Question

William Sullivan was ousted from the presidency of the New England Patriots Football Club, Inc. Later, he borrowed $5,348,000 to buy 100 percent control of the voting shares of the corporation. A condition of the loan was that he reorganize the Patriots so that the income from the corporation could be devoted to repayment of the personal loan and the team's assets could be used as collateral. Sullivan, therefore, arranged for a cash freeze-out merger of the holders of the 120,000 shares of nonvoting stock. David Coggins, who owned 10 shares of nonvoting stock and took special pride in the fact that he was an owner of the team, refused the $15-a-share buyout and challenged the merger in court. He contended that the merger was not for a legitimate corporate purpose but to enable Sullivan to satisfy his personal loan. Sullivan contended that legitimate business purposes were given in the merger proxy statement, such as the National Football League’s policy of discouraging public ownership of teams. Coggins responded that before the merger, Sullivan had 100 percent control of the voting stock and thus control of the franchise, and that no legal basis existed to eliminate public ownership. Decide. [Coggins v. New England Patriots Football Club, 492 N.E.2d 1112 (Mass.)]



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  • CreatedJune 06, 2014
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