Sullivan v. Hammer

1990 WL 114223 (Delaware 1990)

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Nature of the Case

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Facts

Occidental Petroleum (D) mailed a Proxy Statement for the 1989 annual meeting. It reported that a Special Committee had approved a proposal to provide financial support for The Armand Hammer Museum of Art and Cultural Center ('the Museum'). Dr. Armand Hammer, who is over 90 years old, is the founder and Chairman of the Board of D. The statement referred to the financial support that Dl would provide to the Museum, including: (a) funding construction costs estimated at approximately $50 million and granting the Museum a 30-year rent-free lease in the Occidental Petroleum Center; (b) funding an annuity for the Museum, at an estimated after-tax cost of $24 million; and (c) granting the Museum an option to purchase the Museum complex and the Occidental Petroleum Center at the end of the 30-year lease term for $55 million, their estimated fair market value at that time. The statement also set forth a description of Dr. Hammer's employment agreements, including a provision for D to contribute to the Armand Hammer Foundation a lump sum approximating seven times Dr. Hammer's aggregate compensation during the year prior to his death. Sullivan (P) filed this action asserting class and derivative claims alleging that the statement did not disclose certain material facts; that D's expenditures and commitments with respect to the Museum and its obligations to the Armand Hammer Foundation pursuant to Dr. Hammer's employment contract constitute a gift and waste of corporate assets; that certain individual Ds had breached their duty of care in authorizing these expenditures; that Dr. Hammer had breached his duty of loyalty by causing D to make these expenditures for his personal benefit; and (5) that the remaining individual Ds had aided and abetted Dr. Hammer. Claims by other plaintiffs were started in Los Angeles, and a prior claim has been brought in the same court that P took his claim. D invited Ps to enter into settlement discussions. D issued a supplement to its Proxy Statement, and Ps concede that the supplemental disclosures provided the corrective disclosures the other complaints sought. A settlement was reached, but the plaintiff in Kahn filed a motion to enjoin defendants from proceeding to complete the settlement. A Special Committee of D's Board was formed to review the merits of the actions taken by the Board of D and to advise the members of the Special Committee with respect to any financial support to be given by D to the Museum. The committee also had authority to approve or disapprove the proposed settlement agreement in this action after consulting with and considering the advice of its independent counsel. The Special Committee formally approved the challenged charitable contributions. Eventually, a settlement was worked out and presented to the Court a fully executed Stipulation and Agreement of Compromise, Settlement and Release ('the Stipulation of Settlement'). The Notice of Pendency of Class and Derivative Action, Proposed Settlement, Settlement Hearing and Right to Appear was sent to all class members one month prior to the settlement hearing, which was held on April 4, 1990. The settlement was put before the court for approval.