Corporations – Shareholders – Majority Liability for Improper Stock Redemption by Corporation and for Misrepresentations in Private Stock Purchases from Minority Holders
In 1942 a seemingly innocuous suit was brought against the Axton-Fisher Tobacco Corporation to determine the propriety of the alteration of a stock redemption. In 1955 Judge Leahy of the Federal District Court for Delaware handed down an opinion on the damages and relief to be given in the case in what he hopefully termed was the final phase of this famous litigation. It is the purpose of this comment to appraise the basis of the recovery allowed by Judge Leahy. Two readily distinguishable problems will be treated: (1) the nature of relief from a stock redemption called by fiduciaries in violation of their duties, and (2) the nature of relief (under both state common law and rule X-l0B-5 of the Securities and Exchange Commission) for fraudulent purchase of stock by insiders.