Here is a recent decision that is not a surprise under a traditional agent-principal analysis. Even so, it has to sting, because the corporation loses twice – first, when it was defrauded by the former president, and second when the corporation was sued by shareholders for the diminished value of their securities. The fact pattern …
Continue reading “ChinaCast Education Corporation – Fraud of Officer Imputed to Corporation”
The Delaware Supreme Court recently decided William Penn Partnership v. Saliba, a case in which there are no winners. In the case, one of the members breached his fiduciary obligations, but his conduct caused no damage. Nonetheless, the court awarded attorneys’ fees as an “equitable remedy.” In this author’s view, the award distorts the law …
Continue reading “William Penn Partnership – There are No Winners”
Another in a recent wave of California cases has hit the nail on the head, holding that the trustee can be held liable for debts, but not the trust itself. The reason is elementary – a trust is a relationship, not an entity. This rule has roots that run back hundreds of years. It explains …
Continue reading “Trustee Can be Held Liable for Debts As Alter Ego of Limited Liability Company”
In Ahcom, Ltd. v. Smeding, 2010 DJDAR 16125 (9th Cir. Oct. 21, 2010), the Ninth Circuit Court of Appeal considered when alter ego liability could be imposed on corporate shareholders. Applying California law in a bankruptcy context, the court provided contours to alter ego liability. The issue in Ahcom was whether “a creditor of a …
A recent article by attorney Thomas M. Madden compares the fiduciary obligations applicable to limited liability companies under the laws of five different states – Delaware, Massachusetts, New York, California, and Illinois. Mr. Madden concludes that, “A look at the five major states’ codes will quickly dispel any presumption that all states treat limited liability …
Attorneys Jim Weller and Alan Ytterberg published a recent article discussing an odd hybrid entity – the “private trust company.” As the authors explain, “Similar to a regulated trust company, an unregulated trust company is an entity formed under state law for the limited purpose of providing trust services to a single family.” A private …
The issue this week concerns the appropriate remedy when controlling shareholder(s) breach the fiduciary duties they owe to the other shareholders. An article by attorney William S. Monnin-Browder discusses whether courts should apply a minority interest discount in a forced sale. Background As explained in many published opinions, “stockholders in the close corporation owe one …
Continue reading “Minority Interest Discount for Breach of Corporate Fiduciary Duties”
A growing body of case law during the past 20 years has addressed the issue of whether and when corporate directors owe fiduciary duties to creditors. A California appellate court has finally weighed in on this issue, and provided clear guidance on the question. (We can only hope that the California Supreme Court will not …
Continue reading “Berg & Berg – California Obligations of Corporate Directors to Creditors”