Shareholder Agreement Dispute
When a client’s shareholder rights in a food distribution company were challenged, he turned to Dinsmore. Our client had inherited stock in World Finer Foods (WFF), an international food distribution company, from his father, who was an early member of WFF. When our client inherited the stock, WFF alleged that he was subject to the standard shareholder agreement, a portion of which provided that WFF could buy back his shares. We argued that our client’s father had never signed a shareholder agreement and that the stock certificate did not bind our client to a shareholder agreement, meaning that he was not subject to any terms of the agreement. Following a bench trial in district court, the judge ruled that since our client’s father did not sign an agreement or otherwise agree to be bound by an agreement, he could not be held subject to its restrictions or terms. The district court further held that the language of a restriction on the face of the stock certificate was insufficient to bind our client’s father to the terms of the shareholder agreement advanced by WFF. WFF appealed to the Sixth Circuit Court of Appeals, where the ruling was affirmed following briefing and argument by Ms. Rodman. The ruling meant that our client could keep his stock and remain a shareholder of WFF.