right of first refusal

Milliken Enterprises, Inc. is a privately held Delaware corporation and one of the largest textile businesses in the world. Its approximately 200 shareholders are mostly direct descendants of founder Seth Milliken. The ten-member board includes four directors who are Milliken family members or employees, while the remaining six are unaffiliated. Roger Milliken, Gerrish Milliken, and Minot Milliken own or control through trusts more than 50 percent of the preferred and common shares. Following the 1985 death of Mrs. W.B. Dixon Stroud, shares held in a trust controlled by Roger, Gerrish, and Minot Milliken were released to the Strouds, who now own or control close to 17 percent of the shares. Roger Milliken then proposed a General Option Agreement under which the Milliken family and the company would have a right of first refusal on any shares offered to unrelated persons. Nearly 75 percent of shareholders executed the agreement, but the Strouds and a few others did not. The board proposed charter and by-law amendments for consideration at the April 15, 1987 annual meeting. The Strouds filed suit in the Court of Chancery seeking to enjoin the meeting on grounds including inadequate notice and proxy materials. The trial court entered a temporary restraining order that was not contested. A few weeks later, the Milliken board reconvened, withdrew the challenged charter amendments and by laws, and replaced them with a series of new provisions. Further litigation followed, and the 1987 amendments were ultimately withdrawn. In early 1989 the board adopted new Amendments, including provisions on director qualifications and nomination procedures. On March 14, 1989, the company mailed notice of the April 24, 1989 annual meeting to shareholders along with copies of the current by-laws, the board resolution, and the certificate of incorporation. The notice indicated that the board would not solicit proxies. At the meeting, 93 percent of eligible voters attended in person and 78 percent of shares entitled to vote approved the Amendments. Roger Milliken answered questions about business condition but declined to release confidential information without a confidentiality agreement. After the meeting the Strouds filed individual and derivative actions in the Court of Chancery challenging the notice, the Amendments, and By-law 3. The Court of Chancery sua sponte granted summary judgment for the defendants on all claims except the challenge to By-law 3, which it invalidated.

Robert F. Broz served as president and sole stockholder of RFB Cellular, Inc. (RFBC), which held the Michigan-4 cellular license, and as an outside director of Cellular Information Systems, Inc. (CIS), a publicly held Delaware corporation and competitor in the cellular telephone business. CIS had recently emerged from Chapter 11 bankruptcy proceedings in 1994, during which it divested fifteen cellular license systems and entered a loan agreement restricting new acquisitions and debt. In May 1994, Mackinac Cellular Corp. sought to sell the adjacent Michigan-2 license through broker Daniels & Associates, which contacted Broz regarding RFBC's possible acquisition. CIS was not offered the license because Daniels viewed it as not viable due to CIS's financial condition. Broz later signed a confidentiality agreement at the request of Mackinac, and received the offering materials pertaining to Michigan-2. On June 13, 1994, Broz discussed the opportunity with CIS CEO Richard Treibick, who stated CIS was not interested. Similar responses came from directors Peter Schiff and Stanley Bloch. Meanwhile, PriCellular, Inc. pursued acquisition of CIS, entering share purchase agreements with six directors in June 1994 and launching a tender offer in August 1994 at $2.00 per share, with closing delayed due to financing issues until November 23, 1994. Broz submitted written offers to Mackinac for the purchase of Michigan-2 on August 6, September 6 and September 21, 1994. On November 14, 1994, RFBC agreed to purchase Michigan-2 for $7.2 million. PriCellular closed its tender offer nine days later, replaced the CIS board, and on March 2, 1995, CIS sued Broz and RFBC in the Court of Chancery. After trial, the Court of Chancery imposed a constructive trust on the agreement to purchase Michigan-2 and directed that the right to purchase the license be transferred to CIS. Broz and RFBC appealed the judgment to the Supreme Court of Delaware.

The Ute Indian Supervision Termination Act of August 27, 1954 addressed the Ute Indian Tribe of the Uintah and Ouray Reservation in Utah, which then had approximately 1,765 members consisting of 439 mixed-bloods and 1,326 full-bloods. The statute directed partition of tribal assets between the two groups, termination of federal supervision over mixed-blood property, and a development program for full-blood members. At the time the tribe's cash, accounts receivable, and land were valued at roughly $20,702,885, with additional holdings in oil, gas, and mineral rights plus unadjudicated claims against the United States. In 1956 the mixed-blood members formed Affiliated Ute Citizens as an unincorporated association authorized by the Act. Two years later Ute Distribution Corp. was incorporated to manage the undivided assets, including mineral rights, jointly with the full-bloods' business committee; UDC issued ten shares to each of the 490 mixed-blood members, producing 4,900 shares total. First Security Bank of Utah, N.A. served as transfer agent and held the certificates, which carried legends warning that the stock should not be sold or encumbered and requiring any pre-August 27, 1964 sale to be first offered to tribe members at a price no lower than that offered to nonmembers. The Secretary issued the termination proclamation effective at midnight August 27, 1961. During 1963 and 1964 mixed-blood shareholders sold 1,387 UDC shares, all to nonmembers. Bank assistant managers John B. Gale and Verl Haslem at the Roosevelt, Utah branch solicited standing orders from non-Indian buyers, purchased 113 shares themselves, prepared and notarized transfer documents including seller affidavits, and received commissions and gratuities; sales prices to non-Indians ranged from $300 to $700 per share while transfers among non-Indians occurred at $500 to $700 per share. In February 1965 Anita R. Reyos and eighty-four other mixed-bloods filed suit against the bank, Gale, Haslem, and automobile dealers alleging violations of section 10(b) and Rule 10b-5. In April 1968 AUC, on behalf of its 490 members, sued the United States seeking pro rata distribution of the mineral estate and a declaration that AUC rather than UDC was entitled to participate in management. The District Court conducted a bellwether trial of twelve Reyos plaintiffs, made detailed findings concerning the sales and the defendants' conduct, and entered judgments; the Tenth Circuit reviewed both cases on appeal, after which the Supreme Court granted certiorari.

