Heckmann v. Ahmanson
California Court of Appeal
214 Cal. Rptr. 177 (1985)
- Written by Heather Whittemore, JD
Facts
In March 1984, the Steinberg Group (defendants) purchased shares in Walt Disney Productions (Disney). Disney’s board of directors (the board) believed the Steinberg Group was attempting to take over Disney. In response, Disney acquired Arvida Corporation, assuming $190 million in debt. The Steinberg Group filed a shareholder derivative suit against the board in federal district court to block the acquisition, but the transaction was finalized. The Steinberg Group then offered to purchase 49 percent of Disney’s outstanding stock. The board rejected the offer and instead proposed to repurchase all the stock owned by the Steinberg Group for $325 million, approximately $77 per share. This price was above the market price for Disney shares. The Steinberg Group made a profit of $60 million from Disney’s repurchase. The payment to the Steinberg Group and acquisition of Arvida increased Disney’s debt by $866 million and caused its stock price to fall below $50 per share. A group of Disney shareholders (the plaintiff shareholders) (plaintiffs) filed a lawsuit in California state court, alleging that the Steinberg Group had breached its fiduciary duty to Disney and Disney’s shareholders by greenmailing the corporation. The plaintiff shareholders filed a motion for a preliminary injunction imposing a constructive trust on the $60 million profit. The trial court granted the motion. The Steinberg Group appealed.
Rule of Law
Issue
Holding and Reasoning (Johnson, J.)
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