Matter of Munford, Inc., d.b.a. Majik Market, Debtor

97 F.3d 456 (1996)

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Matter of Munford, Inc., d.b.a. Majik Market, Debtor

United States Court of Appeals for the Eleventh Circuit
97 F.3d 456 (1996)

Facts

The Panfida Group (Panfida) made an offer to purchase all outstanding stock in Munford, Inc. (plaintiff) through a leveraged-buyout merger. Panfida created Alabama Acquisition Corporation and Alabama Merger Corporation as vehicles for the buyout. Munford’s board of directors (the directors) (defendants) accepted the offer, the shareholders gave their approval, and the sale was closed. The following year, the Panfida-owned Munford filed for Chapter 11 in bankruptcy court and sought to recover damages against various parties involved in the buyout, including the directors of Munford. The court determined that the directors had violated Georgia’s stock distribution and repurchase statute, which prohibited stock distributions or repurchases that render a corporation insolvent. The case was appealed to federal district court, which adopted the bankruptcy court’s report and recommendations. The directors moved for summary judgment, which was denied. The directors appealed, contending that the statute in question only applied to situations in which control of a company did not change hands. The United States Court of Appeals for the Eleventh Circuit granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Hatchett, C.J.)

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