A Lawsuit of Cox Corporation Inc Against News-Journal Corporation


In May 2004, Cox Corporation Inc, a minority shareholder of News-Journal, filed a lawsuit against News-Journal Corporation, Florida, seeking relief for misused corporate assets. The Court ordered News-Journal to repurchase Cox’s shares at $129.2, which News-Journal could not pay due to limited funds. The Court ordered the selling News-Journal and distributing its asset to Cox as payment. However, The Pension Benefit Guaranty Corporation (PBGC) appealed the order claiming the move would be unfair to other pursuant shareholders and violates the distribution-to-shares provision of the Florida business corporation statute.

The Issue at the Law the Court Is Considering

The issue, in this case, arises from the distribution-to-shares provision of the Florida business corporation. The first provision argues that distribution cannot be made if, after the transaction, the corporation is dissolved, rendering it unable to pay its debts and continue with the business. Secondly, the total assets should be enough to satisfy the majority shareholders’ preferential rights upon the corporation’s dissolution because their rights are superior to the plaintiffs’.

How The Law Was Applied in this Case

Following the court order under section (5), News-Journal had already agreed to pay the plaintiff by repurchasing their shares. Since they could not pay, they were responsible for fulfilling the payment by selling the corporations and distributing the asset to Cox. Further, the Court suggested that Cox had an equitable and first-priority asset claim at News-Journal. Therefore, the Court had to determine whether the repurchase order entitled Cox to equitable asset distribution at News-Journal, which would not lead to violating the distribution-to-shares provision.

Conclusion of the Court

The Court vacated and remanded the case as follows. The Court concluded that it had misinterpreted the distribution-to-shares provision statute Fla.Stat. § 607.1436. Thus, it erred in ordering and distributing News-Journal assets. The initial Court order made on August 13 was vacated entirely. The Court declared that any distribution made to Cox must satisfy subsection (8) of the election-to-purchase statute, Florida (Fla. Stat § 607.1436. on remand, the Court suggested re-evaluating the claims of other News-Journal creditors consistent with the decision.

A lawsuit where Corporate Bondholders Sue the Board of Directors or Officers

In 1989, two RJR-Nabisco bondholders sued the Metropolitan Insurance Company and their CEO following a loss of the value of their bonds due to a leveraged buyout. The bondholders argued that the insurance company had violated an implied agreement of good faith and fairness in the stock market. Consequently, the company had infringed on its fiduciary responsibility to bondholders leading to financial losses. The case was presented to the United States District Court, S.D. New York. The court rejected the plaintiff’s argument arguing that an implied restrictive agreement was not inclusive of their indenture to facilitate or claim losses incurred by an LBO. Future, the court claimed a lack of legal and mutually recognized benefit to justify the implication. Therefore, the bondholders were attempting to add unaccounted terms in their favor.

A lawsuit where a Corporate Shareholder Sue the Board of Directors or Officers

In this case, the board of directors filed a suit against the Andantes board of directors and Trans Union Corporation, where they owned shares. The plaintiffs argued that the board had made an important decision to merge with other companies without their knowledge or consultation. Hence, the decision violated the Del. Code Ann. tit. 8, § 251, and could not rely on the business judgment rule for protection against the claims. Future, the information provided to the merger investor was not accurate. The Delaware Court dismissed the plaintiffs’ claim on two findings. Firstly, the Board of Directors’ decision was informed and entitled to the protection of the business judgment rule. Secondly, the shareholders had been relatively informed of the Boards decisions and were aware of the mergers. Therefore, they could not claim ignorance and withholding of information by the Board of Directors.

A lawsuit where Shareholders Sue other Shareholders of the Same Company

In 1886, Charles Cates, the plaintiff, filed a lawsuit against Wise Coal Company and its directors and officers. Cates was a shareholder in the corporation and claimed to own a significant area of land with coal deposits. He partnered with the defendants to explore the coal and leased the land to the corporation in exchange for shares. Cates filed suit, claiming the company and other shareholders breached duties owed to him as a shareholder when they dissolved the corporation leading to financial loss and damage to his property. The plaintiff argues that the defendant had the motive to defraud him of the land and financial resources, hence the corporation’s dissolution after three months. The case was presented in the Texas supreme court and was dismissed. The plaintiff appealed, but the supreme court held its dismissal decision on the argument that it was not a derivative suit but a direct claim as an individual shareholder.

Facts of the Case

On December 2007, Verifone Holdings, Inc wanted to restate its reports and financial statements for the previous three quarters after selling shares to King. The plaintiff, the King, rushed to file a derivative suit claiming damages in an occurrence that Verifone might suffer a liability in security suits which would affect them as minority shareholders. However, King had not conducted a pre-suit investigation which would make their claims futile in a court motion. Thus, the Delaware Supreme Court reversed an established bright line rule by the Court of Chancery that barred stakeholder plaintiffs from accessing information under section 220 because they filed a derivative action before obtaining the facts, allowing King to access the information.

The Issue at The Law the Court Is Considering

The issue, in this case, emerges from the Court of Chancery’s bright-line rule stating that a stockholder cannot access a corporation’s information if they file an action derivative before getting the information. According to the Court, requesting information after filing a derivative suit burdens a corporation because it involves lawsuits to obtain the data. Therefore, the Court prohibits the plaintiff’s utilization of section 220, allowing the inspection process when the lawsuit has been filed and awaiting court motion.

