Fliegler v. Lawrence

Facts

One of the Defendant directors, acting in his individual capacity, purchased a lease option for antimony (metal) rights. He offered the rights to Agau but the directors agreed that Agau’s financial position would not allow the purchase. The director then transferred the rights to a company formed for the specific purpose of holding those rights. He then gave Agau a long-term option to purchase the holding company. A few months later, Agau’s directors voted to exercise the option. A majority of shareholders voted the same way, but the directors also comprised a majority of shareholders. Plaintiff argued that Defendant directors usurped a corporate opportunity for their own individual benefit, and that the transaction was inherently unfair. Defendants responded that their voted was ratified by shareholders, thereby shifting the burden of proof to Plaintiff to prove that the transaction was fair, but they also offered proof that it was fair.