Reference no: EM133201351 , Length: 2 pages

Judgment reversed in favor of Zapata. Case remanded to the trial court.

QUESTION: The Eliason family owned a majority (5,238) of the 9,990 shares of Brosius-Eliason Co., a building and materials company, with James Eliason (3,928 shares) and his sister Sarah Englehart (1,260) holding the controlling block. The Brosius family owned a total of 3,690 shares. Frank Hewlett owned the remaining 1,062 shares. On July 31, James Eliason executed a proxy giving his daughter, Louise Eliason, authority to vote his shares. Only in the notary public's acknowledgment verifying James's signature did the proxy state that it was irrevocable. The body of the proxy, the part signed by James, did not state it was irrevocable. Two weeks later, James and his sister Sarah made a voting agreement that ensured Eliason family control over the corporation by requiring their shares to be voted as provided in the agreement. The voting agreement was irrevocable because it was coupled with an interest in each other's shares. Soon after, Sarah and Louise had a falling out when Louise tried to assert her family's control of the company. Consequently, Sarah voted her shares with the Brosiuses and Hewlett in violation of the agreement with James. She argued that she was not bound by the voting agreement with James on the grounds that James could not make the agreement because he had given Louise an irrevocable proxy two weeks earlier. Was Sarah right?

VeriFone Holdings, a Delaware corporation with its principal place of business in San Jose, California, designs, markets, and services electronic payment transaction systems. In 2006, VeriFone acquired Lipman Electronic Engineering Ltd. In 2007, VeriFone publicly announced that it would restate its reported earnings for the prior three fiscal quarters. Earnings had been materially overstated due to accounting and valuation errors made while Lipman's inventory systems were being integrated with VeriFone's. After that restatement announcement, VeriFone's stock price dropped more than 45 percent. The next day, Charles King, a VeriFone shareholder, filed a derivative action on behalf of VeriFone against certain of its officers and board of directors, asserting various federal securities fraud claims. A few months later, King demanded that VeriFone permit him to inspect the company's books and records, including VeriFone's Audit Committee Report, which contained the results of an internal investigation of VeriFone's accounting and financial controls conducted after the 2007 restatement announcement. VeriFone refused to grant to King access to the Audit Report on the grounds he lacked a proper purpose under Delaware law because he had previously elected to bring a derivative action. Was VeriFone correct?