Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

MCCLOSKEY v. MCCLOSKEY

May 1, 1978

ELIZABETH K. McCLOSKEY
v.
THOMAS D. McCLOSKEY and McCLOSKEY & COMPANY, INC.



The opinion of the court was delivered by: FOGEL

 FOGEL, J.

 This case presents the following two issues of first impression with respect to the "purchase or sale" standing requirement of Section 10(b) of the 1934 Securities Exchange Act, 15 U.S.C. § 78j(b) *fn1" and Rule 10b-5 *fn2" promulgated thereunder:

 
1) Is an exchange of shares for voting trust certificates a "purchase or sale"?
 
2) Is a shareholder agreement granting a corporation the right of first refusal a "purchase or sale"?3

 Our answer to the first question is no and to the second question is yes ; accordingly, defendants' motion to dismiss, or in the alternative, for summary judgment is denied. Our reasons follows:

 I. STATEMENT OF THE FACTS :

 Plaintiff, Elizabeth McCloskey, is a citizen of Pennsylvania, and former wife of defendant Thomas McCloskey. Prior to August 10, 1965, plaintiff owned 1,386 shares of common stock of McCloskey & Company, a Delaware corporation. On August 10, 1965, the shareholders of McCloskey & Company approved a merger between that corporation and defendant McCloskey & Company, Inc., under which defendant McCloskey & Company, Inc. became the surviving corporation. Pursuant to the merger, and a shareholder's agreement executed on August 10, 1965, certain shareholders of McCloskey & Company, including plaintiff and defendant Thomas McCloskey, exchanged their shares of common stock in McCloskey & Company for an equal number of shares in the surviving corporation, defendant McCloskey & Company, Inc. The remaining shareholders of McCloskey & Company sold their shares of common stock to defendant McCloskey & Company, Inc. for cash and notes payable over a period of ten years.

 Under the terms of the shareholder agreement of August 10, 1965, all shareholders of defendant McCloskey & Company, Inc. were required to execute a voting trust agreement effective for ten years (effective until August 10, 1975), unless terminated earlier by reason of satisfaction of the notes held by the selling shareholders of McCloskey & Company. On August 10, 1965, all shareholders of defendant McCloskey & Company, Inc. executed the voting trust agreement, pursuant to which they exchanged their common stock for voting trust certificates that reflected the number of shares held in trust. The voting trust agreement provided that Matthew McCloskey and defendant Thomas McCloskey would act as voting trustees. On October 10, 1972, Matthew McCloskey resigned as a voting trustee, leaving defendant Thomas McCloskey as the sole voting trustee.

 On April 7, 1973, a special meeting of the shareholders of defendant McCloskey & Company, Inc. was held which plaintiff did not attend; its purposes, as stated in the Waiver of Notice, were: (1) to amend the by-laws to increase the number of directors; and (2) to elect five directors. Defendant Thomas McCloskey presided at the meeting and announced that on March 15, 1973, the voting trust created pursuant to the voting trust agreement of August 10, 1965, had terminated. Accordingly, the shares of common stock in defendant McCloskey & Company, Inc. were distributed to all holders of the voting trust certificates, with the exception of plaintiff and defendant Thomas McCloskey. Stock was not distributed to plaintiff and defendant Thomas McCloskey because they had allegedly executed a second voting trust agreement on March 16, 1973; under that agreement the shares of stock to which plaintiff and defendant Thomas McCloskey would have otherwise been entitled, were exchanged for voting trust certificates in a second voting trust. Under this voting trust, which included a majority of the outstanding shares of defendant McCloskey & Company, Inc., defendant Thomas McCloskey was designated as sole voting trustee; it was effective for ten years (until March 16, 1983), unless terminated earlier by the death of the voting trustee.

 At the April 7, 1973, special meeting of stockholders, defendant Thomas McCloskey proposed a stockholder's agreement for adoption. Under the proposed agreement, defendant corporation acquired the right of first refusal with respect to: (1) all stock currently outstanding; and (2) any subsequently issued stock. If the corporation elected not to exercise its option, the other shareholders were granted the right to buy the stock. This agreement was signed by each shareholder in attendance at the meeting. Defendant Thomas McCloskey signed the agreement, purportedly on behalf of plaintiff while acting in his capacity as voting trustee under the terms of the March 16, 1973, voting trust agreement.

 II. STATEMENT OF THE LEGAL ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.