Essex Universal Corporation v. Yates Case Brief Summary | Law Case Explained

Описание: Get more case briefs explained with Quimbee. Quimbee has over 16,300 case briefs (and counting) keyed to 223 casebooks ► https://www.quimbee.com/case-briefs-o...

Essex Universal Corporation v. Yates | 305 F.2d 572 (1962)

Generally, an agreement by a corporate director to resign from his or her position for money is against public policy and illegal. In the 1962 case Essex Universal versus Yates, the Second Circuit considered whether an agreement by a director to resign in conjunction with the sale of stock was valid when the purchaser would become the majority shareholder of the corporation.

Herbert Yates was the president and chairman of the board of directors of Republic Pictures, a motion picture company that produced many classic Western movies starring John Wayne. At the same time, Essex Universal became interested in purchasing shares of stock in Republic.

In 1957, Yates and Essex entered into a contract where Yates agreed to sell between 500,000 and 600,000 shares of Republic stock to Essex. The amount of stock constituted roughly 28 percent of Republic’s outstanding shares and would transfer control of Republic to Essex.

In addition, the contract required the majority of Republic’s board of directors to resign from their positions so that Essex could elect its own board. This was to be accomplished by having eight of Republic’s fourteen directors resign one-by-one and having each director replaced by an Essex nominee. One-third of Republic’s directors were elected at each annual board meeting, so absent the agreement, Essex wouldn’t obtain control until about eighteen months after the sale.

At closing, Yates rejected Essex’s checks because they were made payable to Essex’s banker, not Yates. Subsequently, Essex sued Yates in New York Supreme Court for breach of contract. The case was removed to federal district court based on diversity of citizenship. Yates moved for summary judgment, claiming that the contract was against public policy and illegal because it required a majority of Republic’s directors to resign. The district court agreed and granted summary judgment for Yates. Essex appealed to the Second Circuit.

Want more details on this case? Get the rule of law, issues, holding and reasonings, and more case facts here: https://www.quimbee.com/cases/essex-u...

The Quimbee App features over 16,300 case briefs keyed to 223 casebooks. Try it free for 7 days! ► https://www.quimbee.com/case-briefs-o...

Have Questions about this Case? Submit your questions and get answers from a real attorney here: https://www.quimbee.com/cases/essex-u...

Did we just become best friends? Stay connected to Quimbee here: Subscribe to our YouTube Channel ► https://www.youtube.com/subscription_...
Quimbee Case Brief App ► https://www.quimbee.com/case-briefs-o...
Facebook ►   / quimbeedotcom  
Twitter ►   / quimbeedotcom  
#casebriefs #lawcases #casesummaries