In re Sunstates Corp. Shareholders' Litigation

788 A.2d 530 (2001)

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In re Sunstates Corp. Shareholders’ Litigation

Delaware Court of Chancery
788 A.2d 530 (2001)

Facts

Sunstates Corporation (defendant) provided for the issuance of preferred stock in its certificate of incorporation. The certificate further provided that Sunstates could not repurchase shares of its preferred stock while in arrears on the preferred-stock dividend. Subsidiaries of Sunstates made significant acquisitions of Sunstates preferred stock while Sunstates was in arrears on the preferred-stock dividend. A group of preferred stockholders (plaintiffs) brought a class action in the Delaware Court of Chancery, alleging violation of the certificate of incorporation and the implied covenant of good faith and fair dealing. Sunstates moved for summary judgment on the issue, asserting that the certificate did not apply to purchase by subsidiaries.

Rule of Law

Issue

Holding and Reasoning (Lamb, J.)

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