Udoff v. Zipf

Decision Date29 March 1978
Citation404 N.Y.S.2d 332,44 N.Y.2d 117,375 N.E.2d 392
Parties, 375 N.E.2d 392 Rose UDOFF, on behalf of herself as a Shareholder of Babcock and Wilcox Company, and on behalf of all others similarly situated, Appellant, v. George C. ZIPF et al., Respondents, et al., Defendants.
CourtNew York Court of Appeals Court of Appeals
Stanley L. Kaufman and Irving Malchman, New York City, for appellant
OPINION OF THE COURT

JONES, Judge.

We conclude that plaintiff's contention that the board of directors' reduction of the exercise price of outstanding stock options was improper cannot be resolved on defendants' present motions for summary judgment.

On the recommendation of the Board of Directors of The Babcock & Wilcox Company, a stock option plan was approved at the annual meeting of shareholders held on April 26, 1972. The objective of the plan was to authorize the board to grant eligible employees options to purchase shares of company stock. For present purposes the significant provision of the plan was the following: "(a) Option Price. The option price per share with respect to each option shall be determined by the Board of Directors but shall not be less than 100% of the fair market value of the Common Stock on the date the option is granted, as determined by the Board of Directors. Nothing herein contained shall, however, be deemed to prevent the Board from authorizing amendments of outstanding options including without limitation the reduction of the option prices specified therein * * * so long as the provisions of any amended option would have been permissible under the Plan if such option had been originally granted as of the date of such amendment with such amended terms." In February, 1973 the corporation acquired 500,000 shares of its own common stock at a price of $24.267 for the purpose of meeting option calls. Pursuant to the plan, in December, 1972, January, 1973 and April, 1974 the board of directors granted options for 238,900 shares of the corporate stock at exercise prices of $23.75 $26.625, the then market prices of the stock.

Paralleling the decline in stock market prices generally, the corporate stock dropped sharply to a low of 11 7/8 on October 3, 1974. At the October 31, 1974 meeting of the board, the directors reduced the exercise price of the outstanding options to the then market price of $13.625.

Appellant alleges two causes of action: first, that in reducing the exercise price of the outstanding options the directors failed to exercise due care and diligence in conducting the corporate affairs and wasted corporate assets, thereby breaching their fiduciary responsibilities to the corporation and its shareholders; second, that, because such reduction indisputably resulted in a material increase in the cost of the plan to the corporation, under applicable New Jersey law shareholder approval was required for the reduction, and concededly no such approval was obtained. We address these two causes of action in reverse order.

Plaintiff predicates her second cause of action on the provisions of a statute of the State of New Jersey, the State in which the corporation was organized: "Unless otherwise provided in the plan, the board may amend * * * any plan * * * provided that (a) any amendment made by the board to a plan which was approved by the shareholders * * * shall be submitted to the shareholders for approval, unless the...

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8 cases
  • Deutsche Bank Nat'l Trust Co. v. Bills, 1027–09.
    • United States
    • United States State Supreme Court (New York)
    • October 15, 2012
    ...before the court, it cannot be determined that there are no issues of material fact, the motion must be denied ( see, Udoff v. Zipf, 44 N.Y.2d 117, 122, 404 N.Y.S.2d 332, 375 N.E.2d 392)” (Long Island College Hosp. v. Axelrod, 118 A.D.2d 177, 182, 504 N.Y.S.2d 275, 277 [1986] ). Here, Morri......
  • Schmidt v. Magnetic Head Corp.
    • United States
    • New York Supreme Court Appellate Division
    • April 30, 1984
    ...98, 108, 408 N.Y.S.2d 83, mod. on other grounds 47 N.Y.2d 619, 419 N.Y.S.2d 920, 393 N.E.2d 994; see, also, Udoff v. Zipf, 44 N.Y.2d 117, 122, 404 N.Y.S.2d 332, 375 N.E.2d 392; Byers v. Baxter, 69 A.D.2d 343, 349, 419 N.Y.S.2d 497, supra ). Here, there has been no investigation by any direc......
  • Rastelli v. Goodyear Tire & Rubber Co.
    • United States
    • New York Supreme Court Appellate Division
    • February 14, 1991
    ...483 N.Y.S.2d 211, 472 N.E.2d 1039; Smith v. Johnson Prods. Co., 95 A.D.2d 675, 676-677, 463 N.Y.S.2d 464; cf., Udoff v. Zipf, 44 N.Y.2d 117, 122, 404 N.Y.S.2d 332, 375 N.E.2d 392). Plaintiff's failure to counter the proof submitted by Goodyear and Budd that they did not manufacture or marke......
  • A child under the Age of Eighteen Years v. Wright (In re Commitment of Guardianship & Custody Pursuant to § 384–B of Soc. Servs. Law K.C.)
    • United States
    • New York Family Court
    • June 15, 2012
    ...before the court, it cannot be determined that there are no issues of material fact, the motion must be denied ( see, Udoff v. Zipf, 44 N.Y.2d 117, 122, 404 N.Y.S.2d 332, 375 N.E.2d 392)” (Long Island College Hosp. v. Axelrod, 118 A.D.2d 177, 182, 504 N.Y.S.2d 275, 277 [1986] ). An order te......
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