Kamin v. American Express Co.

86 Misc.2d 809, 383 N.Y.S.2d 807, aff'd on opinion below 54 A.D.2d 654, N.Y.S.2d 993 (1st. Dept. 1976)

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Nature of the Case

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Facts

The complaint was brought derivatively by two minority stockholders of the American Express Co., asking for a declaration that a certain dividend is a waste of corporate assets, directing that D not to proceed with the distribution, or in the alternative, for monetary damages. The motion to dismiss the complaint requires the Court to presuppose the truth of the allegations. D concedes that no cause was shown. In 1972, American Express acquired for investment 1,954,418 shares of a common stock of a certain corporation (DJL) at a cost of $29.9 million. Allegedly the current value of those shares is $4.0 million. In 1975, the Board of Directors of D declared a special dividend to all stockholders of record pursuant to which the shares of DJL would be distributed in kind. Ps contended that if the D sold the shares, they would sustain a loss of $25 million, which could be used to offset taxable capital gains on other investments. The tax saving would amount to $8 million, which would not be available in the case of the distribution of shares. It is alleged that on October 6, 1975 and October 16, 1975, Ps demanded that the Ds rescind the previously declared dividends on DJL shares and take steps to preserve the capital loss which would result from selling the shares. D refused to comply with this demand. Ps never did anything that would actually bar the distribution and dividends were paid on October 31, 1975. D moved to dismiss P’s action for a failure to state a claim.