Walton v. Morgan Stanley & Company
Facts
Plaintiffs, former Olinkraft shareholders, alleged that during 1977 acquisition negotiations Morgan Stanley received confidential information from Olinkraft for limited use in connection with Kennecott's possible acquisition of Olinkraft. They alleged Morgan Stanley improperly retained that information, that its arbitrage department later bought 149,200 shares of Olinkraft stock after Texas Eastern announced a proposed merger, and that Morgan Stanley's mergers and acquisitions department disclosed Olinkraft's confidential information to Johns-Manville to induce a higher offer. Johns-Manville's subsidiary later acquired 49% of Olinkraft stock at $65 per share, and the remaining shares were exchanged for Johns-Manville preferred stock in a merger. Plaintiffs sued derivatively on behalf of Olinkraft for Morgan Stanley's profits, alleging Morgan Stanley violated a duty to Olinkraft.
Issue
Whether shareholders suing derivatively on behalf of a corporation have standing when their complaint alleges that the defendant violated a duty to the corporation and profited from trading, but does not allege that the corporation itself was injured by the defendant's conduct.
Rule
To establish standing, a plaintiff must allege an injury for which he seeks redress. In a derivative action, standing exists only if the complaint alleges that the corporation on whose behalf the suit is brought was injured by the defendant's assertedly wrongful acts.
See the holding & full analysis
Create a free KwikCourt account to unlock the rest of this brief — and practice the case.
- The court's holding and reasoning
- Doctrine tests, pitfalls & exam hypotheticals
- 10 practice questions + 4 AI-graded essays on this case
Test yourself
Should the court dismiss for lack of standing?