Heckman v. Ahmanson

California Court of Appeal · 1985 · Corporations

168 Cal. App. 3d 119 (1985)

Updated August 22, 2026

Corporationsfiduciary dutyderivative suitsconstructive trustpreliminary injunctiongreenmailaiding and abettingdirector fiduciary duty

Facts

The Steinberg Group acquired Disney stock, increased its holdings to about 12 percent, and announced an intention to make a tender offer for a large portion of Disney shares. Shortly after that announcement, Disney agreed to repurchase all of the Steinberg Group's shares for about $325.4 million, including reimbursement of tender-offer preparation costs, yielding the group about a $60 million profit. Disney borrowed the money for the repurchase, and together with debt from the Arvida acquisition, Disney's indebtedness rose sharply and its stock price fell below $50 after the deal. Before the repurchase, part of the Steinberg Group had filed derivative litigation challenging Disney's Arvida acquisition as wasteful and harmful to Disney, but after the repurchase the group dismissed its individual claims and agreed not to oppose dismissal of the derivative claims.

Issue

Whether the trial court abused its discretion in granting a preliminary injunction restraining the Steinberg Group's use of the profits and requiring accountings, based on a showing that plaintiffs were reasonably likely to succeed on claims that the group breached fiduciary duties and that a constructive trust on the profits might be warranted. Also, whether injunctive relief was proper to prevent dissipation or disappearance of the res during the litigation.

Rule

A preliminary injunction may issue when the court finds (1) plaintiffs are likely to suffer greater injury from denial than defendants from grant, and (2) a reasonable probability that plaintiffs will prevail on the merits. A greenmail recipient may be jointly liable as an aider and abettor if it knowingly participates in directors' breach of fiduciary duty undertaken to preserve control, and a derivative plaintiff assumes a fiduciary role toward other shareholders and may not use that representative position for personal aggrandizement. In California, a constructive trust over wrongfully acquired assets does not depend on the absence of an adequate legal remedy, especially where a preexisting fiduciary relationship exists, and injunctive relief is proper to preserve the res and tracing of trust property so that final judgment is not rendered ineffectual.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeview Studios, a California corporation based in Burbank, announced a debt-financed repurchase of a dissident investor group's shares at a steep premium shortly after the group threatened a takeover bid. Other shareholders sued in Los Angeles seeking to freeze the profit pending trial, alleging the group knowingly benefited from directors' self-protective conduct and that the proceeds may be placed into shifting investment vehicles.

What is the best standard for the court to apply in deciding whether to issue the preliminary injunction?

Explanation. A preliminary injunction turns on two interrelated questions: whether plaintiffs are likely to suffer greater injury from denial than defendants from grant, and whether there is a reasonable probability plaintiffs will prevail on the merits. The court does not finally adjudicate liability at this stage.