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Introduction to the Law of Corporations: Cases and Materials

Sinclair Oil Corp. v. Levien

Stockholders do not normally have fiduciary duties with respect to other stockholders. This principle makes sense for a number of reasons. Stockholders with small stakes have no ability to influence the board of directors and therefore should be free from restrictions in their dealings with other stockholders. However, this principle is subject to an exception. When stockholders can, through their ownership position influence and control the direction of the corporation, then those stockholders have fiduciary obligations with respect to minority stockholders. As a result, in such circumstances, controlling stockholders will bear the burden of proving entire fairness when they engage in self-dealing with the corporation.