parent nodes: derivative suit
Eisenberg v Flying Tiger Line
Facts
FT creates holding company FTC, which then creates a subsidiary FTL
FTL merges with FTC, ratified by 2/3rds of stockholders as required
FT stockholders get FTC stock as consideration
(FTC can now invest in other activities without concern for restrictions on regulated air carriers)
(Creditors of FTC has no interest in the assets of FTL unless piercing the corporate veil occurs)
Eisenberg brings suit against FTC, arguing that the reorganization has diluted his voting rights
Eisenberg claims that claim is personal, not a derivative suit, and refuses to post bond
Analysis
The court refuses to apply [Cohen v Beneficial Industrial Loan Corp]; the court holds that the action is direct on the grounds that the corporation won't benefit if Eisenberg wins.
(Note that Eisenberg couldn't muster the 1/3rd vote to block the merger, so he didn't have that much voting power at any rate)
derivative suit, corporation law