Fliegler v. Lawrence
361 A.2d 218 (Del. 1976)


PROCEDURE: Plaintiff shareholder challenged an order of the Court of Chancery of Delaware, which held that defendant officers did not wrongfully usurp an opportunity that belonged to the corporation and that defendant officers did not wrongfully profit by causing the corporation to exercise an option to purchase defendant close corporation, a majority of whose shares were held by defendant officers.

FACTS:A shareholder brought a derivative action against the officers and directors of Agau Mines, Inc. and the United States Antimony Corp. (USAC) to recover 800,000 shares of Agau stock transferred to USAC.

ISSUE: Will shareholder ratification of a transaction in which directors are personally interested automatically shift the burden of proof to an objecting shareholder to demonstrate that the transaction is unfair?

RULE: Statute providing that transaction between corporation and one or more of its directors or officers is not void or voidable solely for the reason that the director or officer is present at or participates in the meeting of the board or committee which authorizes the transaction if the material facts are disclosed or known to the shareholders did not remove from certain corporate shareholders and officers the burden of proving that transaction in which the corporation acquired a second corporation in which they held a significant interest was intrinsically fair.

HOLDING:The Chancery Court, entered judgment in favor of defendants and plaintiff appealed. The Supreme Court, McNeilly, J., held that where defendant officers, directors, and shareholders of the first corporation had held a significant interest in the second corporation which was acquired by the first corporation, burden was on those defendants to show the intrinsic fairness of the transaction, and that defendants met that burden. AFFIRMED.