Ronnen v. Ajax Electric Motor Corp.
New York Court of Appeals
88 N.Y.2d 582 (1996)
Neil Norry (plaintiff) was the chief executive officer of Ajax Electric Motor Corporation (Ajax) (defendant). Norry and his sister Deborah Ronnen owned a majority of Ajax’s issued and outstanding stock. In 1982, Norry, Norry’s two sons, and Ronnen entered into a shareholders’ agreement. The agreement granted Norry the right to vote Ronnen’s shares by proxy with respect to any and all matters relating to Ajax’s day-to-day operations and corporate management. Norry also had the right to vote Ronnen’s shares regarding any proposed sale of all or substantially all of Ajax’s assets. However, Ronnen retained the right to vote on other major corporate-policy decisions. Additionally, the parties agreed to vote the shares: (1) to ensure a seat on the board of directors for Ronnen, (2) to ensure Ronnen had continued access to all reports concerning Ajax’s management, and (3) to generally cap Norry’s total executive compensation at $125,000 a year. At a shareholders’ meeting on March 13, 1995, Ronnen served a temporary restraining order on Norry that prohibited Norry from voting the Ronnen shares to amend the bylaws or the certificate of incorporation. Norry adjourned the meeting, but Ronnen stayed behind with a few other shareholders and elected a new slate of directors. Norry filed a lawsuit to invalidate the election and sought an order directing a new election. The trial court granted Norry’s request for a new election. Ronnen appealed, and the New York Appellate Division affirmed. Ronnen then appealed to the New York Court of Appeals.
Rule of Law
Holding and Reasoning (Levine, J.)
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