Pennsylvania Supreme Court Allows Post-Merger Suits in Cases of Fraud or Fundamental Unfairness

more+
less-

Many practitioners in Pennsylvania have long been of the view that in the case of a Pennsylvania merger, no legal claim under state law seeking equitable relief or damages based on unfairness of the merger, or even fraud, could be brought by shareholders after the merger closed. At that point, shareholders, it was thought, are limited to their rights to receive the fair value of their shares in accordance with statutory dissenters’ rights. This view was based on the Pennsylvania Supreme Court decision in In re Jones & Laughlin Steel Corporation, 412 A.2d 1099 (1980). There, the court stated, based on an analysis of provisions in the Pennsylvania Business Corporation Law of 1933:

“We wish to emphasize that today’s decision does not condone the manner in which appellants and other minority shareholders were deprived of their equitable interest in J&L. We are not unmindful of the grave unfairness and fraud frequently present in mergers of this type, especially where there is a 'cash-out' of the minority shareholders. See Brudney & Chirelstein, A Restatement of Corporate Freezeouts, 84 Yale L. Rev. 1354, 1358-9, 1367-70 (1978). Our concern, however, does not change the view that appellants’ post-merger remedies were limited to the appraisal of their stock.” 412 A.2d at 1104.

Please see full Alert below for further information.

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:

more+
less-

Reed Smith on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×