This case involved a troubled company, whose board of directors had hired turnaround consultants to assist with management. When the composition of the board of directors changed, the new board sued the consultants, and others, for fraud and unjust enrichment, alleging that the consultants had withheld information from the board and that they had been
Fiduciary Duties
Whitney v. Winston, June 20, 2007 (Jolly)(unpublished)
Plaintiff sought to enjoin a merger. He alleged that the defendants, directors of the company to be acquired, had breached their fiduciary duties by failing to disclose pertinent information to the shareholders, failing to maximize shareholder value, and agreeing to a coercive and unreasonable termination fee.
The Court noted that it was uncertain whether plaintiff…
Egelhof v. Szulik, 2008 NCBC 2 (N.C. Super. Ct. Feb. 4, 2008)(Tennille)
The Court found that plaintiff was an inadequate representative to lead a derivative action. A derivative action plaintiff has fiduciary obligations to the company on whose behalf he brings a suit. This plaintiff had no experience in litigation, no involvement in the suit, and only a small stake in the company. On the point of plaintiff’s…
Battleground Veterinary Hospital, P.C. v. McGeough, 2007 NCBC 33 (N.C. Super. Ct. Oct. 19, 2007)(Diaz)
Defendant, a veterinarian, had signed a covenant not to compete with his former employer. He was, at the time, the sole shareholder, sole officer, and sole director of his employer, although the management of the company was controlled by an affiliated entity (VetCor). Defendant left the business and sold its stock, but before doing so…
Lawrence v. UMLIC-Five Corp., 2007 NCBC 30 (N.C. Super. Ct. Sept. 14, 2007)(Diaz)
Plaintiff, who held a default judgment against a North Carolina corporation, sued its directors to collect from them personally. The claims included breach of fiduciary duty, fraudulent conveyance, failure to give notice of dissolution, and piercing the corporate veil.
The directors served discovery aimed at the validity of the amount of the judgment, which potentially…
State ex re. Long v. Custard, 2007 NCBC 26 (N.C. Super. Ct. Aug. 8, 2007)(Tennille)
The North Carolina Insurance Commissioner sued the defendants, shareholders of insurance carriers in liquidation, for breach of fiduciary duty. Defendants moved to dismiss, claiming that the claims were barred by the statute of limitations at the time of the filing of the petition for liquidation. The Court found the statute of limitations for breach of…
Heinitsh v. Wachovia Bank, 2007 NCBC 19 (N.C. Super. June 11, 2007)(Tennille)
This case involved a trustee caught between the income beneficiary and the remainder beneficiaries of a trust. The beneficiaries disputed whether proceeds of the sale of property were income, to be distributed to the income beneficiary, or principal, to be held in trust for the remainder beneficiaries. The trustee elected to put the money in…
Wachovia Capital Partners, LLC v. Frank Harvey Investment Family Limited Partnership, 2007 NCBC 7 (N.C. Super. Ct. Mar. 5, 2007)(Tennille)
Defendant, via a counterclaim, sought damages as a result of a concluded merger involving a Delaware LLC. The Court held that the decision whether to merge belonged to the Management Committee of the LLC, and that it would review that decision pursuant to the Business Judgment Rule.
Defendant contended that company insiders "stood on both…
Maurer v. Slickedit, Inc., 2006 NCBC 1 (N.C. Super. Ct. Feb. 3, 2005)(Tennille)
The Court began this final installment of the Maurer (2005 NCBC 1; 2005 NCBC 4) saga with a bit of ominous poetry: "O, what a tangled web we weave, When first we practise to deceive."
The first issue it addressed was whether bonus payments which the company had withheld from a terminated shareholder/employee were "wages"…
In re Pozen Shareholders Litigation, 2005 NCBC 7 (N.C. Super. Ct. Nov. 10, 2005)(Tennille)
The Court dismissed a series of shareholder derivative actions due to plaintiffs’ failure to make the required demand under Delaware law. Since the shareholders did not attack a specific action of the board, the Court undertook to determine "whether any of the directors were rendered ‘interested’ by any of the conduct alleged and, if so…