Lacos Land Company v. Arden Group, Inc.
Court of Chancery of Delaware
517 A.2d 271 (1986)
Lacos Land Company (plaintiff), a minority Class A shareholder in Arden Group, Inc. (defendant), challenged a shareholder-approved recapitalization creating a new Class B stock with ten votes per share and the power to elect 75% of the board - a structure the company admitted was designed mainly to benefit Briskin, Arden's controlling shareholder and CEO. The board-appointed committee reviewing the plan never retained independent counsel or financial advisors, and the proxy statement sent to shareholders included Briskin's own stated position: he would refuse to support any transaction that might expose the company to a hostile takeover, even if that transaction were in the company's best interest, unless steps were taken to secure his voting control. Shareholders approved the recapitalization at the annual meeting, with more than half of the favorable votes coming from Briskin, his family, or a trustee following management's direction; Lacos sought to enjoin the new stock's issuance.
Whether a shareholder vote authorizing a charter amendment is valid when it was procured under the threat that, absent approval, the company's controlling officer-director would oppose transactions that might otherwise benefit the company.