Lacos Land Co. v. Arden Group, Inc.

Lacos Land Company (Lacos) (plaintiff) owned 4.5 percent of Class A common stock in Arden Group, Inc. (Arden) (defendant). Bernard Briskin was Arden’s principal shareholder and chief executive officer. Briskin proposed to Arden’s board of directors (defendants) a recapitalization scheme that would adopt a dual-class common-stock structure. Class B common stock would be created and would possess 10 votes per share, as compared to Class A’s one vote. As a class, Class B stockholders would elect 75 percent of Arden’s board. The new stock would be available on a share-for-share basis to Class A stockholders, but transfer restrictions on Class B stock meant that Briskin would likely be the only stockholder exchanging shares. Consequently, the new class was mainly attractive to Briskin. The board approved the plan and issued a proxy statement to stockholders describing the proposed charter amendments. The proxy statement explained that Briskin had informed the board that he would not support any transactions that might make the company vulnerable to a hostile takeover, even if such transactions were in the company’s best interests, unless steps were first taken to secure his voting position in the company. Arden’s shareholders authorized the charter amendments at their annual meeting. Lacos sued Arden and its board, arguing that the vote was fatally flawed. Lacos sought a preliminary injunction preventing issuance of the Class B stock while the case was pending.