Levin v. Mississippi River Fuel Corp.

Background

MoPac, a Missouri railroad corporation, and the smaller Texas and Pacific Railway planned to merge into a new company, T&M. MoPac created two kinds of shares after bankruptcy: Class A (about 1,849,576 shares) with a limited $5 annual dividend preference and Class B (about 39,731 shares) holding the remaining earnings and equity, most of which Alleghany controlled. MoPac’s board said it would submit the consolidation to a single collective vote of all shares. Several small Class B holders sued, seeking a declaration that Missouri law and MoPac’s Articles require separate class voting for this consolidation.

Reasoning

The Court focused on whether federal statute §5(11) displaces state law about classes of stock. It read §5(11) to incorporate “applicable State law,” including Missouri’s provision that the company’s articles control when they require a class vote. The District Court had found MoPac’s Articles (Art. VII, §D(3)) cover the consolidation because the plan would change Class A and Class B rights and would eliminate that provision. The Supreme Court agreed and reversed the Court of Appeals, holding that Missouri law and MoPac’s Articles require a separate majority vote by Class B shareholders.

Real world impact

Class B holders must be given their own majority vote before this consolidation can be approved, making it harder for a combined Class A majority to complete the merger without Class B assent. The Court did not rule on whether the merger is fair; that question remains for the Interstate Commerce Commission. The decision enforces corporate articles and state law protections for minority-class shareholders in railroad consolidations.

Dissents or concurrances

Justice Fortas did not participate. The Court of Appeals had emphasized national consolidation policy and a broad reading of §5(11), but the Supreme Court rejected that preemption view as applied here.