McDermott Inc. v. Lewis

McDermott International (International), a Panamanian corporation, owned a Delaware-incorporated subsidiary, McDermott Inc. (McDermott) (defendant), which in turn held substantial shares in its own parent, International. During a corporate reorganization, McDermott voted its International shares to make International a 92-percent-owned subsidiary of itself, leaving International's public stockholders with only about 10 percent of voting power, largely to avoid U.S. taxation and deter hostile takeover attempts. Harry Lewis and Nina Altman (plaintiffs), McDermott stockholders, sued in Delaware to rescind the reorganization, arguing Delaware law bars a subsidiary from voting its shares in its parent; International argued Panamanian law, which permitted such voting, should govern instead since International had no operations or contacts in Delaware. The trial court granted partial summary judgment for the plaintiffs, applying Delaware law, and McDermott appealed.