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Law School Case Brief

Schreiber v. Carney - 447 A.2d 17 (Del. Ch. 1982)

Rule:

Where a merger has no meaningful effect on the plaintiff's ownership of the business enterprise, he should have standing to maintain a derivative suit to correct an alleged breach of fiduciary duty.

Facts:

Plaintiff brought suit challenging the propriety of a loan from defendant corporation to defendant shareholder alleging the transaction constituted vote-buying and therefore was void and the loan was a corporate waste. Defendant argued that there was no showing of waste, and plaintiff lacked standing to bring the suit because he was not a stockholder at the time the suit was commenced.

Issue:

Does plaintiff have standing to bring the derivative suit against the corporation?

Answer:

Yes.

Conclusion:

The court held that the merger had no meaningful effect on plaintiff's ownership of the business enterprise; therefore, he had standing to maintain the derivative suit. Additionally, the court found that vote-buying was not illegal per se unless the object or purpose was to defraud or in some way disenfranchise the other stockholders. The court also found, however, that vote-buying must be viewed as a voidable transaction subject to a test of intrinsic fairness. Finally, court held issue of corporate waste was a question of fact for trial.

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