Opinion ID: 557198
Heading Depth: 2
Heading Rank: 1

Heading: The Loehmann Family's Decision to Sell Their Stock

Text: 5 Plaintiff first alleges that at the time of the AEA merger the Loehmann family sought a prompt sale of its Loehmann's stock because it needed cash to pay estate taxes. Mendell believed that Anita Loehmann Stafford (Stafford) had a conflict of interest when she gave her support in the proxy statement to the proposed merger at a price of $31.30 a share. Mendell claims Stafford--as a representative and beneficiary of the largest shareholder of Loehmann's and as a company director--had the ability to persuade the other directors and shareholders to approve the transaction. In making this allegation Mendell relied upon the following facts to indicate that family financial pressures rather than what was best for Loehmann's was the paramount purpose in the recommendation of the merger proposal to the shareholders. 6 It was conceded by defendants that the taxes due upon the estates of Charles and Anita Loehmann exceeded their liquid assets by millions of dollars. To resolve the problem Stafford had two options: have the estate taxes paid over a 15-year period, with only the interest due for the first five years and the principal payable in subsequent ten annual installments, pursuant to I.R.C. Sec. 6166 (1988), or sell off a substantial portion of Loehmann's stock to raise funds. 7 Prior to the deaths of Charles and Anita Loehmann the family had considered selling its holdings. In the mid-1970s offers from three potential bidders, including AEA, had been considered, and though a sale was never consummated, negotiations had brought it close. In 1977 Anita Loehmann had retained Drexel Burnham, Lambert, Inc. (Drexel) to locate a purchaser because she was dissatisfied with corporate management. Drexel was unable to come up with an offer from the companies it contacted. 8 Later, Stafford called upon Drexel to find a purchaser, expressing an interest in selling the family holdings alone or in conjunction with a sale of the entire company. Stafford's financial advisers had suggested that she diversify the estates' assets, and that the family's shares would command a higher price were they to be sold as a block. Stafford rather surprisingly stated that the advisers never told her that the stock had to be sold to raise funds for the estate taxes.