a takeover. Appellee passed a non-binding resolution at the shareholders meeting calling on the board to redeem the existing rights plan. Appellant’s board was hostile to the resolution and the rights plan remained intact.
Appellee then prepared a proxy statement for inclusion in the proxy materials for the next annual shareholders meeting. The proposed amendment to the bylaws would require any rights plan implemented by the board of directors to be put to the shareholders for a majority vote. Appellant refused to include the resolution in its proxy statement. Appellee brought suit and won. Appellant appealed and moved to suspend the injunction hoping to postpone shareholder vote on the proxy issue until after the resolution of this case. The motion was denied. Fleming was forced to allow its shareholders to vote on the proxy. It passed with 60% of the voted shares.

Issue.
Whether Oklahoma law restricts the authority to create and implement shareholder rights plans exclusively to the board of directors.

Whether shareholders may propose resolutions requiring that shareholder rights plans be submitted to the shareholders for vote at the succeeding annual meeting.

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Brief Fact Summary. Thomas & Betts Corporation, (Appellant), appeals the Court of Chancery holding granting in part and denying in part its request for inspection of certain books and records of Leviton Manufacturing Co., Inc., (Appellee).

Synopsis of Rule of Law. Where substantial evidence supports a finding that plaintiff’s primary motives for the inspection are improper, plaintiff has a greater-than-normal evidentiary burden to adduce evidence from which a credible possibility of mismanagement and waste may be inferred and to adduce specific evidence of waste and mismanagement.

Facts. Appellee is a closely held corporation. Appellant is a publicly traded business that was interested in either acquiring or engaging in some sort of joint venture with Appellee. Appellee was not interested in either. Appellant decided to seek a minority position in Appellee to force a sale of the company. Appellant purchased Thomas Blumberg’s 29.1% share of Appellee and promised to pay Blumberg more should Appellant acquire Appellee.
Harold Leviton, President, CEO, and majority stockholder in Appellee, rebuffed Appellant’s attempts to establish an amicable relationship and offered to buy Appellant’s shares. Appellant requested to review all the books and records of Appellee. Appellee allowed Appellant only limited access. Appellant served a formal demand to Appellee. In an associated letter Appellant threatened litigation if Leviton should continue to refuse to sell his stocks. Leviton formally refused both the demand for inspection and the acquisition offer.
Appellant brought suit to compel inspection of Appellee’s books and records. The Court of Chancery held that Appellant served the demand in order to gain leverage in its efforts to acquire Appellee. This was antithetical to Appellee’s interests. However, a limited inspection was permissible so Appellant could value its shares since a fundamental change of circumstances had occurred.

Issue.
Whether the Plaintiff has a greater than normal evidentiary burden to adduce evidence from which a credible possibility of mismanagement and waste may be inferred and to adduce specific evidence of waste and mismanagement.

Whether the Court of Chancery abused its discretion in limiting the scope of its inspection of Appellee’s books and records.

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Brief Fact Summary. Appellee, Dynamics Corporation of America, challenged the validity of an Indiana state law that granted additional shareholder rights, claiming that it was preempted by federal law and violated the Commerce Clause of the United States Constitution.

Synopsis of Rule of Law. States, as the creators of corporate entities, have the ability to define the protections afforded to shareholders providing that it is possible to comply with the state law and federal law.

Facts. Appellee owned 9.6% of Appellant, CTS Corporation and announced a tender offer to increase their ownership to 27.5%. Six days before their announcement, an Indiana law, Indiana’s Control Share Acquisitions Act, came into effect. The Act allows for disinterested shareholders to hold a shareholders’ meeting to discuss the merits of a tender offer for controlling shares. Appellee argues that the Act is preempted by a federal law, the Williams Act. The Williams Act provides guidelines that offerors need to follow when making a tender offer. Appellee also argues that the Indiana Act violates the Commerce Clause because it treats in-state entities differently from out-of-state entities.

Issue.
The first issue is whether the Williams Act preempts the Indiana Act.

The second issue is whether the Indiana Act violates the Commerce Clause due to unequal treatment between in-state and out-of-state entities.

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Brief Fact Summary. D-K-M and its chairman, Moran, (Appellants), brought suit after the Board of Directors of Household Int’l Inc., (Appellee), adopted the Preferred Share Purchase Rights Plan as a preventative measure against future takeover attempts. Appellants appeal the Court of Chancery holding in favor of Appellees.

Synopsis of Rule of Law. The board of directors is authorized to adopt a “poison pill.” The decision to adopt a poison pill shall be evaluated under the business judgment rule.

Facts. The Board of Directors of Appellees adopted the Preferred Share Purchase Rights Plan, (Plan), as a preventative measure against future takeover attempts. Subsequently, Appellants brought suit. The Plan provides that Appellee’s common stockholders are entitled to the issuance of one Right per common share under two triggering conditions. The triggers are, first, a tender offer for 30% of the shares and second, the acquisition of 20% of the shares by any single entity or group. Once triggered, the Right authorizes the holder to purchase $200 of common stock of the offeror or purchaser for $100 thereby causing massive dilution of the value of the aggressor’s shares. Prior to the triggering event, the right is automatically fixed to the shares and can’t be traded separately form the shares.

Issue.
Whether the business judgment rule is the standard to be applied to the adoption of the Plan by the board.

Whether Delaware General Corporation Law authorizes the issuance of the Plan.

Whether the Board is authorized to usurp stockholder’s rights to receive hostile tender offers.

Whether the Board is authorized to fundamentally restrict stockholders’ rights to conduct a proxy contest.

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Brief Fact Summary. Mentor Graphics Corporation, (Plaintiff), challenges the validity of a “no and” rights plan of limited duration that the target company board adopted in response to Plaintiff’s hostile tender offer and proxy contest to replace the board and acquire Quickturn Design Systems, Inc., (Defendant).

