Shanken v. Lee Wolfman, Inc.

Lee Wolfman, Inc. (defendant) authorized and issued stock to three shareholders. Lee Wolfman owned 100 shares of class A common stock. Irene Ford owned 100 shares of class B common stock. James Shanken (plaintiff) owned 100 shares of class C common stock. Each class comprised 150 authorized shares. Per Texas state statute, a two-thirds majority vote of the outstanding shares of each class is required to amend a corporation’s articles of incorporation if modifying the number of authorized shares of such class. Three directors of Wolfman, Inc. voted in favor of a resolution to amend the corporate charter to provide for a pro-rata increase of the aggregate number of authorized shares in each class of common stock for a total of 250 shares per class. Shanken opposed the charter amendment. Without Shanken’s approval, the shares of class C common stock could not be increased. Instead, the three shareholders, with Shanken opposing again, voted in favor of a resolution to increase the authorized shares of class A and class B common stock by 175 shares each. After the second vote, the corporate charter was amended to increase the number of authorized class A and class B shares in accordance with the second resolution. Shanken filed a lawsuit against Wolfman Inc., claiming two-thirds of each and every class must have voted in favor of the resolution to increase the aggregate number of authorized stock in any class. The lower court granted summary judgment in favor of Wolfman, Inc. Shanken appealed to the Texas Court of Civil Appeals.