Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 2

In 2007, eBay started an online classifieds business called Kijiji. eBay designedKijiji to compete with Craigslist, the most widely used online classifieds website in the United States. At the time that it startedKijiji, eBay owned 28.4% of Craigslist and was one of only three stockholders. As a result of choosing to compete with Craigslist and pursuant to the Craigslist stockholders' agreement, eBay lost certain contractual consent rights and the right of first refusal over the shares it owned. The other two stockholders asked eBay to sells its shares back to the company or to a third party, but eBay refused. The two stockholders responded, in their capacity as directors, by (1) adopting a plan that restricted eBay from purchasing additional Craigslist shares and hampered eBay's ability to sell its shares to third parties, (2) implementing a staggered board to make it impossible for eBay to unilaterally elect a director to the Craigslist board, and (3) seeking to obtain a right of first refusal in Craigslist's favor over the shares eBay owned through a scheme that reduced eBay's ownership in Craigslist from 28.4% to 24.9%. eBay sued, asserting that the other two stockholders had breached the fiduciary duties they owed eBay as a minority stockholder. What result? [eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1 (Del. Ch. 2010).]