Nixon v. Blackwell
626 A.2d 1366 (Del.Supr. 1993)

  • Nixon owned some nonvoting stock in a corporation called E.C. Barton. The directors established an employee stock ownership plan (ESOP) that allowed employees to buy and sell their stock.
    • The directors did not provide a similar mechanism to allow non-voting shareholders like Nixon to buy or sell stock.
  • Nixon sued, arguing that the directors had breached their fiduciary duty to minority shareholders.
  • The Trial Court found that the decision to establish the ESOP was legal. Nixon appealed.
    • The Trial Court agreed that the corporation had not provided substantially equal treatment to the employee and non-employee shareholders.
    • However, the Court found that establishing an ESOP advanced legitimate business objectives.
  • The Delaware Supreme Court affirmed.
    • The Delaware Supreme Court noted that under Delaware law, if a company was designated a close corporation, then certain statutory protection would apply to minority shareholders. (8 Del.C §342).
    • However, the Court found that E.C. Barton was not designated as a close corporation in their articles of incorporation, and so the statutory protections did not apply to them.
    • The Court found that in a corporation, the shareholders did not owe a fiduciary duty to other shareholders.