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Business Organizations Keyed to Allen
Rales v. Blasband
Citation:
634 A.2d 927 (Del. 1993).Facts
During the 1980s, Blasband owned 1100 shares in Easco Hand Tools, Inc. In September 1988, Easco sold $100 million of Notes due in 1998. According to a prospectus for the public offering, the proceeds from the sale would be used for paying (1) Easco’s indebtedness, (2) funding corporate expansion, and (3) general corporate purposes. The prospectus also stated that the balance would be invested in “government and other marketable securities.” However, Blasband alleged, that $61.9 million was not invested in government or marketable securities, but rather in “junk bonds” offered by Drexel Burnham Lambert, Inc. which had declined substantially in value resulting in a loss of at least $14 million for Easco.
In February 1990, Easco entered into a merger agreement with Danaher and became its wholly-owned subsidiary. Thereafter, Blasband became a stockholder in Danaher. Danaher’s board of directors consisted of eight members: Steven Rales, Mitchell Rales, George Sherman, Donald Ehrlich, Mortimer Caplin, George Kellner, Emmett Stephenson, Jr., and Walter Lohr. The Rales brothers and Caplin were directors of Easco at the time of the purchase of the Drexel bonds and the Rales brothers allegedly had a prior business relationship with Drexel.
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