From our private database of 31,100+ case briefs...
Fait v. Hummel
United States Court of Appeals for the Seventh Circuit
333 F.3d 854 (2003)
Pentech Pharmaceuticals, Inc. (Pentech) experienced financial troubles. Pentech’s CEO, Ragab El-Rashidy, and Robert Fait (plaintiff), a member of the board of directors, controlled a majority of the common stock’s voting power. An investor-rights agreement gave Pentech’s preferred shareholders the right to elect four of the five board members if Pentech violated certain covenants. After a court found such a violation, the preferred shareholders replaced Fait and another director. Additionally, El-Rashidy was placed on administrative leave and soon resigned from the board. This left four board members: Bruce Ronsen (defendant), James Lumsden (defendant), Albert Hummel (defendant), and Howard Myles (defendant). Ronsen, Hummel, and Myles voted to approve a stock offering of more than 4 million shares of common stock for $1 per share. Lumsden abstained from the vote due to close ties with preferred shareholders. The preferred shareholders, who had a right of first refusal, purchased all the available shares. The offering was intended as an infusion of capital to prevent bankruptcy, but it also had the effect of diluting the voting power of the common stock and allowing the preferred shareholders to keep their control of the company. Fait challenged the validity of the offering in federal district court. The court found that the offering was valid, because Ronsen, Hummel, and Myles had extensive knowledge of Pentech’s financial state, and that Fait had failed to meet the burden of proving that the transaction was unfair. Fait appealed. The United States District Court for the Seventh Circuit granted certiorari.
Rule of Law
Holding and Reasoning (Evans, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 557,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 557,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 31,100 briefs, keyed to 984 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.