1. Bob files suit to enjoin Mildred, Deborah, and the Nova
ASSIGNMENT1.Zenith Steel Company operates a prosperous business. The board of
directors voted to spend $20 million of the company’s surplus funds to purchase a majority
of the stock of two other companies—the Green Insurance Company and the Blue Trust
Company. The Green Insurance Company is a thriving business whose stock is an excellent
investment at the price at which it will be sold to Zenith Steel Company. The principal
reasons for Zenith’s purchase of the Green Insurance stock are to invest surplus funds and
to diversify its business. The Blue Trust Company owns a controlling interest in Zenith Steel
Company. The Blue Trust Company is subject to special governmental controls. The main
purpose for Zenith’s purchase of the Blue Trust Company stock is to enable the present
management and directors of Zenith Steel Company to perpetuate their management of the
company. Jones, a minority shareholder in Zenith Steel Company, brings an appropriate
action to enjoin the purchase by Zenith Steel Company of the stock of either the Green
Insurance Company or the Blue Trust Company. What decision as to each purchase?2.
Mildred, Deborah, and Bob each own one-third of the stock of Nova Corporation. On Friday,
Mildred received an offer to merge Nova into Buyer Corporation. Mildred, who agreed to
call a shareholders’ meeting to discuss the offer on the following Tuesday, telephoned
Deborah and Bob and informed them of the offer and the scheduled meeting. Deborah
agreed to attend. Bob, however, was unable to attend because he was leaving on a trip on
Saturday and asked if the three of them could meet on Friday night instead. Mildred and
Deborah agreed. The three shareholders met informally Friday night and agreed to accept
the offer only if they received preferred stock of Buyer Corporation for their shares. Bob
then left on his trip. On Tuesday, at the time and place appointed by Mildred, Mildred and
Deborah convened the shareholders’ meeting. After discussion, they concluded that the
preferred stock payment limitation was unwise and passed a formal resolution to accept
Buyer Corporation’s offer without any such condition. Bob files suit to enjoin Mildred,
Deborah, and the Nova Corporation from implementing this resolution. Explain whether the
injunction should be issued.3. Tretter alleged that his exposure over the years to asbestos
products manufactured by Philip Carey Manufacturing Corporation caused him to contract
asbestosis. Tretter brought an action against Rapid American Corporation, which was the
surviving corporation of a merger between Philip Carey and Rapid American. Rapid
American denied liability, claiming that immediately after the merger, it had transferred its
asbestos operations to a newly formed subsidiary corporation. Can Rapid avoid liability by
such transfer? Explain.4. All Steel Pipe and Tube is a closely held corporation engaged in the

2. business of selling steel pipes and tubes. Leo and Scott Callier are its two equal
shareholders. Scott, Leo’s uncle, is one of the company’s two directors and is president of
the corporation. Scott is the general manager. Scott’s father and Leo’s grandfather, Felix, is
the other director. Over the years, Scott and Leo have had differences of opinion regarding
the operation of the business. Nevertheless, despite their deteriorating relationship, the
company has flourished. When negotiations aimed at Leo’s redemption of Scott’s shares
began, however, the parties could not reach an agreement. The discussion then turned to
voluntary dissolution and liquidation of the corporation, but still no agreement could be
reached. Finally, Leo fired Scott and began to wind down All Steel’s business and to form a
new corporation, Callier Steel Pipe and Tube. Leo then brought an action seeking a
dissolution and liquidation of All Steel. Should the court order dissolution? Explain.5. The
shareholders of Endicott Johnson who had dissented from a proposed merger of Endicott
with McDonough Corporation brought a proceeding to fix the fair value of their stock. At
issue was the proper weight to be given to the market price of the stock in fixing its fair
value. The shareholders argued that the market value should not be considered because
McDonough controlled 70 percent of Endicott’s stock and the stock had been delisted from
the New York Stock Exchange. Are the shareholders correct? Explain