The Hawaiian Islands were originally settled by Polynesian immigrants from the western Pacific. These settlers developed an economy around a feudal land tenure system in which one island high chief, the ali’i nui, controlled the land and assigned it for development to certain subchiefs. The subchiefs would then reassign the land to other lower ranking chiefs. All land was held at the will of the ali’i nui and eventually had to be returned to his trust. There was no private ownership of land. Beginning in the early 1800s, Hawaiian leaders and American settlers repeatedly attempted to divide the lands of the kingdom among the crown, the chiefs, and the common people. These efforts proved largely unsuccessful, however, and the land remained in the hands of a few. In the mid-1960s, after extensive hearings, the Hawaii Legislature discovered that the State and Federal Governments owned almost 49 percent of the State’s land while another 47 percent was in the hands of only 72 private landowners. The legislature further found that 18 landholders with tracts of 21,000 acres or more owned more than 40 percent of this land. The legislature concluded that concentrated land ownership was responsible for skewing the State’s residential fee simple market, inflating land prices, and injuring the public tranquility and welfare. To redress these problems, the legislature enacted the Land Reform Act of 1967. The Act created a mechanism for condemning residential tracts and transferring ownership of the condemned fees simple to existing lessees. In April 1977, the Hawaii Housing Authority held a public hearing concerning the proposed acquisition of some of appellees’ lands. It made the statutorily required finding that acquisition would effectuate the public purposes of the Act. In October 1978, it directed appellees to negotiate with lessees. When negotiations failed, the Authority ordered appellees to submit to compulsory arbitration. Rather than comply with the compulsory arbitration order, appellees filed suit in February 1979 in United States District Court. They asked that the Act be declared unconstitutional and that its enforcement be enjoined. The District Court temporarily restrained the State from proceeding against appellees’ estates. Three months later, while declaring the compulsory arbitration and compensation formulae provisions of the Act unconstitutional, the District Court refused preliminarily to enjoin appellants from conducting the statutory designation and condemnation proceedings. Finally, in December 1979, it granted partial summary judgment to appellants, holding the remaining portion of the Act constitutional under the Public Use Clause. The Court of Appeals for the Ninth Circuit reversed. On applications of HHA and private appellants, the Supreme Court noted probable jurisdiction.

In 1978 Broadwest Realty Corporation owned a two-story building on Broadway between 94th and 95th Streets in Manhattan that contained a theater occupying approximately 58 percent of the floor space and separate commercial space. Broadwest had been unable to secure a permanent tenant for the theater and was operating its properties, including adjacent Pomander Walk and the Healy Building, at a net loss. Symphony Space, Inc., a not-for-profit arts organization that had previously rented the theater for one-night engagements, entered into negotiations with Broadwest. On December 1, 1978, Broadwest and Symphony executed a contract for the sale of the building to Symphony for a purchase price of $10,010, with $10 paid at closing and the balance secured by a purchase-money mortgage. On December 31, 1978, the parties executed four separate documents: a deed conveying the building to Symphony, a lease from Symphony to Broadwest of the commercial space for $1 per year running from January 1, 1979 to May 31, 2003, a $10,000 mortgage note from Symphony due December 31, 2003, and an option agreement granting Broadwest the exclusive right to repurchase the entire building during specified exercise periods. The option agreement set four exercise periods: after July 1, 1979 with closing in 1987, 1993, 1998 or 2003; following maturity of the mortgage note; during the ninety days after termination of the lease other than for nonpayment of rent; and during the ninety days after notice of Symphony’s default under the mortgage. Purchase prices ranged from $15,000 to $28,000 depending on the closing year. The option was stated to be unconditional and to run with the land. The transaction was structured so that Symphony could obtain a property-tax exemption for the theater parcel while Broadwest retained approximately $140,000 in annual rental income and reduced its own taxes by $30,000 per year. In the summer of 1981 Broadwest sold and assigned its interests in the lease, option, mortgage, and the adjacent properties to defendants Pergola Properties, Inc., Bradford N. Swett, Casandium Limited, and Darenth Consultants for $4.8 million. In January 1985 defendant Swett served notice exercising the option on the ground of alleged default and set a May 6, 1985 closing. Symphony disputed the default and, in March 1985, commenced this declaratory-judgment action. Defendants served additional exercise notices in April 1985 and March 1987. After the trial court granted Symphony summary judgment and the Appellate Division affirmed, the Appellate Division certified the question whether the order was properly made, and the Court of Appeals granted review.