CORPORATIONS - CONDITIONS UNDER WHICH SETTLEMENT OF CORPORATE CLAIMS WILL NOT PREVENT A STOCKHOLDER'S DERIVATIVE SUIT ON SUCH CLAIMS

Authors

John M. Ulman, University of Michigan Law SchoolFollow

Abstract

In the recent case of United States Lines, Inc. v. United States Lines Co. the plaintiff was a minority stockholder in United States Lines, Inc., whose only asset was a minority stock interest in the United States Lines Company. A majority of the stock in both companies was owned by the International Mercantile Marine Company. An action originally brought by the United States Lines, Inc., but settled out of court, was sought to be continued by the plaintiff, who alleged: (1) that the Marine Company and its subsidiaries had entered into fraudulent contracts with the United States Lines Company and had made excessive charges, amounting to several million dollars, payable to the Marine Company and its subsidiaries; (2) that a settlement was approved by the majority (consisting of shares owned by the Marine Company) of United States Lines, Inc., whereby the suit was to be dismissed and the shareholders of United States Lines, Inc. were given the option of trading their shares for junior preferred stock of United States Lines Company; (3) that the expense was to be borne by the Marine Company and it was to pay the debts of United States Lines, Inc., amounting to about $40,000. The court held that the plaintiff might continue the derivative action because it did not clearly appear that the settlement was advantageous to the corporation and its stockholders.

Recommended Citation

John M. Ulman, CORPORATIONS - CONDITIONS UNDER WHICH SETTLEMENT OF CORPORATE CLAIMS WILL NOT PREVENT A STOCKHOLDER'S DERIVATIVE SUIT ON SUCH CLAIMS, 37 Mich. L. Rev. 625 (1939).
Available at: https://repository.law.umich.edu/mlr/vol37/iss4/9