FIELD V. TRUMP
850 F.2d 938 (2nd Cir, 1988), cert. denied, 489 U.S. 1012 (1989)
NATURE OF THE CASE: This was a dispute over a leveraged buyout of stock.
FACTS: Pay'n Save acquired Shuck's Auto Supply in 1984. The former owners of Shuck's (Ds)
then held 18.4% of Pay'n Save's outstanding common stock. Ds were not happy shareholders but
eventually they made peace and got seats on the boards of directors after a standstill
agreement was obtained. Things did not really change and eventually a buyer for the company
was sought. Hendricks (D1) was the CFO and he talked with Trump (D2) about purchasing Pay'n
Save. D2 wanted management to participate in the equity of the resulting entity. D2 then
made a cash tender offer of $22 per share for 2/3rds of the outstanding shares. D2 then
raised that offer to $22.50 but warned the board it would be withdrawn if not approved. The
majority of the board approved but Ds voted against. Several conversations then took place
between Ds and D2 and after a private meeting, D2 announced it was withdrawing its offer to
negotiate with Ds. Things were settled quickly with $3.3 million being paid for an option to
purchase Ds' shares at $23.50 and D2 also paid Ds $900,000 for fees and expenses. This
settlement agreement was subject to Pay'n Save board approval and the increased share merger
price of $23.50. This made Ds sale price in reality $25 per share if the fees were included.
Field (P) sued for the $1.50 extra price paid to Ds (14(d)(7)). The district court dismissed
the claims under Rule 14d-2(b).
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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