How The Law Was Applied in this Case

The plaintiff quickly filed a derivative action before conducting a thorough pre-suit inspection. Although the move is ill-advised and premature, the plaintiff has a right to access the information, according to Section 220. According to the Court, the Plaintiff does not lack a proper motive to seek information because they filed a lawsuit first. Barring the plaintiff from accessing the information dismisses the case with prejudice and without leave to amend. Therefore, the Delaware Court had to reconsider the bright line rule to allow the plaintiff leave to amend and obtain adequate evidence.

Conclusion of the Court

The Court held that the text and underlying policies of Section 220 do not support the Chancery’s bright rule barring the stockholder plaintiff from accessing information after filing a derivative action first. A stockholder Plaintiff could reverse the course and request the corporation to obtain data with another lawsuit if the information was not obtained before or in the process of filing the lawsuit.

Summary of the Tesla Corporation

Tesla, Inc was formerly known as Tesla Motors from 2003 to 2017. The company’s founders are Martin Eberhard, an American Entrepreneur, and Marc Tarpenning. It was founded in 2003 and named after Nikola Tesla, Serbian American inventor. The company manufactures electric automobiles, car batteries, home power appliances and storage, and solar panels. The company has manufacturing branches in Germany, the United States, and China and numerous operations across Europe and Asia. Its headquarters are in the American in Austin, Texas. Tesla Inc is one of the most valuable companies globally and stands as the most excellent automaker, with a market capitalization of over $ 840 billion (Bruijl, 2017). The company was headed by Eberhard as Chief Executive Officer (CEO) and Tarpenning as the Chief Financial Officer (CFO) until 2007.

In 2004, Elon Musk joined the corporation after contributing more than $ 6 billion, making him a co-founder and product architect. Following a series of disagreements and a lawsuit against Eberhard, he was ousted in 2007, and Musk took over as the CEO. Musk has become a leading global manufacturer under Musk’s leadership, making him a famous entrepreneur. The Securities and Exchange Commission (SEC) sued Musk for fraud charges In September 2018 (U. S Securities and Exchange Commission, 2018). According to the commission, Musk issues misleading and false statements about the company leading to unnecessary market disruption. Musk’s tweets included a move to make Tesla private and claiming he had the funds for the decision. However, SEC argued that the information was incorrect since Musk did not have the resources. At the same time, Musk had failed to notify the commission of privatizing the company before the public declaration (U. S Securities and Exchange Commission, 2018). The two sides reached a settlement stating that Musk resign as CEO for three years and an additional $20 million penalty from the corporation. Musk is still the CEO but is set to step down if the Court upholds SEC’s allegations.

Summary of the Theranos Scandal

The Theranos scandal is a fraud case involving a technology company and the medical sector. The company claimed to have made technological devices for blood testing, which required significantly small amounts of blood to perform various tests accurately. The case goes back to 2014 when Elizabeth Holmes, founder, and CEO of Theranos, supposedly revolutionized technology to provide efficient blood-related tests using minimal blood (U.S. v. Elizabeth Holmes et al., 2022). Holmes claimed that her technology could use a pinprick amount of blood for over 240 blood tests, whereas other devices used a whole vial for fewer tests. The medical sector thought the technology could revolutionize medicine and save thousands of lives, accepting the offer. Consequently, the company attracted investors who wanted to be part of the medical revolution.


In conclusion, Holmes’ technology proved ineffective after a few trials where the results were fundamentally incorrect. The medical sector claimed that Holmes’ technology was founded on lies that could jeopardize many people’s health. The U.S. presented a lawsuit against Holmes and other former Theranos employees associated with the crime. Holmes was charged with criminal fraud, misleading information to investors, and deliberate claims on the efficiency of the blood test devices (U.S. v. Elizabeth Holmes et al., 2022). Holmes stepped down as CEO in 2018, leading to the company shut down. She was found guilty of all charges in 2022 by the federal jury, facing a jail term of up to 20 years.


Bruijl, G. H. (2017). Tesla motors, inc.: Driving digital transformation and the digital ecosystem. SSRN Electronic Journal.

Cates v. Sparkman, 66 Tex. 155 (1886) (CaseLaw access project, Harvard Law School n.d.). Web.

Cox enterprises inc. v. Pensions Benefit Guaranty Corporation (United States Court of Appeal 2012).

Elon Musk settles sec fraud charges; Tesla charged with and resolves securities law charge. (2018). U. S Securities and Exchange Commission. Web.

King v. Verifone Holdings, 994 A.2d 354 (Del. Ch. 2010)

Metropolitan Life Insurance v. RJR Nabisco, Inc., 716 F. Supp. 1504 (S.D.N.Y. 1989) Web.

Smith v. Van Gorkom. (2016) (Thomson Reuters). Web.

U.S. v. Elizabeth Holmes, et al. (2022) Web.

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Work Cited

"A Lawsuit of Cox Corporation Inc Against News-Journal Corporation." LawBirdie, 21 Aug. 2023, lawbirdie.com/a-lawsuit-of-cox-corporation-inc-against-news-journal-corporation/.


LawBirdie. (2023) 'A Lawsuit of Cox Corporation Inc Against News-Journal Corporation'. 21 August.


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1. LawBirdie. "A Lawsuit of Cox Corporation Inc Against News-Journal Corporation." August 21, 2023. https://lawbirdie.com/a-lawsuit-of-cox-corporation-inc-against-news-journal-corporation/.


LawBirdie. "A Lawsuit of Cox Corporation Inc Against News-Journal Corporation." August 21, 2023. https://lawbirdie.com/a-lawsuit-of-cox-corporation-inc-against-news-journal-corporation/.