HB Korenaes Investments, L.P. v. Marriott Corporation
Delaware Court of Chancery
1993 WL 205040 (1993)
- Written by Eric Miller, JD
Facts
Marriott Corporation (defendant) planned to transfer its profitable hotel business to a spin-off company, Marriott International, Inc. The plan called for Marriott to distribute a special dividend of Marriott International common stock, which itself paid dividends, to holders of Marriott common stock. Although Marriott was obligated to pay dividends to preferred stockholders before paying any dividend to its common stockholders, the preferred stockholders were excluded from the planned special dividend, and their regular dividend was indefinitely discontinued. The certificate of designation for the preferred stock provided a right to conversion to common stock at a price that could be adjusted in the event of a distribution of assets to holders of the common stock. Four institutional investors holding a majority of the Marriott preferred stock (the preferred stockholders) (plaintiffs) brought an action against Marriott and its directors (defendants) in the Delaware Court of Chancery. The first count of the preferred stockholders’ action alleged a breach of Marriott and its directors’ fiduciary duties of loyalty and good faith and fair dealing to the preferred stockholders. Marriott and its directors moved for dismissal.
Rule of Law
Issue
Holding and Reasoning (Allen, J.)
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