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U.S. Supreme Court

Levin v. Mississippi River Fuel Corp., 386 U.S. 162 (1967)

Levin v. Mississippi River Fuel Corp.

No. 352

Argued January 19, 1967

Decided February 27, 1967*

386 U.S. 162


The capital stock of the Missouri Pacific Railroad Company (MoPac), a Missouri corporation, consists of two classes, A and B. Class A, with 1,849,576 shares outstanding, is preferentially entitled to noncumulative dividends not to exceed $5 a share annually, and its equity is limited to $100 a share. Class B, with 39,731 shares outstanding, is entitled to the earnings and equity in excess of the Class A preferences, and its equity is currently valued at about $6,500 a share. MoPac's corporate charter provides that each share of each class is entitled to one vote, with the proviso that a separate vote of each class is required on any proposal affecting the preferences or relative rights of either class. Section 5(11) of the Interstate Commerce Act requires for ICC approval of a voluntary railroad merger the assent of the majority of the shares entitled to vote "unless a different vote is required under applicable State law." Missouri law applicable to mergers provides for approval by at least a two-thirds vote of all outstanding shares (Mo.Rev.Stat. § 351.425). Another section of state law provides for class voting where a corporation's charter so requires (§ 351.270). A plan to consolidate MoPac and a subsidiary railroad was approved by their boards of directors and submitted for ICC approval, including provision for an exchange of each MoPac share, without regard to class, for four shares of the new corporation. The proposed plan was to be passed on by the stockholders voting collectively, rather than by class. Charging that the proposed exchange was unfair in view of the far greater value of the Class B stock than that of the Class A stock, appellants, Class B stockholders, brought this suit for declaratory relief. The District Court upheld appellants' contention that the collective voting plan would violate MoPac's corporate charter and both state and federal law. The Court of Appeals reversed on the ground that, despite Missouri law, the "plenary character of § 5(11) . . . , with its consequent preemptive nature" compelled a contrary result.

Held: In a consolidation such as that proposed here, Missouri law

Page 386 U. S. 163

applies, and § 351.270 of that law requires application of the corporate charter provision, which, in turn, requires a majority assent of the stockholders on a separate class-vote basis. Pp. 386 U. S. 167-170.

359 F.2d 106, reversed and remanded.

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