## Facts

- Four affiliated, closely held corporations were owned and directed by three individuals: Arnold Zidell (37.5%), Emery Zidell (37.5%), and Jack Rosenfeld (25%).
- Emery served as chief executive; Rosenfeld’s 25% block was decisive for control.
- In 1971, Arnold asked Rosenfeld if he would sell his shares; Rosenfeld indicated willingness, and Arnold informed Emery but did not pursue a transaction.
- Without notifying Arnold, Emery negotiated with Rosenfeld, and in May 1972 Rosenfeld sold:
  - All of his stock in Tube Forgings of America, Inc. to Jay Zidell (Emery’s son), and
  - Slightly more than half of his 25% interest in each of the other three corporations to Jay.
- The purchases gave Emery and Jay a controlling interest across the corporations; Arnold learned of the transactions only after closing.
- The corporations had no established policy, practice, resolution, or agreement to redeem large blocks of shares or to require that significant share blocks be offered to the corporations before private sale.
- Arnold brought a derivative action seeking an order compelling Jay to transfer the purchased shares to the corporations at Jay’s cost, asserting the purchase opportunity belonged to the corporations and was improperly taken privately.

## Issues

1. Whether the opportunity to buy Rosenfeld’s shares constituted a corporate opportunity belonging to the corporations.
2. Whether the directors breached fiduciary duties to the corporations by permitting or arranging Jay’s private purchase rather than a corporate purchase.
3. Whether derivative relief compelling transfer of the shares to the corporations was warranted given the corporations’ lack of an established share-repurchase policy and the existing control structure.

## Decision

- The Oregon Supreme Court affirmed the decree dismissing the derivative complaint.
- The court held the directors did not breach fiduciary duties to the corporations by allowing Jay’s private purchase of Rosenfeld’s shares.
- The court concluded the chance to acquire Rosenfeld’s stock was not a corporate opportunity under the circumstances, particularly in the absence of any corporate policy or expectancy to repurchase shares.

## Legal Principles

- Directors generally may purchase or deal in the corporation’s stock on their own behalf, absent misuse of inside information or other disloyal conduct.
- A corporate-opportunity claim requires more than a transaction that affects corporate control; it typically requires a corporate plan, expectancy, policy, or obligation that the opportunity be offered to the corporation.
- Allegations that stock was acquired at a favorable price, without evidence of a corporate policy or expectancy to repurchase such shares, do not alone convert a private stock purchase into a corporate opportunity.
- Derivative relief compelling a transfer of privately acquired shares to the corporation is disfavored where the corporation had no established repurchase program and corporate authorization for such a purchase was not reasonably shown.

## Conclusion

Because the corporations had no policy or expectancy to redeem Rosenfeld’s shares and the directors’ private purchase of stock was not shown to appropriate an opportunity belonging to the corporations, the court upheld dismissal of the derivative action seeking to force a transfer of the shares to the corporations.


Zidell v. Zidell, Inc., 277 Or. 423, 560 P.2d 1091 (Or. 1977)