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Lone Star Indus. v. Compania Naviera Perez Companc (In re New York Trap Rock Corp.)

United States District Court for the Southern District of New York

November 16, 1993, Decided

93 Civ 5480 (VLB)




This bankruptcy appeal involves sale of the debtor Lone Star's 50% interest in a series of Argentine corporations. The holder of the other 50% interest, the defendant Perez Companc, sold its share to a potential buyer at a higher price than obtained by Lone Star, to the only other interested bidder for shares in the Argentine entities. 1 Prior to this sale, Perez Companc held an advantage in bidding for Lone Star's share because as the existing 50% owner, only it could deliver 100% of the shares involved to a third party. Only Perez Companc could offer complete control of the Argentine companies to a new owner.

 [**2]  Lone Star, on the other hand, chose to take advantage of its ability to file for a  [*879]  noninsolvency bankruptcy for purposes of effecting a corporate reorganization under Chapter 11 of the United States Bankruptcy Code, and pursuant to that Chapter sought to liquidate its 50% interests in the Argentine entities. Because a 50% share of what amounts to a corporate partnership with parties with whom one has no prior dealings is difficult to sell, Lone Star found Perez the only available buyer - for the very reason that only it could obtain for itself or a third party complete ownership of the Argentine entities. Lone Star, of course, knowingly entered into the corporate betrothals involved which would doubtless be profitable if and only if both 50% owners cooperated, and which would foreseeably be difficult to sell successfully to others at a desirable price.

] As is often the case in bargaining, a party which must complete a transaction is in a weaker position than one which can walk away from it. See Roth, "Toward a Theory of Bargaining: An Experimental Study in Economics," 220 Science 687 (May 13, 1983); Hofstadter, "Mathematical Themas," 245 Sci Am 18 (July 1981). Where a party is irrevocably [**3]  committed to sell an asset and bail out of a relationship, the opportunities for win-win bargaining in a nonzero sum game which are available in ongoing relationships are thinned to a point approaching nonexistence. Compare T. Schelling, The Strategy of Conflict (1960) with E. Goffman, Strategic Interaction (1969).

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160 B.R. 876 *; 1993 U.S. Dist. LEXIS 16326 **

In re: NEW YORK TRAP ROCK CORPORATION, LONE STAR INDUSTRIES, INC., et al., Debtors. LONE STAR INDUSTRIES, INC., A Delaware corporation, Debtor and Debtor-in-Possession, Plaintiff - Appellant, v. COMPANIA NAVIERA PEREZ COMPANC, SACFIMFA, SUDACIA, SA, INVESORA PATAGONICA, SA and LOMO NEGRA COMPANIA INDUSTRIAL ARGENTINA SA, all Argentine corporations, Defendants - Appellees.

Prior History:  [**1]  (Chapter 11) Case Nos 90 B 27276 to 21286, 90 B 21334 and 21335, (Jointly Administered) Adversary Proceeding No 92-5403A.


entities, premium, corporate control, shareholders, nonfederal, reasons, trading, shares, potential bidder

Business & Corporate Compliance, Contract Formation, Contracts Law, Contract Formation, Bankruptcy Law, Administrative Powers, Estate Property Lease, Sale & Use, Collusive Bidding, General Overview, Business & Corporate Law, Shareholders, Shareholder Duties & Liabilities, Mergers & Acquisitions Law, Takeovers & Tender Offers, Duties & Liabilities of Shareholders, Securities Law, Postoffering & Secondary Distributions, Tender Offers, Contracts Law, Affirmative Defenses, Fraud & Misrepresentation, Standards of Performance, Creditors & Debtors, Antitrust & Trade Law, Robinson-Patman Act, Coverage, Clayton Act, Penalties, Claims, Jurisdiction, Sherman Act, Remedies, Civil Procedure, Preliminary Considerations, Venue, Forum Non Conveniens, Jurisdiction, Subject Matter Jurisdiction, Jurisdiction Over Actions, Supplemental Jurisdiction