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Schneider v. Lazard Frères & Co.

552 N.Y.S.2d 571 (1990)

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Schneider v. Lazard Frères & Co.

New York Supreme Court, Appellate Division
552 N.Y.S.2d 571 (1990)

RW

Facts

The board of directors of RJR Nabisco, Inc. (RJR) appointed a special committee to conduct RJR’s sale by auction. The committee hired Lazard Frères & Company and another firm (bankers) (defendants) as its financial advisors. Based on the bankers’ advice, the committee conducted the auction in such a way that RJR’s board eventually rejected a bid from an in-house management group and voted to sell RJR to Kohlberg, Kravis, Roberts & Company (Kohlberg). Laz Schneider and other dissident RJR shareholders (plaintiffs) believed that the management group’s bid was more financially favorable to the group’s interests. The shareholders filed court challenges in two states: (1) a Delaware lawsuit against RJR’s board, RJR’s special committee, and Kohlberg, seeking to block the Kohlberg merger; and (2) a New York case against the bankers for negligence. The bankers moved to dismiss the New York case, arguing that their only fiduciary duty was to the special committee and not to the shareholders.

Rule of Law

Issue

Holding and Reasoning (Chandler, J.)

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