Ezzes v. Ackerman

Citation43 Del.Ch. 420,234 A.2d 444
PartiesErwin H. EZZES, Appellant, v. Paul C. ACKERMAN et al., Appellees.
Decision Date19 September 1967
CourtUnited States State Supreme Court of Delaware

Appeals from the Court of Chancery in and for New Castle county.

William E. Taylor, Jr., Wilmington, and Norman Anneberg, New York City, for appellant.

Edmund N. Carpenter, II, of Richards, Layton & Finger, Wilmington, for Chrysler Corporation.

Richard F. Corroon, of Potter, Anderson & Corroon, Wilmington, for appearing individual defendants, appellees.

WOLCOTT, Chief Justice, CAREY, Justice, and WRIGHT, Judge, sitting.

WOLCOTT, Chief Justice.

These consolidated appeals are from two orders of the Court of Chancery. One denied plaintiff's motion to stay further proceedings in this cause to permit the trial to go forward in a companion action brought by this plaintiff in the Federal District Court of Delaware. The second granted defendants' motion for judgment on the ground that the action was barred by reason of Res judicata. The two appeals were filed separately but were consolidated for the purpose of decision.

This is a derivative action brought against Chrysler Corporation and certain of its officers and directors. In essence, it is charged that commencing in December, 1963, the individual defendants illegally sold shares of Chrysler stock received under stock options granted to them and, as a result of such sales, made large profits which the plaintiff derivatively seeks to recover for the benefit of Chrysler.

The plaintiff charges that on April 17, 1962 Chrysler stockholders approved extending a then-existing Stock Option Plan, previously approved by stockholders, until April 30, 1967. The then-existing Stock Option Plan required persons exercising options under it to agree to hold the shares for investment and not for distribution.

On January 10, 1963, Chrysler directors voted to delete the provision of the Stock Option Plan requiring the recipients to hold the Chrysler shares for investment. The deletion of this provision in the Plan was not submitted to the stockholders for their approval. However, the Plan, itself, permitted amendment of it by director action only.

The theory of the plaintiff is that a wrong was committed against the Corporation not when the individual defendants exercised the options granted to them, but when they sold the shares received by the exercise of the option in violation of the limitation eliminated by the director action of January 10, 1963. This is on the theory that only the stockholders may legally amend the Plan.

The defendants interposed the defense of Res judicata based upon the so-called Dann-Gallo-Chrysler litigation which ultimately was settled and the settlement approved by the Court of Chancery and, on appeal, by this Court. Dann v. Chrysler, 41 Del.Ch. 438, 198 A.2d 185, aff'd Hoffman v. Dann, Del., 205 A.2d 343, cert. denied 380 U.S. 973, 85 S.Ct. 1332, 14 L.Ed.2d 269. This plaintiff, Ezzes, an objector to the settlement, appealed and actively participated in opposing the settlement.

In the course of opposing the settlement he advanced many arguments and reasons why the settlement should be disapproved, all of which were rejected.

The defendants at bar maintain that the issues presented by the complaint in the instant action were actually decided adversely to the plaintiff's claim, or could have been decided adversely to the plaintiff's claim, in the course of the settlement proceedings.

There can be no doubt but that in a stockholder's derivative suit a judgment entered either after trial on the merits or upon an approved settlement is Res judicata and bars subsequent suit on the same claim in behalf of the Corporation. Williamson v. Columbia Gas & Oil Co., D.C., 91 F.Supp. 874, aff'd 186 F.2d 464, cert. denied 341 U.S. 921, 71 S.Ct. 743, 95 L.Ed. 1355; Auerbach v. Cities Service Co., 36 Del.Ch. 554, 134 A.2d 846.

While the plaintiff argues to the contrary, we are of the opinion that the defense of Res judicata is no longer confined to a second attempt to re-assert the same 'cause of action' asserted in the first suit, but is available if the pleadings framing the issues in the first action would have permitted the raising of the issue sought to be raised in the second action, and if the facts were known, or could have been known to the plaintiff in the second action at the time of the first action. Auerbach v. Cities Service Co., supra.

The question before us, therefore, is...

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30 cases
  • Meding v. Hurd
    • United States
    • U.S. District Court — District of Delaware
    • 19 Abril 1985
    ...in the first action would have permitted the raising of the issue sought to be raised in the second action." Ezzes v. Ackerman, 43 Del.Ch. 420, 234 A.2d 444, 456 (1967). Relying on a draft of the subsequently adopted Restatement (Second) of Judgments § 24, Vice-Chancellor Hartnett offered a......
  • Matsushita Elec. Industrial Co. v. Epstein
    • United States
    • U.S. Supreme Court
    • 27 Febrero 1996
    ...claim preclusive effect to a settlement releasing claims that could not have been presented in the trial court. See Ezzes v. Ackerman, 234 A.2d 444, 445-446 (Del.1967) ("[A] judgment entered either after trial on the merits or upon an approved settlement is res judicata and bars subsequent ......
  • Lloyd v. Jefferson, Civ.A. 97-307-GMS.
    • United States
    • U.S. District Court — District of Delaware
    • 12 Mayo 1999
    ...transaction that formed the basis of the prior adjudication." Maldonado v. Flynn, 417 A.2d 378, 381 (Del.Ch.1980) (citing Ezzes v. Ackerman, 234 A.2d 444 (Del.1967); Steigman v. Beery, 203 A.2d 463 (Del.Ch.1964); Epstein v. Chatham Park, Inc., 153 A.2d 180 (Del.Super.1959)). "The determinat......
  • Cottrell ex rel. Wal-Mart Stores, Inc. v. Duke
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • 18 Diciembre 2013
    ...in a shareholder-derivative lawsuit will preclude subsequent litigation by the corporation and its shareholders. See Ezzes v. Ackerman, 234 A.2d 444, 445 (Del.1967); La. Mun. Police Emps. Ret. Sys. v. Pyott, 46 A.3d 313, 329–31 & n. 11 (Del.Ch.2012), rev'd on other grounds,74 A.3d 612 (Del.......
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