Crosby Vs. Beam: Case Study

Crosby v. Beam: There is "a heightened fiduciary duty between majority and minority shareholders in a close corporation. Where a controlling majority shareholder in a close corporation breaches their heightened fiduciary duty to minority shareholders by utilizing their majority control of the corporation to their own advantage, without providing minority shareholders with an equal opportunity to benefit, such breach, absent a legitimate business purpose, is actionable. Where such a breach occurs, the minority shareholder is individually harmed. When such harm can be construed to be individual in nature, then a suit by a minority shareholder against the offending majority or controlling shareholders may proceed as a direct action (not derivative).

Id. at 60-61. The court states that, “Just like the plaintiff in Nagy, Susan has not alleged a financial freeze-out claim that might otherwise warrant a finding that the controlling stockholders owed her a fiduciary duty.” Id. at 61. The Blaustein court cites to Riblet Prods. Corp. v. Nagy, 683 A.2d 37, and the text of the Nagy states that, “To be sure, the Majority Stockholders may well owe fiduciary duties to Nagy as a minority stockholder . . . Nagy does not allege that his termination amounted to a wrongful freeze out of his stock interest in Riblet, nor does he contend that he was harmed as a stockholder by being terminated.” Nagy at 40. Therefore, it seems that as a general matter majority stockholders do not have a Crosby duty in Delaware, but may have a fiduciary duty to minority shareholders when it comes to freeze out

An amendment to the certificate of incorporation to delete such a provision shall be adopted by a vote of the holders of a majority of all outstanding stock of the corporation, whether or not otherwise entitled to vote. If the certificate of incorporation contains a provision authorized by this section, the existence of such provision shall be noted conspicuously on the face or back of every stock certificate issued by such corporation.

6) Do courts give more/less scrutiny to Corporations than LLCs or partnerships? This question is answered within the separate deadlock and schism sections. But as a general answer, no.

7) Elaborate on the Crosby statement that no demand is needed in special duty situations because it makes little sense to allow the wrongdoers of the breach of fiduciary duty to be in control of the remedy through a derivative suit: such a situation does not actually remedy anything. Crosby v. Beam is a seminal Supreme Court of Ohio cases that stated majority shareholders in a close corporation owe a heightened fiduciary duty to the minority shareholders of the corporation. Crosby v. Beam, 47 Ohio St. 3d 105, at 108-109. In addition the Crosby court held