Breach of Fiduciary Duty Blogs

Sears CEO Settles Shareholder Lawsuit With $40 Million Payment Pledge

Sears has been a mainstay of the US retail economy since the 19th century, and while it is no longer the dominant force it was once was, it is still the twelfth largest retailer in the company. But in a move to maintain the company’s financial strength, the company sold 235 of its stores to a real-estate investment trust company called Seritage Growth Companies in 2015. These types of reorganizations and restructuring are of course by no means uncommon in this rapidly changing company, but Sears shareholders balked at the fact that Seritage was created by Sears CEO Eddie Lampert, meaning he was on both sides of the transaction. The shareholders brought suit against Seritage and Lampert, and the shareholder suit was settled earlier this month with an agreement that Lampert and Seritage would pay $40 million back to Sears on account of its shareholders.

The Questioned Deal Between Sears and Seritage

Seritage paid $2.6 billion to purchase the 235 Sears locations in 2015, and Sears agreed to pay rent to Seritage for continued use of the stores. The Sears shareholders who filed the lawsuit against the directors of Sears who approved the deal, among others, alleged that this deal was not in the interest of the shareholders but rather served to benefit Seritage. The complaint noted that Sears has neared bankruptcy in the intervening time since the deal was made while Seritage has profited off the deal.

The shareholders alleged that Lampert facilitated the deal and was the “driving force” behind it to benefit himself at the expense of the Sears shareholders by stripping the company of “its valuable core assets” in the form of the company’s real estate holdings in the store. The shareholders further alleged that other Sears directors ignored the interests of shareholders and were “acting at the behest” of Lampert in approving the deal.

The $40 million to be paid in the deal will come from the defendants and their insurers and the four named shareholders in the action will receive $10,000 apiece.

Experienced Representation in Your Shareholder Litigation Matter

The business litigation attorneys at Wagenseller Law Firm in downtown Los Angeles have extensive experience in representing businesses, corporations, directors, officers, and shareholders in shareholder disputes. We have worked with businesses and individuals throughout Southern California across a wide range of industries, including financial service entities, manufacturers, importers, retail stores, restaurants, entertainment entities, law firms, and more. Contact us today to discuss your breach of fiduciary duty matter.

Los Angeles Partnership Law: A Fiduciary’s Loyalty, Honesty

Los Angeles partnership litigation lawyers will be interested in a case from earlier this year entitled Feresi v. The Livery, LLC.  This case involved a lawsuit between members in a Limited Liability Company.  One member filed the lawsuit against the LLC’s president and his trust, contending that the president’s claim to a security interest in the member’s share was the result of a breach of fiduciary duty of good faith and fair dealing.  The trial court declared the president’s (trust’s) security interest null and void and enjoined the president from attempting to enforce the security interest.  The president (and trust) appealed.
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Partnership Breach of Fiduciary Duty: Attorney Update

Partnership and breach of fiduciary duty attorneys may have noticed a new California Court of Appeals case dealing with breach of fiduciary duty. This case arose from a real estate partnership in northern California in which four individuals entered into a partnership to purchase and develop a parcel of land into residential homes.  They had already subdivided the property into three lots but then the economy collapsed and the partners began squabbling.  The synopsis of the case reads as follows:  “Majority partners brought action for breach of contract and breach of fiduciary duties to partnership.  Minority partners cross-complained for breach of contract.”  The trial court entered judgment for a majority partner and the Court of Appeals affirmed.  [Agam v. Gavra (2015) 236 Cal.App.4th 91].
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Aiding and Abetting a Breach of Fiduciary Duty

The California Court of Appeal issued a recent case addressing aiding and abetting a breach of fiduciary duty.  The case is entitled Nasrawi v. Buck Consultants LLC (Nov. 6, 2014) 179 Cal.Rptr.3d 813, 14 Cal.Daily Op. Serv. 12,672, 2014 Daily Journal D.A.R. 14,927.

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Fiduciary Obligations: Moving Your Board From Good To Great

This morning I attended a presentation on the fiduciary obligations of non-profit Boards of Directors. The panelists were Darya Allen-Attar (Morgan Stanley), Cheryl A. Calhoun (CBIZ MHM LLC), Lisa Greer Quateman (Polsinelli) and Mary Adams O’Connell (Adams O’Connell, Inc.). The panelists, all active on nonprofit Boards of Directors including the American Lung Association, Westside Family YMCA and Children’s Hospital, spoke about conflicts of interest and other fiduciary obligations. Just because you are volunteering your time to a worth charity, you as a Director are still subject to duties of loyalty, duties of care and, in the non-profit world, duties of obedience. An excellent take away from the talk, which applies to your for-profit business as well as non-profits, is to identify the biggest risks to your organization. Oftentimes this is called the SWOT analysis (strengths, weaknesses, opportunities and threats). The standards of conduct for Directors in non-profit Boards is set forth in the California Corporations Code, sections 5210-5260.

Corporate Litigation: Are Your Directors Acting Fairly?

Corporate litigation attorneys are often involved in corporate litigation that challenges the fairness of corporate director and officer acts. What happens when corporate directors and officers have a conflict of interest and engage in transactions in which they have personal interests?

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