Gabelli & Co. v. Liggett Group, Inc.

Grand Metropolitan Limited (Grand Met) (defendant) formed a wholly owned subsidiary, GM Sub Corporation (defendant), to acquire Liggett Group, Inc. (Liggett) (defendant). In the spring of 1980, GM Sub made a tender offer to acquire all shares of Liggett’s common stock for $69 per share—a price significantly higher than the range in which the stock had been trading. Liggett’s board of directors approved the offer and recommended that the shareholders accept it. GM Sub then acquired 87.4 percent of Liggett’s common stock. Minority shareholder Gabelli & Company, Inc., Profit Sharing Plan (Gabelli) (plaintiff) refused to tender its 800 shares in Liggett. As a result of the pending merger, Liggett’s third-quarter dividend, which normally was declared in July of each year, was not declared or paid. On July 16, 1980, Gabelli sued to compel payment of the dividend, asserting that the majority shareholders had breached a fiduciary duty to the minority shareholders by declining to declare the dividend. In the lawsuit, Gabelli did not file for an injunction to block or otherwise object to the merger. The merger became effective on August 6, 1980, and the remaining minority shareholders were cashed out at the same $69-per-share price that they would have received had they tendered their shares in the initial offer. Liggett moved to dismiss Gabelli’s complaint on the ground that the complaint did not state a claim on which relief could be granted.