Trans World Airlines, Inc. v. Summa Corp.

374 A.2d 5 (Del.Ch. 1977)

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Nature of the Case

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Facts

Howard Hughs owned all the stock of Toolco (D), which owned a majority of the shares of TWA (P). Toolco did not allow TWA to purchase airplanes for itself but instead required TWA to buy its airplanes exclusively through Toolco. Toolco ran into financial problems and was unable to provide TWA with a sufficient number of airplanes. As a result, TWA could not buy all the airplanes that it needed and suffered a loss of business as a result. The reasoning for this exclusive agreement was to provide the parent Toolco with a tax benefit. The exclusive purchasing agreement was not meant to benefit the business interests of TWA at all. Shareholders of TWA sued Toolco on a theory of breach of the fiduciary duty of loyalty.