Coster v. UIP Companies, Inc.

Wout Coster and Steven Schwat each owned half of UIP Companies, Inc. (UIP) (defendant). Wout died before he could negotiate the buyout and sale of his shares to his key lieutenant and chosen successor, Peter Bonnell. Instead, those shares passed to Wout’s widow, Marion Coster (plaintiff). Marion deadlocked with Schwat over appointing Bonnell to UIP’s board—an appointment that could interfere with Marion’s plan to force her own financially advantageous buyout. Marion petitioned the Delaware Court of Chancery to appoint a fully empowered custodian to run UIP. The board broke the deadlock and mooted Marion’s custodianship action by diluting UIP’s existing shares and selling one-third of the new shares, at a fair price, to Bonnell. The chancery court denied Marion’s petition to cancel the board’s action, finding that the board had acted with entire fairness. The Delaware Supreme Court remanded the case for the chancery court to apply the standard of review developed in Schnell v. Chris-Craft Industries, Inc., and determine whether the board’s action was not only fair but also equitable with regard to Marion’s interests. On remand, the chancery court once again upheld the board’s action. Marion once again appealed to the Delaware Supreme Court, arguing that the Schnell standard applied only to legal but improperly motivated board actions. The high court accepted the remand court’s findings.