Kahn v. Sullivan

594 A.2d 48 (Del. 1991)

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Nature of the Case

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Facts

Occidental for many years has contributed money to the collection owned by billionaire corporate magnate, Armand Hammer, a Board member and the CEO of Occidental. For many years, the Board has determined that it is in the best interest of Occidental to support and promote the acquisition and exhibition of the Art Collection. Through Occidental's financial support and sponsorship, the Art Collection has been viewed by more than six million people in more than twenty-five American cities and at least eighteen foreign countries. The majority of those exhibitions have been in areas where Occidental has operations or was negotiating business contracts. Hammer had a deal to permanently display the collection at a Los Angeles museum. That deal fell through because Mr. Hammer insisted that the museum display a full-length portrait of himself. On January 19, 1988, at a meeting of the executive committee of Occidental's board of directors, Dr. Hammer proposed that Occidental, in conjunction with the Foundation, construct a museum for the Art Collection. After discussing Occidental's history of identification with the Art Collection, the Executive Committee decided that it was in Occidental's best interest to accept Dr. Hammer's proposal. They consulted with Skadden Arps, a law firm, about the tax consequences. The Board then appointed a special independent committee to review the decision to build the museum. Skadden Arps signed off on the museum, and the Committee decided that the museum would build goodwill for Occidental. On April 25, 1989, Occidental reported the Special Committee's approval of the Museum proposal to its shareholders in the proxy statement for its annual meeting to be held May 26, 1989. On May 2, 1989, the first shareholder action ('the Kahn action') was filed, challenging Occidental's decision to establish and fund the Museum proposal. The Sullivan action was filed on May 9, 1989. Sullivan (D) settled with Occidental. The name of the museum was changed, and some limitations were placed on Occidentals donations to the museum. Kahn (P) challenged the independence of the committee and also challenged the courts approval of the settlement and filed suit.