Brecher v. Gregg

392 N.Y.S.2d 776 (1975)

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Nature of the Case

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Facts

Lin Broadcasting Corporation was incorporated in Delaware in 1961 and became a publicly held company with assets of about $55 million. Lin holds licenses issued by the FCC to operate 10 radio and 2 television stations. Gregg (D) was the principal founder of Lin and served as president and a member of the board as well as chairman during various times from 1961 to 1969. D owned 82,000 shares of common stock. The other defendants were also directors of Lin. This suit resulted from a transaction between D and the Saturday Evening Post (SEPCO) which later bought D's shares for $3,500,000. In addition to that, D agreed to relinquish certain rights that he had under an employment contract with LIN which included, among other things, stock options. This was a premium of over $1,260,000 more than the market price on the day of the sale. Brecher (P) contends that the corporation is entitled to this windfall and that because the remaining directors followed D's promise and actually did vote to elect nominees of SEPCO as president and as three of the directors they are liable jointly with D and severally for the premium resulting from the sale. At trial, no evidence was introduced to establish that any of the director Ds other than D were involved in the negotiations for the sale of D's stock nor that they received any benefit therefrom. The court found that SEPCO paid a premium for D’s promise to resign as president, bring about the election of SEPCO’s nominee as president and the election of three of SEPCO’s nominee’s as directors.