squeeze-out

Case Study In October 2001 the only three directors of a North Carolina business announced their intention to acquire all the firm's outstanding stock they did not already own for $8.00 per share in cash. At the time of the proposed buyout, the three directors owned 78% of outstanding shares, which had been trading in the $4.00 to $5.00 range. Although the majority of minority shareholders voted in favor of a merger that would result from the buyout, a dissident shareholder filed a class action lawsuit challenging the proposal. The shareholder claimed a breach of fiduciary duty on the part of the directors as a result of unfair dealing, unlawful coercion, and unfair price. A trial court dismissed the lawsuit in 2002, a decision upheld by an appeals court two years later. The dissident shareholder had been squeezed out of his ownership in the firm.