BETH PROFFITT v. SMOKY MOUNTAIN WOODCARVERS SUPPLY, INC., ET AL. (Tenn. Ct. App. May 15, 2012)
This appeal arises from the termination of Beth Proffitt (“Plaintiff”) from employment at Smoky Mountain Woodcarvers Supply, Inc. (“the Corporation”). Plaintiff, a minority shareholder in the Corporation, sued the Corporation, as well as the other shareholders Mac Proffitt and Ray Proffitt (collectively, “the Defendants”) in the Circuit Court for Blount County (“the Trial Court”). The Trial Court bifurcated the issues of liability and damages.
Plaintiff alleged, among other things, that the Defendants breached their fiduciary duty to her. After a trial on the matter of liability, the Trial Court found the Defendants liable for breach of fiduciary duty. After the hearing on damages, the Trial Court awarded damages to Plaintiff, including lost salary and bonus. The Trial Court also awarded Plaintiff her attorney’s fees. The Defendants appeal.
We find that the Trial Court did not err in finding that the Defendants did breach their fiduciary duty to Plaintiff. We, however, reverse the award of attorney’s fees to Plaintiff. Otherwise, we affirm the judgment of the Trial Court.
Opinion available at:
https://www.tba.org/sites/default/files/proffittb_051512.pdf
Showing posts with label Breach of Fiduciary Duty. Show all posts
Showing posts with label Breach of Fiduciary Duty. Show all posts
Tuesday, May 22, 2012
Tuesday, March 20, 2012
Court reviews breach of fiduciary duty, breach of contract, and other issues in a case involving an employee's termination
CYNTHIA H. KOVACS-WHALEY, DIRECTOR AND SHAREHOLDER OF WELLNESS SOLUTIONS, INC. v. WELLNESS SOLUTIONS, INC. ET AL. (Tenn. Ct. App. March 19, 2012)
Plaintiff, an employee, shareholder, and director of Wellness Solutions Inc., filed this action against the Company and shareholders Steven Scesa and Laura Reaves following the termination of Plaintiff’s employment with Wellness Solutions, Inc., asserting a shareholder derivative action and claims for breach of fiduciary duty and duty of good faith.
Following her termination and the initiation of this action, the Company exercised a call option contained within the Shareholders’ Agreement and purchased Plaintiff’s stock. Plaintiff then amended her complaint to include claims for breach of contract and false light invasion of privacy against Mr. Scesa.
The trial court summarily dismissed all of Plaintiff’s claims. We reverse the summary dismissal of Plaintiff’s claim for breach of contract finding there are genuine issues of material fact. We also reverse the summary dismissal of Plaintiff’s claim for false light invasion of privacy finding that Mr. Scesa, as the moving party, failed to negate the essential element of damages or demonstrate that Plaintiff cannot prove the essential element of damages at trial.
We affirm the summary dismissal of Plaintiff’s claims for breach of fiduciary duty, breach of the duty of good faith, and breach of the duty of loyalty upon the finding the Defendants demonstrated that the business judgment rule applies to their decisions at issue, which negates an essential element of each of these claims. Further, we deny Defendants’ request for attorneys’ fees pursuant to Tennessee Code Annotated § 47-56-401(c) upon the finding that Plaintiff did not properly bring a shareholder’s derivative action.
Opinion available here:
https://www.tba.org/sites/default/files/kovacs-whaleyc_031912.pdf
Plaintiff, an employee, shareholder, and director of Wellness Solutions Inc., filed this action against the Company and shareholders Steven Scesa and Laura Reaves following the termination of Plaintiff’s employment with Wellness Solutions, Inc., asserting a shareholder derivative action and claims for breach of fiduciary duty and duty of good faith.
Following her termination and the initiation of this action, the Company exercised a call option contained within the Shareholders’ Agreement and purchased Plaintiff’s stock. Plaintiff then amended her complaint to include claims for breach of contract and false light invasion of privacy against Mr. Scesa.
The trial court summarily dismissed all of Plaintiff’s claims. We reverse the summary dismissal of Plaintiff’s claim for breach of contract finding there are genuine issues of material fact. We also reverse the summary dismissal of Plaintiff’s claim for false light invasion of privacy finding that Mr. Scesa, as the moving party, failed to negate the essential element of damages or demonstrate that Plaintiff cannot prove the essential element of damages at trial.
We affirm the summary dismissal of Plaintiff’s claims for breach of fiduciary duty, breach of the duty of good faith, and breach of the duty of loyalty upon the finding the Defendants demonstrated that the business judgment rule applies to their decisions at issue, which negates an essential element of each of these claims. Further, we deny Defendants’ request for attorneys’ fees pursuant to Tennessee Code Annotated § 47-56-401(c) upon the finding that Plaintiff did not properly bring a shareholder’s derivative action.
