United States Court of Appeals for the Second Circuit
219 F.2d 173 (2d Cir. 1955)
Russell Feldmann (defendant) was the majority stockholder in the Newport Steel Corporation (Newport). During the Korean War, there was a severe shortage of steel supply, making Newport very valuable. Feldmann, taking advantage of the shortage, sold his controlling interest to Wilport Company (Wilport) for a premium price. Newport stockholders (plaintiffs) brought a derivative suit against Feldmann seeking accounting for and restitution of Feldmann’s gains in the sale. The plaintiffs contended that the premium Wilport paid included a corporate asset—the ability to control production of steel in a time when supply was very low. They argued that this power was held in trust for Newport by Feldmann as its fiduciary.
Rule of Law
Holding and Reasoning (Clark, C.J.)
Dissent (Swan, J.)
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