Story v. Kennecott Copper Corp.

In 1968 Kennecott Copper Corp. (Kennecott) (defendant) purchased Peabody Coal Company (Peabody) for $600 million and made capital investments of $530 million. Soon after Kennecott purchased Peabody, the Federal Trade Commission ordered Kennecott to sell its interest in Peabody. In 1977 Kennecott sold its shares of Peabody to another company for $1.2 billion without obtaining shareholder approval. Lee B. Story (plaintiff), a shareholder in Kennecott, filed a lawsuit in New York state court on behalf of herself and other shareholders, alleging that Kennecott violated the New York Business Corporation Law by failing to obtain shareholder approval before selling Peabody. Section 909 of the Business Corporation Law required a corporation to obtain the approval of at least two-thirds of its shareholders before selling all or substantially all of its assets. Story reasoned that Kennecott’s sale of Peabody constituted all or substantially all of Kennecott’s assets because Peabody was Kennecott’s only profitable asset for the two years before the sale. Kennecott moved for summary judgment, arguing that the Peabody assets were not all or substantially all of its assets. To support its motion, Kennecott asserted that its non-Peabody assets were worth over $1 billion, and that Peabody’s profits constituted only one-third of Kennecott’s income in the time that it owned Peabody.