Genger v. TR INVESTORS, LLC
2011 Del. LEXIS 371
| Del. | 2011Background
- Trans-Resources, a Delaware fertilizer/chemical company, was controlled by Genger via TPR and related trusts.
- In 2004, Genger transferred TPR’s 52.85% stake to himself and the Orly and Sagi Trusts, triggering a Stockholders Agreement with Purchase Rights and voting protections for Glenclova and Investors.
- The 2004 Transfers violated disclosure/consent requirements of the Stockholders Agreement, though Genger claimed disclosure to Trump Group occurred; it did not occur to Glenclova/Investors until 2008.
- In 2008, the Trump Group obtained majority voting control and entered into a Funding Agreement with Genger that would grant them majority board control, which Genger later repudiated.
- To protect its position, the Trump Group purchased the Sagi Trust Shares (19.5% of Trans-Resources) and obtained an option under a Side Letter, enabling potential transfer rights if the 2004 Transfers were void.
- Section 225 action was filed to determine which group could lawfully designate the Trans-Resources board, leading to a multi-opinion judgment including spoliation and side-letter determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether spoliation findings supported contempt sanctions | Genger asserts insufficient evidence of spoliation | Trump Group asserts clear destruction of relevant files | Spoliation proven; sanctions affirmed |
| Whether Trump Group ratified the 2004 Transfers | Trump Group ratified transfers by post-2008 conduct | No express/implicit ratification; 2008 actions did not validate transfers | No ratification; transfers void ab initio |
| Whether Irrevocable Proxy ran with the Sagi Shares | Proxy applied to those shares regardless of transfer | Proxy did not meet New York requirements and did not bind successors | Proxy not irrevocable or binding on subsequent owners; side-letter ownership status limited |
Key Cases Cited
- Frank v. Wilson & Co., 32 A.2d 277 (Del. 1943) (sanctions and waiver principles in Delaware)
- Lehman Capital v. Lofland, 906 A.2d 122 (Del. 2006) (abuse of discretion standard for sanctions)
- Box v. Box, 697 A.2d 395 (Del. 1997) (summary/limited scope of §225 proceedings)
- Rosenfield v. Standard Elec. Equip. Corp., 83 A.2d 843 (Del.Ch.1951) (principles on in rem adjudications in §225)
- Agranoff v. Miller, 1999 WL 219650 (Del.Ch. 1999) (cited for §225 scope and remedies; not official reporter)