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Keywords

fiduciarycorporationfiduciary duty

plaintiffappealfiduciarycorporationfiduciary dutyappellee

Related Cases

Broz v. Cellular Information Systems, Inc., 673 A.2d 148

Facts

Robert F. Broz, the President and sole stockholder of RFB Cellular, Inc. (RFBC), was also a director of Cellular Information Systems, Inc. (CIS), a competitor of RFBC. Broz acquired a cellular telephone service license known as the Michigan–2 Rural Service Area Cellular License, which was not offered to CIS due to its financial difficulties and lack of interest. CIS later sued Broz, claiming he usurped a corporate opportunity that rightfully belonged to them, despite the fact that CIS had expressed no interest in pursuing the license.

At the time of the conduct at issue in this appeal, Broz was also a member of the board of directors of plaintiff below-appellee, Cellular Information Systems, Inc. (“CIS”). CIS is a publicly held Delaware corporation and a competitor of RFBC.

Issue

Did Robert F. Broz breach his fiduciary duty to Cellular Information Systems, Inc. by acquiring the Michigan–2 license without presenting the opportunity to the CIS board?

Rule

A corporate director may not take a business opportunity for himself if the corporation is financially able to exploit the opportunity, has an interest or expectancy in it, and the director's self-interest conflicts with the corporation's interests. However, if the corporation has no interest or financial ability to pursue the opportunity, the director may take it for himself without breaching fiduciary duty.

The corporate opportunity doctrine represents but one species of the broad fiduciary duties assumed by a corporate director or officer. A corporate fiduciary agrees to place the interests of the corporation before his or her own in appropriate circumstances.

Analysis

The court analyzed whether CIS had an interest or financial ability to pursue the Michigan–2 opportunity. It found that CIS was in a precarious financial position and had no interest in the license, as it was actively divesting its cellular license holdings. Therefore, Broz was not required to present the opportunity to the CIS board, as there was no conflict of interest or usurpation of a corporate opportunity.

The court found that CIS was not financially capable of exploiting the Michigan–2 opportunity. Although the Court of Chancery concluded otherwise, we hold that this finding was not supported by the evidence.

Conclusion

The Supreme Court reversed the lower court's judgment, concluding that Broz did not breach his fiduciary duty because CIS had no interest or financial ability to pursue the Michigan–2 license.

Accordingly, the judgment of the Court of Chancery is REVERSED.

Who won?

Robert F. Broz prevailed in the case because the court found that he did not breach his fiduciary duty, as CIS had no interest or financial ability to pursue the opportunity.

Broz contends that the Court of Chancery erred in holding that he breached his fiduciary duties to CIS and its stockholders.

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