McLaughlin v. Schenk
Annotate this CaseIn 1999, Greg Schenk purchased shares in Cookietree, Inc. in violation of a 1991 shareholder agreement (agreement). In 2005, Cookietree's board of directors, including Schenk, voted to waive the provisions of the agreement that precluded the stock purchase. Shareholders representing ninety percent of Cookietree's shares, including Schenk, ratified the 1991 stock purchase (collectively, the 2005 waivers). A minority shareholder, Samuel McLaughlin, brought suit challenging the stock purchase. The Supreme Court held that the 2005 waivers were tainted by Schenk's participation in the votes and remanded for a fairness hearing. Cookietree then took several corporate actions it intended to have the same effect of a fairness hearing. Thereafter, the district court held that McLaughlin was still entitled to a fairness hearing. When the case was reassigned to another district court judge, the replacement judge disagreed with the determination that a fairness hearing was necessary and entered summary judgment in favor of Cookietree and Schenk. The Supreme Court affirmed, holding (1) the district court did not violate the law of the case doctrine; (2) the court did not violate the Court's mandate in McLaughlin I by declining to hold a fairness hearing; and (3) post-remand corporate action mooted the need for a fairness hearing.
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