Anadarko Petroleum Corporation v. Panhandle Eastern Corporation

In August 1986, the directors of Panhandle Eastern Corporation (Panhandle) (defendant) voted to effectuate a spin-off of its subsidiary, Anadarko Petroleum Corporation (Anadarko) (plaintiff). The spin-off entailed distributing one share of Anadarko stock for every share of Panhandle stock held. The record date to determine the Panhandle shareholders was set for September 12 and the stock distribution was set for October 1. The directors promulgated an information statement to put any prospective shareholders of Anadarko’s stock on notice that, to effectuate the spin-off, certain agreements may be formed between Panhandle and Anadarko that would disadvantage Anadarko. By September 30, Anadarko directors, most of whom were affiliated with Panhandle, approved multiple agreements that disadvantaged Anadarko. Three of Anadarko’s directors resigned and were replaced with new directors. The new directors challenged the agreements on the ground that Panhandle and the former directors owed a fiduciary duty to Anadarko’s prospective shareholders and had breached this duty by forming the agreements. Anadarko argued that a fiduciary duty existed for multiple reasons. First, Anadarko argued that the prospective shareholders became record owners of Anadarko stock upon the creation of a stock ledger listing the Panhandle shareholders on the record date. Second, Anadarko argued that the prospective stockholders were beneficial owners of Anadarko’s stock and therefore were owed a fiduciary duty. Third, Anadarko argued that the directors were trustees of the stock, which created a fiduciary duty. The chancery court rejected Anadarko’s arguments that a fiduciary relationship existed and granted summary judgment for Panhandle. Anadarko appealed.