Wertheim Schroder & Co. v. Avon

1993 WL 126427 (1993)

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Wertheim Schroder & Co. v. Avon

United States District Court for the Southern District of New York
1993 WL 126427 (1993)

Facts

Avon Products, Inc. (Avon) (defendant) sought to reduce the annual dividend on its common stock from $2 to $1 per share. As part of the plan, Avon issued a new series of preferred stock called Preferred Equity-Redemption Cumulative Stock (PERCS), effective through September 1, 1991, for stockholders who wanted to continue receiving the $2 per-share annual dividend. The PERCS terms included an accelerated-redemption provision stating that PERCS holders would be entitled to a one-for-one exchange for common stock or cash, plus unpaid dividends, if Avon paid a cumulative annual dividend of $1.50 per share or more on the common stock. PERCS holders also had the option of a redemption at certain fixed prices. Wertheim Schroder & Co. (Wertheim) (plaintiff) acquired approximately 138,000 PERCS shares. In February 1991, Avon declared a special dividend of $3 per share of common stock in addition to its quarterly dividend of $0.35 per share, though the special dividend was not to be paid until September 16. Wertheim brought a breach-of-contract claim against Avon in federal district court, arguing that the declaration of the special dividend triggered the accelerated-redemption provision. Avon moved for summary judgment.

Rule of Law

Issue

Holding and Reasoning (Leisure, J.)

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