Schreiber v. Carney

Jet Capital (defendant), owning 35 percent of TIA's voting shares, opposed a proposed merger between TIA and Texas Air because it would trigger an $800,000 tax liability for Jet, and Jet threatened to block the merger unless it could exercise its TIA stock warrants, which it lacked funds to do. A committee of uninterested TIA directors, after consulting experts, approved a loan to Jet at below-market interest that would jump to prime and become immediately repayable once Jet exercised its warrants; the loan had little financial impact on TIA. TIA's board unanimously approved the loan and submitted it to shareholders, requiring both a majority of all shares and a majority of uninterested shareholders (excluding Jet) after full disclosure, and shareholders overwhelmingly approved it. TIA shareholder Schreiber (plaintiff) sued, claiming the measure was invalid vote-buying and corporate waste.