Summary
In Pinnacle, the shareholder bringing suit was estopped because the trial court found that the proxy statement discussed in detail the facts regarding the merger and stated that failure to respond would be counted as a vote in favor of the transaction.
Summary of this case from Shapiro v. GreenfieldOpinion
May 11, 1999
Appeal from the Supreme Court, New York County (Herman Cahn, J.).
In this shareholder derivative action, plaintiff is estopped from maintaining suit since it acquiesced in the challenged transactions ( Diamond v. Diamond, 307 N.Y. 263, 266; Winter v. Bernstein, 149 Misc.2d 1017, 1020, affd in relevant part 177 A.D.2d 452). The record reveals that a proxy statement discussed in detail the relevant facts regarding the merger and informed shareholders that a failure to respond would be counted as a vote in favor of the transaction. Plaintiff failed to prove that it voted in opposition to the merger and merely contends that estoppel is inapplicable where there is no allegation that it voted in favor of the transaction. However, by its silence, plaintiff has conceded that it did not vote against the merger, and accordingly, it has no standing to maintain the within action.
Plaintiff also contends that a merger of defendant corporation into another corporation controlled by the defendant corporation was in violation of Business Corporation Law § 612 Bus. Corp. (b) because a partnership controlled by defendant was permitted to vote on the merger. This contention was properly rejected by the IAS Court since Business Corporation Law § 612 Bus. Corp. is inapplicable to partnerships. Plaintiff has failed to state a claim for fraud since all the relevant facts regarding the merger were disclosed in the proxy statement sent to shareholders. Further, since plaintiff has conceded on appeal that stock warrants issued to defendants Cumming and Steinberg were lawful and in accordance with Business Corporation Law § 505 Bus. Corp., plaintiff's claims, based on the stock transactions, for conversion and waste of corporate assets must fail.
Concur — Ellerin, P. J., Sullivan, Wallach, Lerner and Buckley, JJ.