Orman v. Cullman

Orman (plaintiff), a Class A shareholder of General Cigar Holdings, Inc. (defendant), a leading manufacturer of premium cigars, challenged a merger in which a subsidiary of Swedish Match AB would acquire a 64% equity interest in General Cigar. The Cullman Group, four related directors (Edgar Cullman Sr., his son Edgar Cullman Jr., daughter Susan Cullman, and nephew John Ernst), would retain controlling equity, leadership positions, board-appointment power, and favorable put-call options after the merger. Other directors also had financial ties to the Cullman Group or the transaction: one owned a company set to receive $3.3 million from the merger, one had a consulting agreement controlled by the Cullman Group, two had long-standing business relationships with Cullman Group members, and one had ties to an underwriter benefiting from the deal. Orman alleged the directors breached their duties of loyalty and disclosure by approving a transaction unfair to the company's public shareholders and by omitting material facts from the proxy statement soliciting shareholder approval of the merger.