Login

Login

To access this feature, please Log In or Register for your Casebriefs Account.

Add to Library

Add

Search

Login
Register

Zahn v. Transamerica Corp

    Brief Fact Summary. Plaintiff Zahn brought this suit after Defendant Transamerica Corp., as the majority shareholder of Axton-Fisher (“A-F”), decided to redeem Plaintiff’s Class A shares at $80.80 per share prior to the liquidation of A-F. The value of the shares would have been substantially higher at the point of liquidation.

    Synopsis of Rule of Law. Unlike a director, a shareholder, majority or otherwise, is entitled to vote in a manner that is most beneficial to their interests.

    Facts. A-F was a tobacco company that had as its principal asset leaf tobacco which they bought in late 1942 and early 1943 for $6,361,981. By April of 1943 the value of the tobacco was about $20 million. Defendant, a holding company, was the majority shareholder which entitled them to control nearly every aspect of A-F’s operations. Defendant converted all of their Class A stocks to class B stocks, and then called for a redemption of outstanding Class A stocks at $80.80 per share. The company’s charter allowed for the redemption, but the timing of it was suspicious because right after the redemption Defendant liquidated A-F. As a result, owners of Class A shares lost out on what Plaintiff valued to be a $240 per share return. Plaintiff redeemed some Class A shares, so Plaintiff sought equitable relief to turn in outstanding shares at $240 per share and sought the difference between the $80.80 and $240 for the redeemed shares. Defendant argued that they followed the corporate c
    harter when they voted for the redemption.

    Issue. The issue is whether Plaintiff is entitled to equitable relief for a decision made by the majority shareholder that was otherwise allowable under the corporate charter.

    Held. The court differentiated between a decision made by a shareholder and a director, and determined that the Plaintiff was entitled to equitable relief if, as Plaintiff maintains, the directors were acting on Defendant’s behalf when they decided to redeem Class A shares. Defendant is entitled as a shareholder to vote their interests, but their capacity as director (if the directors are acting as an extension of the majority shareholders) is limited because they owe a fiduciary duty to every shareholder.

    Discussion. The important factor in this case was Defendant’s alleged control over the Board, and the fact that the decision to redeem the shares was a decision granted to the directors and not the shareholders.


    Create New Group

      Casebriefs is concerned with your security, please complete the following