Delaware Court of Chancery
431 A.2d 1274 (Del. Ch. 1981)
Plant Industries, Inc. (Plant) (defendant) was a producer of steel drums. Over the course of six months, Plant’s board of directors sold off several of its unprofitable subsidiaries. Plant’s chief executive officer, Bregman (defendant), then began negotiating the sale of Plant National (Quebec) Ltd. (National) to raise funds and help Plant’s balance sheets. National was Plant’s Canadian division and had been “Plant’s only income producing facility for the past four years.” In the years leading up to the negotiated transfer, National accounted for 34.9 percent, 36.9 percent, 42 percent, and 52.4 percent of Plant’s pre-tax income, respectively. By then, National accounted for 51 percent of Plant’s total assets and 45 percent of its net sales. After the sale, Plant planned to move away from its steel drum business and begin making plastic drums. Plant ultimately entered into an agreement to sell National to Vulcan Industrial Packaging, Ltd. (Vulcan), despite getting a higher offer from Universal Drum Reconditioning Co. (Universal). Plant’s board argued that it could not negotiate with Universal, because it had entered a firm agreement with Vulcan. Plant’s shareholders (plaintiffs) filed a derivative lawsuit in the Delaware Court of Chancery, seeking to enjoin the sale. The plaintiffs argued that the deal with Vulcan constituted a sale of “substantially all” of Plant’s assets and could therefore only be accomplished by a majority vote of the shareholders at a meeting called with twenty days’ notice under 8 Del. C. § 271.
Rule of Law
Holding and Reasoning (Marvel, J.)
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