Bankers Securities Corporation v. Kresge Department Stores, 54 F. Supp. 378 (D. Del. 1944)
February 29, 1944
KRESGE DEPARTMENT STORES, Inc.
District Court, D. Delaware.
Aaron Finger (of Richards, Layton & Finger), of Wilmington, Del., for plaintiff.
Arthur G. Logan (of Logan & Duffy), of Wilmington, Del., for defendant.
LEAHY, District Judge.
This is an action to enjoin Kresge Department Stores, Inc., from purchasing any of its outstanding preferred stock from S. S. Kresge, owner of a majority of the preferred stock. Plaintiff seeks a preliminary injunction.
Kresge is alleged to own a majority of the voting stock also and has named the present board of directors who, it is charged, is not independent and acts as directed by Kresge. It appears that on February 5, 1944, defendant invited its preferred stockholders to make tenders of said stock up to a maximum of $525,000, which is to be available for the retirement of said stock. The tenders are to close tomorrow, March 1, 1944, at 2 P. M. On information and belief merely plaintiff alleges that the purpose of the invitation is in order that Kresge stock may be purchased by the corporation at an excessive price.
When a Delaware corporation purchases its capital stock, this is a matter entirely within the discretion of its board of directors and a court should not interfere with such a transaction, unless there is misconduct or fraud on the part of the board of directors. Rule 9(b) of the Rules of Civil Procedure, 28 USCA following section 723c, specifically provides that in all averments of fraud the circumstances constituting such shall be stated with particularity. There is no averment in fact that Kresge even intends to offer his stock to the corporation. The present complaint lacks the required preciseness of allegation. As a court of equity does not interfere with the acts of corporate officers in purchasing the corporation's stock except on a showing of misconduct or abuse of discretion, I am compelled to conclude that the present complaint fails to meet this test. Accordingly, the motion for a preliminary injunction is denied.