Brief Fact Summary. Briskin, the main senior member of Arden Group, Inc. (D) threatened actions against the corporation if a new type of stock was not issued.
Synopsis of Rule of Law. If extortion from a fiduciary forced the adoption of a new class of stock, then that issuance is voidable.
Under Delaware law, it is undisputed that when a board of directors is required or elects to seek shareholder action, it is under a duty to disclose fully and fairly pertinent information within the board's control.View Full Point of Law
Issue. If extortion from a fiduciary forced the adoption of a new class of stock, then is that issuance is voidable?
Held. (Allen, Chan.) Yes. If extortion from a fiduciary forced the adoption of a new class of stock, then that issuance is voidable. Fiduciaries have an obligation to act with the corporation’s interest in mind. While shareholders are not normally fiduciaries, Briskin is also a director and officer, which are normally fiduciaries. For an officer or director to use extortion to get a measure passed is improper. This breach of fiduciary duty makes the transaction approved by extortion voidable. An injunction is issued.
Discussion. Since individual shareholders often use coercion in corporate power struggles, coercion alone does not invalidate these transactions. Rather, it is when a fiduciary uses improper coercion that transactions are brought into question.