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33 Mercer L. Rev. 615 (1981-1982)
Coleman v. Taub: Employment Contract May Prohibit Freezeout Sanctions from Applying to Closely Held Corporations

handle is hein.journals/mercer33 and id is 627 raw text is: NOTES Coleman v. Taub: Employment Contract May Prohibit Freezeout Sanctions from Applying to Closely Held Corporations In a recent decision, Coleman v. Taub,' the Court of Appeals for the Third Circuit' reversed the district court's granting of summary judg- ment- and held that the majority shareholder in a two-man close corpora- tion had not necessarily violated Delaware law by eliminating the minor- ity shareholder, a former employee of the corporation, in a freezeout merger when both parties had previously agreed, in the minority share- holder's employment contract, that upon terminination of his employ- ment for any reason whatsoever, the corporation would have the right to purchase all of his stock. In answering the sole question of whether this freezeout merger was impermissible under Delaware Law,5 the Third Cir- cuit focused initially on the scope of the fiduciary duty owed by the ma- jority shareholder to the minority shareholder in a freezeout merger. The court then analyzed the effect that the special contractual relationship between the two parties would have on that fiduciary duty. Plaintiff, Leon Coleman, was an employee of defendant, Taub Builders, Inc. (Old Taub). During his employment, Coleman acquired ten shares, or one percent, of Old Taub. The balance of the stock, ninety-nine percent, was owned by defendant, Aaron Taub, the president of Old Taub. Cole- man's employment contract with Old Taub provided that should Cole- man's employment be terminated for any reason whatsoever, Old Taub would have the right to repurchase all of Coleman's stock at a price to be 1. 638 F.2d 628 (3d Cir. 1981). 2. Mr. Justice Rosenn delivered the opinion for the court. 3. Coleman v. Taub, 487 F. Supp. 118 (D. Del. 1980). 4. 638 F.2d at 629. 5. Id.