[Solved] Blue Chip Stamps v. Manor Drug Stores (U.S.1975) Case Study

Business Studies

Read the Blue Chip Stamps v. Manor Drug Stores case ruling and write a summary.

Blue Chip Stamps v. Manor Drug Stores Summary

Blue Chip Stamps is a company dealing with the issue of stamps. The United States sued it in 1963 due to anti-trust issues. In 1967 the case was withdrawn due to the consent of the decree. The company reorganized through a merger and formed the new blue chip stamps corporation. Notably, the move resulted in altering the shares of the previous shareholding. The union was formalized through registration as per the requirements of the companies act. In 1968, a company’s former client filed another case against the old and the new blue chip stamps corporation. The defendants in the case were the corporation’s shareholders and directors.

The respondent argued that the company’s prospectus was misleading, so it could take advantage of the shares sale by reselling the already sold shares at a higher price. The respondent further demanded compensation from the company due to the damages and losses he had undergone due to the misleading prospectus. Luckily, the case was dismissed as the respondent had not bought or sold shares following the security exchange commission requirements. However, the respondent appealed in the United States court of appeal.

The security exchange act has undergone many amendments to fully disclose the course of action needed under varying shares exchange circumstances.

The plaintiff has had a rough time in court and numerous appeals as clients sue the corporation. It has led to the loss of time and resources and tainting the company’s image. Some of the adjustments are aimed at minimizing the incidences of fraud as well as either of the parties taking advantage of the other. It is recommended that the security exchange commission should revisit the exchange act. Besides, they should advise corporations and other participants in the stock exchange on the purchase and sale of shares.

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