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Introduction to the Law of Corporations: Cases and Materials

Weinberger v. UOP, Inc.

In Weinberger, the court deals with a common loyalty problem. What are the fiduciary duties of a controlling stockholder in dealing with minority stockholders. In such situations, the controlling stockholder, because of her ability to control and direct management decisions of the corporation, has fiduciary obligations to deal with minority stockholders fairly. Transactions between the controller and the corporation will not receive the protection of the business judgment presumption.

Rather, the controlling stockholder bears the burden of proving the fairness of its dealings with the corporation.  The entire fairness standard requires the court to examine two aspects of the board's dealings with the corporation: whether the board dealt fairly with the corporation and whether the challenged transaction was at a fair price to the corporation.

As you read Weinberger, consider the facts and ask yourself if you were advising the controller how, if they were able to do things all over again, they might change things to make sure the actions of the controller and the board comported with the entire fairness standard as described by the court.