## Facts

- Lev Zetlin owned about 2% of the outstanding shares of Gable Industries, Inc.
- Hanson Holdings, Inc., Joseph J. Sylvestri, and members of the Sylvestri family collectively owned 44.4% of Gable’s shares, constituting effective control.
- The controlling shareholders sold their 44.4% block to Flintkote Co. for $15 per share while the market price was about $7.38 per share.
- Zetlin sued seeking to participate pro rata in the premium paid for control.
- The trial court entered judgment for the controlling shareholders; the Appellate Division affirmed.

## Issues

1. Whether minority shareholders are entitled to share equally in a premium paid for a controlling block of stock when control is sold at a premium over market price.
2. Whether New York law requires a control transfer to occur through an offer to all shareholders on the same premium terms absent wrongdoing.

## Decision

- The Court of Appeals of New York affirmed the Appellate Division’s order, with costs.
- The court held that a controlling shareholder may sell, and a buyer may purchase, a controlling block at a premium without offering the premium to minority shareholders.
- The court limited minority shareholder relief to situations involving looting of corporate assets, conversion of a corporate opportunity, fraud, or other bad-faith conduct.
- The court declined to adopt an “equal opportunity” or mandatory tender offer rule, stating that such a change should come from the Legislature.

## Legal Principles

- Absent looting, diversion of corporate opportunity, fraud, or other bad faith, the control premium belongs to the controlling shareholder and need not be shared with minority shareholders.
- The law protects minority shareholders from abuse of control, but does not grant them a right to participate in the price paid for control in an otherwise lawful sale.
- A judicially created rule requiring equal premium participation would materially change established practice and is a matter for legislative action rather than common-law revision.

## Conclusion

The court held that New York law permits the sale of corporate control at a premium without minority participation unless the transaction involves traditional forms of fiduciary misconduct such as looting, fraud, or other bad faith.


Zetlin v. Hanson Holdings, Inc., 48 N.Y.2d 684 (N.Y. 1979)