Leasco Corp. v. Taussig

Facts

Leasco was the parent company of Louis Berger, Inc. (Berger, Inc.) and Louis Berger Associates. The “Berger division” was engaged in the business of civil engineering and consulting. In July 1969, Leasco engaged Taussig as vice president and counsel for Berger, Inc. Shortly thereafter, Berger, Inc. began efforts to acquire assets in McCreary-Koretsky Engineers, Inc. (MKE). MKE was facing bankruptcy at the time. McCreary-Koretsky International, Inc. (MKI), a subsidiary of Berger, Inc., was incorporated specifically for the purpose of acquiring MKE’s assets. Taussig then became vice president of MKI and acted as a liaison between MKI, Berger, Inc., and Leasco.

In December 1970, Leasco began considering divesting the entire Berger division. Taussig approached Leasco about its intent to divest MKI and offered to purchase the company. During discussions, Taussig estimated MKI’s earnings for the 1971 fiscal year to be $200,000. The parties ultimately agreed to a cash price of $625,000 combined with a release of Leasco’s guarantee on a $375,000 loan. On February 26, 1971, the agreement was entered for the sale of MKI with a closing date April 15 (later changed to May 28). On March 12, 1971, Taussig received MKI’s February financial statement disclosing a net loss of $4,702 due to a design error on a bridge project. The error also caused losses for the month’s of March and April. During the closing, Taussig refused to accept tender of the MKI stock or to perform as required under the contract.