Opinion available here:
https://www.tba.org/sites/default/files/kovacs-whaleyc_031912.pdf
Thursday, March 24, 2011
Court Reviews Whether Plaintiff Sufficiently Alleged the Futility of Demanding a Board of Directors to Initiate a Lawsuit
IN RE HEALTHWAYS, INC. DERIVATIVE LITIGATION (Tenn. Ct. App. March 15, 2011)
Plaintiff in shareholder derivative action appeals the dismissal of his suit alleging breaches of fiduciary duty and other misconduct, including insider trading, by current and former officers and directors of corporation. Plaintiff filed suit without first making demand on the board of directors of the corporation that the directors initiate the lawsuit. Defendants moved to dismiss the suit on the ground that plaintiff failed to allege with requisite particularity that such demand would have been futile. We affirm the dismissal of the action.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/healthways_COR_032411.pdf
Plaintiff in shareholder derivative action appeals the dismissal of his suit alleging breaches of fiduciary duty and other misconduct, including insider trading, by current and former officers and directors of corporation. Plaintiff filed suit without first making demand on the board of directors of the corporation that the directors initiate the lawsuit. Defendants moved to dismiss the suit on the ground that plaintiff failed to allege with requisite particularity that such demand would have been futile. We affirm the dismissal of the action.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/healthways_COR_032411.pdf
Friday, February 25, 2011
Court Reviews an Interlocutory Appeal Regarding Class Certification
DONALD J. ROBERTS IRA, ET AL. v. PHILLIP H. MCNEILL, SR., ET AL. (Tenn. Ct. App. February 23, 2011)
This is an interlocutory appeal from a class certification. The named plaintiffs, former owners of preferred stock in Equity Inns, Inc., filed a class action against the company's former directors. Their amended complaint asserted breaches of the fiduciary duties allegedly owed to the preferred shareholders during the negotiation and approval of a merger. The trial court granted the plaintiffs' motion for class certification with respect to "[a]ll holders of Equity Inns preferred stock as of June 21, 2007." We vacate and remand for further consideration.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/robertsd_022311.pdf
This is an interlocutory appeal from a class certification. The named plaintiffs, former owners of preferred stock in Equity Inns, Inc., filed a class action against the company's former directors. Their amended complaint asserted breaches of the fiduciary duties allegedly owed to the preferred shareholders during the negotiation and approval of a merger. The trial court granted the plaintiffs' motion for class certification with respect to "[a]ll holders of Equity Inns preferred stock as of June 21, 2007." We vacate and remand for further consideration.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/robertsd_022311.pdf
Friday, December 17, 2010
TN Supreme Court Reviews Whether a Creditor May Bring a Direct Cause of Action Against an Insolvent Corporation’s Directors and Officers
MICHAEL SANFORD v. WAUGH & COMPANY, INC. ET AL. (Tenn. December 17, 2010)
The primary issue presented in this appeal is whether an individual creditor of an insolvent corporation may bring a direct cause of action for breach of fiduciary duty against the corporate directors and officers.
We hold that a creditor of an insolvent corporation may not bring a direct claim, only a derivative claim, against officers and directors for breach of the fiduciary duties they owe to the corporation.
We adopt the reasoning of the Delaware Supreme Court in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), observing that corporate creditors are adequately protected by existing law, and that recognizing a new direct cause of action is unnecessary and would impede corporate governance.
We further hold that the trial court properly excluded evidence of conspiracy to interfere with contract and dismissed the claim for punitive damages. The judgment of the Court of Appeals is reversed.
Opinion available at:
http://www.tba2.org/tba_files/TSC/2010/sanfordm_121710.pdf
The primary issue presented in this appeal is whether an individual creditor of an insolvent corporation may bring a direct cause of action for breach of fiduciary duty against the corporate directors and officers.
We hold that a creditor of an insolvent corporation may not bring a direct claim, only a derivative claim, against officers and directors for breach of the fiduciary duties they owe to the corporation.
We adopt the reasoning of the Delaware Supreme Court in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), observing that corporate creditors are adequately protected by existing law, and that recognizing a new direct cause of action is unnecessary and would impede corporate governance.
We further hold that the trial court properly excluded evidence of conspiracy to interfere with contract and dismissed the claim for punitive damages. The judgment of the Court of Appeals is reversed.
Opinion available at:
http://www.tba2.org/tba_files/TSC/2010/sanfordm_121710.pdf
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