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Strong v. Repide | 213 U.S. 419 (1909)

Under the common law, corporate officers historically didn’t have a duty to disclose material facts to shareholders when engaging in private trading of the company’s stock. In Strong versus Repide, the United States Supreme Court considered whether any circumstances exist under which the common law imposes a duty of disclosure on corporate officers engaged in private trading.

Eleanor Strong and Francisco Repide both owned stock in the Philippine Sugar Estates Development Company. In addition to owning a majority of the company’s stock, Repide was also the company’s director and administrator general, giving him exclusive control of the company’s management. The company owned a profitable piece of land, and the Philippine government made an offer to purchase the land. Repide, acting on the company’s behalf, conducted all negotiations with the government. While the negotiations were underway, Repide hired a third party broker to buy all of Strong’s stock. The third party broker hired a second third party who communicated with Strong’s agent. Repide and the third parties never disclosed the pending land sale to Strong or her agent. The Philippine government ultimately purchased the land, which greatly increased the company’s stock value.

Strong brought suit against Repide in a court in the Philippines, claiming that her shares were obtained by fraud because Repide concealed the facts of the pending sale, which was likely to affect the value of the company’s stock. Strong also claimed that her agent lacked the authority to sell her shares. The court found in Strong’s favor. The Philippine Supreme Court ultimately reversed, holding that Repide had no duty to disclose the sale to Strong and thus hadn’t committed fraud. Strong appealed, and the United States Supreme Court granted cert.

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