Case Brief: Cox Communications, Inc. Shareholders Litigation

Case Brief: Cox Communications, Inc. Shareholders Litigation, In re

Delaware Court of Chancery

879 A.2d 604 (2005), available at https://www.quimbee.com/cases/cox-communications-inc-shareholders-litigation-in-re.


CONTEXT:

The Cox family, holders of 74 percent of the stock of Cox Communications, Inc. (Cox) (defendant), decided to take the company private in 2004. On August 2, 2004, Cox announced a proposal to purchase the remaining shares at $32 per share. The board set up a special committee to consider the proposal and negotiate on behalf of minority shareholders. At the same time, numerous lawsuits were filed on behalf of minority shareholders (plaintiffs), alleging that the price was unfair and that the Cox family was trying to extract all the profit from the enterprise for itself. The special committee retained counsel, and after a lengthy period of negotiation ultimately accepted a bid from Cox for $34.75 per share, on the condition that a majority of the minority shareholders approve the deal. While the special committee’s work was ongoing, the Cox family was also negotiating with the plaintiff-shareholders’ attorneys. At various times the plaintiffs’ attorneys demanded a price of $37 per share and a condition that a majority of the minority shareholders approve the transaction. After the special committee obtained its deal, the attorney for the Cox family told the plaintiffs’ attorneys that $34.75 per share with a majority of the minority approval condition was the final offer. The attorneys accepted the deal and agreed to settle the litigation. The Cox family signed the merger agreement on in October 2004. In the final stipulation of settlement of the litigation, the Cox family agreed not to oppose attorney’s fees for the plaintiffs’ attorneys of $5 million. No one filed objections to the merger settlement, but several parties filed objections to the attorney’s fees. They argued that since the special committee handled the negotiation, the lawsuits served virtually no purpose other than to generate attorney’s fees.


VOCABULARY:

  1. defendant: a noun, the person in a trial who is accused of committing a crime, or who is being sued by another person

  2. proposal: a noun, a formal suggestion or plan; the act of making a suggestion; an act of formally asking sb to marry you

  3. extract: a verb, to obtain information, money, etc., often by taking it from sb who is unwilling to give it 

  4. retain: a verb, if a member of the public retains sb such as a lawyer, he or she pays money regularly or in advance so the lawyer, etc. will do work for him or her

  5. stipulation: a noun, something stipulated especially a condition, requirement, or item specified in a legal instrument


COMMENTS

This article is a case brief with respect to controlling shareholder’s fiduciary duty.

I’m working on a paper regarding this topic. As a law school student, it’s of great importance to get familiar with precedents, which were created by courts and should be followed by the later cases.

This brief shows the basic facts of  Cox Communications briefly.  Later cases, whose facts resemble the fact of this case, should be judged as the way as this case had been judged.


EXTENTION

A lion, a wolf, and a rabbit founded a food manufacturing corporation two months ago. However, they didn’t reach an agreement with regard to what kinds of food they should produce. The lion put forward a proposal that they should produce meat and the wolf agreed, but the rabbit rejected it. However, when the rabbit was taking care of its sick mother, the lion and the wolf approved the proposal. Therefore, their corporation began to produce meat.

After realizing this, the rabbit sued. The wolf and the lion, as defendants retained a fox as their attorney. 

Justice Elephant presides the trial. The plaintiff claims that the wolf and the lion are extracting profits of the corporation at the expense of its interest. The defendants and the plaintiff acknowledge their wrongdoing and agree to reach a compensation stipulation to settle this lawsuit. 

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