Law School Case Brief
Schreiber v. Carney - 447 A.2d 17 (Del. Ch. 1982)
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.
Plaintiff shareholder, Leonard I. Schreiber, brought a suit challenging the propriety of a loan from Texas International to defendant, Jet Capital Corporation, the holder of 35% of the shares of stock of Texas International. Schreiber alleged that the transaction constituted vote-buying and therefore, was void and the loan was a corporate waste. Texas International argued that there was no showing of waste, and that Schreiber lacked standing to bring the suit because he was not a stockholder at the time the suit was commenced.
Was the transaction void? DId Schreiber have standing to bring the suit, notwithstanding he was not a stockholder of the corporation at the time the suit was commenced?
The Supreme Court of Delaware 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 found, however, that vote-buying must be viewed as a voidable transaction subject to a test of intrinsic fairness. With regard to Schreiber’s legal standing to bring the suit, 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.
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