Cheff v. Mathes
Delaware Supreme Court
199 A.2d 548 (Del. 1964)
Holland Furnace Company's board, including director and CEO Cheff (defendant), authorized a corporate repurchase of 155,000 shares from Motor Products Corporation after Motor Products chairman Arnold Maremont — who had a reputation for buying into and liquidating companies, disliked Holland's unique direct-sales model, misled Cheff about his interest in the company while quietly buying shares, and was refused a board seat — accumulated roughly 100,000 shares of Holland stock. The buyout price exceeded market price but was not unreasonable given the controlling stake involved. Shareholders (plaintiffs) sued, alleging the real purpose was to entrench the board's own control, and the Delaware Court of Chancery agreed; the board appealed.
Whether a corporate board that buys out a dissident stockholder's shares, motivated by a sincere belief that the buyout is necessary to maintain proper business practices, will be held liable for that decision.