Synopsis of Rule of Law. When a board of a corporation takes action to resist or defend against a hostile bid for control the target company board’s defensive actions will be entitled to business judgment rule protection only if it can establish that 1) it had reasonable grounds to believe that the hostile bid constituted a threat to corporate policy and effectiveness and 2) that the defensive measures adopted were reasonable in relation to the threat that the board reasonably perceived.

Facts. Plaintiff sold an emulation product to Defendant. Some time later, Plaintiff acquired Meta Systems, a French company involved in the emulation business, and began to market its products in the United States. Defendant reacted by successfully suing for patent infringement. Plaintiff then decided to acquire Defendant. Plaintiff announced an unsolicited cash tender offer for all outstanding common shares of Defendant at a price representing a 50% premium over Defendant’s immediate pre-offer price and a 20% discount from Defendant’s February 1998 stock price levels.
Plaintiff also announced its intent to solicit proxies to replace the board at a special meeting. Defendant concluded that Plaintiff’s offer was inadequate and recommended that Defendant shareholders reject Plaintiff’s offer. Then the board amended the by-laws to delay a shareholder called special meeting for at least three months. The board also amended Defendants shareholder rights plan by eliminating its dead hand feature and replacing it with a Deferred Redemption Plan, (DRP) under which no newly elected board member could redeem the rights plan for six months after taking office if the purpose of the redemption would be to facilitate transaction with an “Interested Person” An Interested Person would be one who proposed the election of the new directors to the board, in this case, Plaintiff.
Plaintiff then filed this action seeking declaratory judgment that Defendant’s newly adopted takeover defenses are invalid and an injunction requiring the board to dismantle those defenses.

Issue.
Whether the board had reasonable grounds to believe that the hostile bid constituted a threat to corporate policy and effectiveness.

Whether the defensive measures adopted were proportionate or reasonable in relation to the threat that the board reasonably perceived.

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Brief Fact Summary. MCDM Holdings Inc., and others, (Plaintiffs), brought suit for breach of contract, breach of implied covenant of good faith, breach of fiduciary duty, and unjust enrichment. Credit Suisse First Boston Corp., (Defendant) moves to dismiss the action.

Synopsis of Rule of Law. SLUSA preempts any claim that is 1) a covered class action; 2) based on state law; 3) in which the plaintiff has alleged either a misrepresentation or omission of a material fact or any manipulative or deceptive device or contrivance; 4) in connection with the purchase or sale of a covered security.

Facts. Plaintiffs are several corporations who hired Defendant to underwrite their Initial Public Offerings. Plaintiffs allege that Defendant purposely under priced the securities to guarantee that they would rise in value once issued to the public and then required purchasers who wanted to purchase IPO shares pay it the prospectus price plus a share of profits that the customers realized. As a result Defendant’s profits were far greater than the 7% amount agreed upon in the underwriting agreement. Plaintiff’s basic theory of the case is that Defendant deliberately and secretly underpriced stock in the hot IPOs of unwitting putative class members thereby depriving them of millions of dollars in IPO proceeds.

Issue.
Whether SLUSA preempts this class action.

Whether Plaintiffs have no standing to bring this suit because they have suffered no injury.

Whether Plaintiffs have failed to allege a breach of contract, breach of good faith, and breach of fiduciary duty because they have failed to identify an express term of the underwriting agreement that was breached.

Whether Plaintiffs have properly alleged a claim of Unjust Enrichment.

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Brief Fact Summary. Louis Wolfson, Elkin Gerbert, Joseph Kosow, and Marshal Staub, (Plaintiffs), seek indemnification by Merritt – Chapman & Scott Corp., (Defendant), against expenses incurred in a criminal action. Both parties move for summary judgment.

Synopsis of Rule of Law. Corporate officers are entitled to partial indemnification if successful on a count of an indictment, which is an independent criminal charge even if unsuccessful on another related count.

Facts. Plaintiffs were charged with participation in a conspiracy to violate federal securities laws, perjury and filing false annual reports with the SEC and New York Stock Exchange. After several trials, Wolfson entered a plea of no contest to filing false annual reports, was fined $10,000, and the other charges against him were dropped. Gerbert agreed not to appeal his conviction for perjury, was fined $2,000, and other charges against him were dropped. The charges against Kosow and Staub were also dropped. Plaintiffs seek indemnification by Defendant, against expenses incurred in these criminal proceedings.

Issue. Whether a corporate officer is entitled to indemnification in the absence of vindication by a finding or concession of innocence.

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Brief Fact Summary. The Federal Deposit Insurance Corporation, (Appellant) filed a declaratory judgment action against Fidelity and Deposit Company of Maryland, (Appellee), to determine whether Appellee provided coverage under a directors’ and officers’ liability policy. The district court granted summary judgment to Appellee finding no coverage under Appellee’s policy.

Synopsis of Rule of Law. Notice of an institution’s worsening financial condition is not notice of an officer’s or director’s act, error, or omission.

Facts. Appellee issued four directors’ and officers’ liability policies to four affiliate banks. The policy covered claims against the insured if the required notice is given to the insurer during the policy period. The banks furnished Appellee with information about their lending activities that described increasing loan losses and delinquencies and the issuance of a cease and desist order by the Office of the Comptroller of the Currency. In response to the increasing loan losses Appellee informed the banks that it would cancel their policies. The banks merged and then became insolvent. Appellant was declared receiver. Appellant sued the banks’ directors and officers for improperly or illegally making, administering, or collecting loans. Appellee denied coverage and this suit followed.

Issue.
Whether the policy allows notice in the broader form of any act, error, or omission that may give rise to a claim for specified wrongful acts.

Whether the insureds gave adequate notice of specified wrongful acts.