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There was no looting or theft of a corporate opportunity. There was no breach by the defendants because the sale of their shares to United Financial and the going public where they cashed in was a legitimate transfer of their controlling shares for a premium. Minority shareholders of Association brough a direct suit against the controlling shareholders for breach of fiduciary duty.ĭefendants argued that they were merely selling their shares and still indirectly controlled Associated through United Financial.

The minority shareholders of Assocation were not given the same opportunity to also transfer their shares to United Financial and share in the increase value form those shares. The plan had the effect of allowign the contorl group to cashin in on their investment in Association through the sale of United Financial securities. The control group retained enough shares of United Financial to also remain in control of that company through which they continued to indirectly control Associated. Most of the proceeds from the sales of Untied Financial securities went to the control group, which previously had been in control of Association. The control group now controlled United Financial (which controlled Association iwth its 87% ownership) and then had two different public offerings of United Financial securities. Instead of going public and benefiting all shareholders, the control group transferred their shares (that is, 87% of the shares of Association) to a holding company (United Financial) which would then become the parent corporation of Association.As a result, existing shareholders would be able to cash in on the interest of the business. One way to profit would have been for Association to do a public offering of shares resulting in its shares trading in the stock market.Since Association was essentially a closely held corporation, its shared were not actively traded. The controlling shareholders ("the control group") of United Saving and Loan Association ("Association") decided to profit from the rise in the market value of savings and loan companies.

The California Supreme Court took a strict view of control transactions in Jones v.