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