Logourl black

Birnbaum v. Newport Steel Corp.

United States Court of Appeals for the Second Circuit
193 F.2d 461 (1952)


Newport Steel Corporation was controlled by Russell Feldman (defendant), a director and holder of 40 percent of the company’s stock. Thousands of small investors held the remainder of Newport’s stock. In June 1950, Follansbee Steel Corporation proposed a merger with Newport which would have been highly profitable to Newport’s shareholders. Feldman and the other directors of Newport (defendants), whom Feldman controlled, rejected Follansbee’s offer. Feldman instead sold his Newport stock to Wilport Company (defendant) at twice the market rate. Wilport, a consortium of manufacturers, intended to use Newport’s production capacity as a captive supply of steel during an international shortage. Prior to the sale of his stock, Feldman wrote to Newport’s shareholders and stated that the negotiations with Follansbee had been terminated due to an uncertain internal situation. After the sale, the incoming president of Newport informed the shareholders of Feldman’s sale of stock but did not disclose the sale price or Wilport’s intentions with the company. A group of shareholders of Newport brought a derivative suit on behalf of the corporation against Feldman, the other directors, Wilport, and Wilport’s new directors and officers. They alleged that a fraud had been perpetrated upon the shareholders of Newport in connection with the sale of Feldman’s stock, in violation of SEC Rule 10b-5. The trial court granted the defendants’ motion to dismiss, holding that Rule 10b-5 protected only purchasers or sellers of stock. The shareholders appealed.

Rule of Law

The rule of law is the black letter law upon which the court rested its decision. To access this section, start your 7-day free trial of Quimbee for Law Students.


The issue section includes the dispositive legal issue in the case phrased as a question. To access this section, start your 7-day free trial of Quimbee for Law Students.

Holding and Reasoning (Hand, J.)

The holding and reasoning section includes:

  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

To access this section, start your 7-day free trial of Quimbee for Law Students.

Here's why 90,000 law students rely on our case briefs:

  • Reliable - written by law professors and practitioners not other law students.
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your class - works on your mobile and tablet.
  • 12,195 briefs - keyed to 164 casebooks.
  • Uniform format for every case brief.
  • Written in plain English - not in legalese and not just repeating the court's language.
  • Massive library of related video lessons - and practice questions.
  • Ability to tag case briefs in an outlining tool.
  • Top-notch customer support.
Start Your Free Trial Now