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Law School Case Briefs
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KATZ v. OAK INDUSTRIES INC.
Court of Chancery of Delaware, New Castle County (1986) | 508 A.2d 873
TL;DR: A financially distressed corporation made a 'take-it-or-leave-it' exchange offer to its bondholders, requiring them to strip their bonds of protective covenants to participate. A bondholder sued, claiming wrongful coercion. The court found no breach of duty and allowed the offer to proceed.
Legal Significance: This case firmly establishes that the relationship between a corporation and its bondholders is purely contractual, not fiduciary. Directors may act to maximize shareholder value even if it disadvantages bondholders, so long as their actions do not violate the indenture agreement.