The following synopsis was prepared by Chauna Abner, an attorney in the Delaware office of Eckert Seamans.
In Leased Access Preservation Association v. Ivan Thomas, et al., C.A. No. 2019-0310-KSJM, Order (Del. Ch. Jan. 8, 2020), a non-profit, non-stock corporation filed suit against Ivan Thomas, a former board member of the plaintiff, alleging, in part, that Thomas breached his fiduciary duties of loyalty and good faith by: (1) misappropriating or usurping a corporate opportunity for his own benefit and to the detriment of the plaintiff; and (2) using confidential information Thomas obtained as a director of the plaintiff to compete against the plaintiff in a bid for a contract.
Brief Overview of Case
More specifically, the complaint alleged that from 2014 through March 2019, the plaintiff leased Channel 28 from the City of Wilmington. The complaint also alleges that from December 2017 through January 2019, Thomas served on the plaintiff’s board of directors. In November 2018, the City of Wilmington began soliciting proposals for the management of Channel 28. The complaint alleges that Plaintiff submitted its bid to manage the channel — and Thomas, while still on the Board, submitted a competing bid on behalf of his media company. Thomas and the plaintiff were the only two bidders. The City of Wilmington awarded the contract to Thomas’s company.
Elements of Claim
In deciding whether to dismiss the complaint, first the Court explained the well-known elements a plaintiff must prove to establish a claim for misappropriating or usurping a corporate opportunity:
(1) the corporation is financially able to exploit the opportunity; (2) the opportunity is within the corporation’s line of business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimical to his duties to the corporation.
Id. at 6 (quoting Broz v. Cellular Info. Sys., Inc., 673 A.2d 148, 155 (Del. 1996)).
Court’s Reasoning
The Court distinguished the facts of this case from the facts of Triton Constr. Co. v. Eastern Shore Elec. Serv., Inc., 2009 WL 1387115 (Del. Ch. May 18, 2009), where a defendant employee who worked simultaneously for a competing business submitted several bids for the competing business at the same time the plaintiff submitted bids. In that case, the court held that the plaintiff’s own submissions of bids on those projects precluded it from claiming that the former employee usurped or diverted those projects under the corporate opportunity doctrine since it was arguable whether any one contractor would have had a reasonable expectation that its bid would be accepted on any one job.
The Court resolved all facts in favor of the plaintiff, as required in the procedural context of a motion to dismiss under Rule 12(b)(6), and ultimately held that “[g]iven the nature of this market and the limited pool of bidders, it is reasonably conceivable that LAPA had a reasonable expectation in obtaining the Channel 28 contract.” The Court further held that had Thomas not interfered, there was a reasonable probability that the plaintiff would have been awarded the contract as the only remaining bidder.