Baron v. Strawbridge & Clothier

646 F. Supp. 690 (1986)

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Baron v. Strawbridge & Clothier

United States District Court for the Eastern District of Pennsylvania
646 F. Supp. 690 (1986)

Facts

Strawbridge & Clothier (Strawbridge) (defendant) was a publicly traded corporation that was organized under Pennsylvania law. Ronald Baron (plaintiff) was a Strawbridge shareholder. Baron disagreed with virtually all Strawbridge management’s business strategy and decisions, including Strawbridge’s commitment to remaining independent by not allowing itself to be purchased by a larger company. Baron formed Berry Acquisition Company (Berry) (plaintiff) for the purpose of making a hostile tender offer for Strawbridge’s stock. Strawbridge’s directors (defendants) sought to protect against a hostile takeover by Baron via Berry or another possible bidder by proposing that Strawbridge’s shareholders adopt various antitakeover measures and requiring that board candidates be nominated at least 45 days before a shareholder meeting. The directors did not propose other possible defensive measures, such as adopting a poison pill, concluding that such tactics were not appropriate. Strawbridge’s shareholders approved the proposed antitakeover measures. Nevertheless, Berry made a tender offer to Strawbridge’s shareholders. In consultation with expert advisors, the directors concluded that Berry’s offer was not in the best interests of either Strawbridge’s shareholders or Strawbridge’s stakeholders (i.e., Strawbridge’s employees, customers, and community). Baron brought a shareholder derivative suit against Strawbridge and the directors, challenging Strawbridge’s adoption of the antitakeover measures and the directors’ opposition to Baron and Berry’s tender offer.

Rule of Law

Issue

Holding and Reasoning (Kelly, J.)

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