Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 19

A Question of Ethics Topps Co. makes baseball and other cards, including the Pokemon collection, and distributes Bazooka bubble gum and other confections. Arthur Shorin, the son of Joseph Shorin, one of Topps's founders and the inspiration for "Bazooka Joe" (a character in the comic strip wrapped around each piece of gum), worked for Topps for fifty years and had served as its board chair and chief executive officer since 1980. Shorin's son-in-law, Scott Silverstein, served as Topps's president and chief operating officer. When Topps's financial performance began to lag, the board considered selling the company. Michael Eisner (formerly head of Disney Studios) offered to pay $9.75 per share and to retain Topps's management in a merger with his company. Upper Deck Co., Topps's chief competitor in the sports-card business, offered $10.75 per share but did not offer to retain the managers. Topps demanded that Upper Deck not reveal its bid publicly, but Topps publicized the offer, without accurately representing Upper Deck's interest and disparaging its seriousness. Upper Deck asked Topps to allow it to tell its side of events and to make a tender offer to Topps's shareholders. Topps refused and scheduled a shareholder vote on the Eisner offer. Topps's shareholders filed a suit in a Delaware state court against their firm, asking the court to prevent the vote. [ In re Topps Co. ShareholdersLitigation, 926 A.2d 58 (Del.Ch. 2007)]
1 The shareholders contended that Topps's conduct had "tainted the vote." What factors support this contention? How might these factors affect the vote?
2 Why might Topps's board and management be opposed to either of the offers for the company? Is this opposition ethical? Should the court enjoin (prevent) the scheduled vote? Explain.