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Business Associations Keyed to Hwang, 3rd Ed.
Nixon v. Blackwell
Citation:
626 A.2d 1366 (1993)Facts
E.C. Barton founded E.C. Barton & Company in 1928, creating Class A voting stock and Class B non-voting stock. Upon his death in 1967, Barton’s testamentary plan bequeathed 49% of Class A stock to eight loyal employees, with the remaining 51% placed in trust for the same employees. Class B non-voting stock representing 75% of total equity was bequeathed to family members. The corporation had no public market for its stock, creating liquidity problems for all shareholders. In 1975, the board established an ESOP allowing employees to receive cash or stock upon termination, with annual independent appraisals determining stock value. The corporation also purchased key man life insurance policies with proceeds earmarked for repurchasing employee stock upon death or retirement. The board made several self-tender offers to repurchase Class B stock from non-employee shareholders at various prices, which plaintiffs largely rejected. Plaintiffs, owning 25% of Class B stock collectively, sued claiming the board breached fiduciary duties by providing liquidity mechanisms for employee-shareholders through the ESOP and key man insurance without comparable provisions for minority non-employee shareholders.
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