Brief Fact Summary. Appellants, Leonard Sugarman and Statler Industries, Inc., are appealing a judgment for Appellee minority shareholders, Jon Sugarman et al., for damages that resulted from Appellants freezing out Appellees from corporate revenues.
Synopsis of Rule of Law. In order to prove that majority shareholders are freezing out minority shareholders from financial benefits, the minority shareholders need to demonstrate a pattern of majority decisions that collectively indicate a plan to withhold the benefits to the minority.
Issue. The issue is whether Appellants violated a fiduciary duty owed to Appellee minority shareholders by freezing them out from financial benefits.
Held. The United States Court of Appeals for the First Circuit held that the lower court was correct in holding Appellants liable for damages to the Appellee shareholders. Although the court declined to hold that any one factor alone established a freezing out, they held that the collective volume of the devices employed by Appellants demonstrated a freezing out of the minority shareholders. The only defense Appellants had was to argue that the trial court was in error in how it viewed the facts behind Leonard’s salary, his father’s pension and the amount offered per share.