## Facts

- Plastics Corporation of America, Inc. issued stock-purchase warrants dated December 16, 1960, giving holders a five-year option to buy 30,000 shares at $1 per share.
- The warrants granted no voting or shareholder rights until exercise.
- The warrants contained provisions addressing specified corporate changes (including reorganizations and asset distributions) and adjustment mechanisms intended to preserve the warrants’ economic purpose.
- During the warrants’ term, Plastics transferred part of its business/assets to a newly formed corporation, United Fabricators and Electronics, Inc.
- Plastics received all United stock and distributed United shares to Plastics shareholders on a one-for-two basis.
- Warrant holders were notified of a deadline to exercise early so they could become shareholders in time to receive United shares.
- The transaction did not reserve shares or otherwise protect warrant holders who exercised after the deadline but within the five-year warrant period, effectively preventing them from receiving the United distribution or its equivalent.
- Plaintiffs (warrant holders/assignees) sued Plastics for breach of the warrant contracts and sued United for willful and malicious interference with the contract relationship.

## Issues

1. Whether, accepting the complaint’s allegations as true and construing them in plaintiffs’ favor, the pleadings stated a claim that United willfully and maliciously interfered with plaintiffs’ contractual rights under the warrants.
2. Whether it was proper to resolve, on the pleadings alone, that the spin-off transaction could not fall within the warrants’ corporate-change provisions so as to defeat the interference claim against United.

## Decision

- The Minnesota Supreme Court reversed the judgment on the pleadings entered for United.
- The court held the complaint sufficiently alleged facts that, if proved, could establish United’s willful and malicious interference with plaintiffs’ contract rights.
- The case was remanded for further proceedings.

## Legal Principles

- On judgment on the pleadings, a court must accept the nonmovant’s well-pleaded factual allegations as true and construe all reasonable inferences in the nonmovant’s favor; dismissal is improper if any set of provable facts could entitle relief.
- Stock-warrant instruments containing corporate-change and adjustment provisions are interpreted in light of their principal purpose to preserve the option’s economic value against foreseeable restructurings.
- A nonparty corporation formed in, or participating in, a transaction may be liable for intentional interference with contract where it knowingly participates in conduct that defeats existing contractual rights; whether the conduct constitutes such interference may require factual development.

## Conclusion

The court held that plaintiffs’ allegations about the spin-off structure and lack of protection for later warrant exercise could support a finding that United intentionally interfered with the warrant contracts, so dismissal on the pleadings was improper.


Stephenson v. Plastics Corp. of Am., 150 N.W.2d 668 (Minn. 1967)