Zion v. Kurtz

Harold Kurtz (defendant) formed Lombard-Wall Group, initially as sole stockholder. In a transaction with Abraham Zion (plaintiff), Zion acquired all the company's Class A stock and Kurtz kept the Class B stock. Zion and Kurtz signed a shareholders' agreement, governed by Delaware law, providing that the company would take no business action without the Class A holders' consent. The company's articles did not mention this veto power, but Kurtz agreed in writing to take whatever further action was necessary to give effect to the agreement, at a time when he was still sole stockholder and director. The board later approved two agreements over Zion's objection, and Zion sued to cancel them as violations of the shareholders' agreement.

Whether a stockholders' agreement requiring a minority shareholder's consent before any corporate business or activity is valid and enforceable in a Delaware corporation, even though the company was not formally incorporated as a close corporation and the agreement was never written into its certificate of incorporation.