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Sinclair Oil Corp. v. Levien

Delaware Supreme Court
280 A.2d 717 (Del. 1971)



Sinclair Oil Corp. (Sinclair) (defendant) owned about 97 percent of the stock of its subsidiary, Sinclair Venezuelan Oil Company (Sinven) (plaintiff). From 1960 to 1966, Sinclair caused Sinven to pay out $108 million in dividends, which was more than Sinven earned during the time period. The dividends were made in compliance with law on their face, but Sinven contended that Sinclair caused the dividends to be paid out simply because Sinclair was in need of cash at the time. In addition, in 1961 Sinclair caused Sinven to contract with Sinclair International Oil Company (International), another Sinclair subsidiary created to coordinate Sinclair’s foreign business. Under the contract, Sinven agreed to sell its crude oil to International. International, however, consistently made late payments and did not comply with minimum purchase requirements under the contract. Sinven brought suit against its parent, Sinclair, for the damages it sustained as a result of the dividends, as well as breach of the contract with International. The Delaware Court of Chancery applied the intrinsic fairness standard and found in favor of Sinven on both claims. Sinclair appealed.

Rule of Law


Holding and Reasoning (Wolcott, J.)

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Questions & Answers

How Sinclair reaped the benefits from the oil contract between the subsidiary companies?

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