## Facts

- Kennecott Copper Corporation acquired Peabody Coal Company in 1968 for about $600 million and later invested about $530 million more.
- The Federal Trade Commission ordered Kennecott to divest Peabody; the order was upheld on appeal.
- Kennecott arranged to sell Peabody to a consortium led by Newmont Mining Corporation for about $1.2 billion.
- Kennecott proceeded without first seeking shareholder approval for the transaction.
- A shareholder sued, alleging the Peabody sale constituted a sale of “all or substantially all” of Kennecott’s assets under N.Y. Business Corporation Law (BCL) § 909 and that retaining/reinvesting proceeds (rather than distributing them) was improper and wasteful.
- Kennecott asserted it had more than $1 billion in assets excluding Peabody and that Peabody contributed roughly one-third of total net revenues during the ownership period.
- The sale had not yet closed and remained subject to regulatory approval; no final decision had been made on how to use the proceeds.

## Issues

1. Whether selling Peabody constituted a sale of “all or substantially all” of Kennecott’s assets under BCL § 909 requiring prior shareholder approval.
2. Whether Peabody’s relative profitability (including being allegedly the only profitable operation in a recent period) made the sale one of “all or substantially all” assets despite substantial remaining asset value.
3. Whether allegations of corporate waste or improper motive were supported sufficiently to survive summary judgment, given the transaction’s contingent and incomplete status.
4. Whether a court could compel Kennecott to distribute sale proceeds directly to shareholders rather than retain or reinvest them.

## Decision

- The court granted defendants’ motion for summary judgment and dismissed the complaint.
- The contemplated sale did not constitute a sale of “all or substantially all” assets within BCL § 909; shareholder approval was not required.
- The court rejected the claim that only income-producing property counts as “assets” under § 909 and declined to apply an “integral part” test not found in the current statute.
- Corporate waste and improper motive allegations were deemed speculative and legally insufficient where the sale had not closed and use of proceeds had not been decided.
- The court refused to order a mandatory distribution of proceeds, finding no basis to displace managerial discretion.

## Legal Principles

- Under BCL § 909, “assets” refers to corporate assets in a balance-sheet sense; the statutory inquiry is not limited to current profitability of the property being sold.
- A sale is not “all or substantially all” merely because the asset sold is the corporation’s most profitable segment, where substantial remaining assets persist.
- Courts will not reintroduce prior statutory tests (such as an “integral part” approach) when the legislature omitted that language from the current statute.
- Claims of waste or improper purpose must rest on concrete facts; contingent transactions and undecided future use of proceeds generally do not support such claims at summary judgment.
- Decisions to retain, reinvest, or distribute sale proceeds ordinarily fall within directors’ business judgment absent a showing of bad faith, self-dealing, or waste.

## Conclusion

The court dismissed a shareholder challenge to Kennecott’s planned divestiture of its coal subsidiary, holding that the transaction did not trigger BCL § 909’s shareholder-approval requirement and that speculative allegations about waste and future use of proceeds could not justify judicial intervention or compelled distributions.


Story v. Kennecott Copper Corp., 90 Misc. 2d 333, 394 N.Y.S.2d 353 (Sup. Ct. N.Y. Cnty. 1977)