Old Dominion Copper Mining & Smelting Co. v. Lewisohn Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: Promoters sold property to a corporation they controlled for a large profit before selling shares to the public. The Supreme Court held the corporation could not sue to recover the profit because it had consented to the deal when the promoters were its only shareholders.
Legal Significance: This case established the restrictive “federal rule” on promoter liability, holding that a corporation cannot sue for secret profits if all shareholders at the time of the transaction consented, even if the promoters intended to and later did sell shares to innocent subscribers.
Old Dominion Copper Mining & Smelting Co. v. Lewisohn Law School Study Guide
Use this case brief structure for your own legal analysis. Focus on the IRAC methodology to excel in law school exams and cold calls.
Case Facts & Court Holding
Key Facts & Case Background
Defendants’ testator, Lewisohn, and his associate, Bigelow, acted as promoters for the plaintiff, Old Dominion Copper Mining & Smelting Co. They acquired options on certain mining properties for approximately $1 million. They then formed the plaintiff corporation, with their own nominees as the initial directors and subscribers. While Lewisohn and Bigelow (and their syndicate) owned all of the corporation’s issued stock, they caused the corporation to purchase the mining properties from them for $3.25 million, paid for with 130,000 shares of corporate stock. The promoters did not disclose the substantial profit they made. Immediately following this transaction, the corporation, as part of the promoters’ original plan, offered the remaining 20,000 shares of its stock to the public. These shares were purchased by innocent subscribers who were unaware of the promoters’ profits. The corporation, now with new public shareholders, brought a suit in equity to rescind the sale or recover the secret profits from Lewisohn’s estate.
Court Holding & Legal Precedent
Issue: Can a corporation bring a suit against its promoter to recover secret profits from a transaction when, at the time of the transaction, the promoter and his associates were the sole shareholders, even if the transaction was part of a plan to subsequently sell shares to uninformed public subscribers?
No. The judgment dismissing the bill is affirmed. The corporation cannot recover Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet
IRAC Legal Analysis
About IRAC analysis
IRAC (Issue, Rule, Analysis, Conclusion) is the structure professors expect in exam answers. Each LSD.Law brief states the issue, the governing rule with citations, the court's application of that rule, and the conclusion - the same reasoning pattern you will use on exams and in practice.
Legal Issue
Can a corporation bring a suit against its promoter to recover secret profits from a transaction when, at the time of the transaction, the promoter and his associates were the sole shareholders, even if the transaction was part of a plan to subsequently sell shares to uninformed public subscribers?
Conclusion
This decision established the influential "federal rule" on promoter liability, which strictly Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut
Legal Rule
A corporation cannot maintain a suit to recover a promoter's secret profits Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in vo
Legal Analysis
Writing for the Court, Justice Holmes focused on the separate legal identity Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolor
Flash-to-Full Case Opinions
Flash Summary
- A corporation cannot sue promoters for secret profits if, at the