APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION
522 N.E.2d 172, 168 Ill. App. 3d 1, 118 Ill. Dec. 717 1988.IL.309
Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding.
JUSTICE SCARIANO delivered the opinion of the court. HARTMAN, P.J., and STAMOS, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SCARIANO
Plaintiff brought this action for restitution and other relief, alleging wrongdoing by corporate fiduciaries in connection with the corporation's sale of one of its businesses. Plaintiff also alleges that this wrongdoing was fraudulently concealed from him until after he had sold his stock and after the corporation merged with another company. The trial court dismissed plaintiff's second amended complaint, ruling that the fiduciary duties owed and allegedly violated by the defendants related only to plaintiff's status as a shareholder and that defendants' alleged breach of their duties resulted in corporate claims rather than personal claims of the shareholders. Plaintiff appeals, arguing that the trial court erred in holding that a former shareholder cannot maintain an action against corporate fiduciaries where the misconduct and resulting damage were fraudulently concealed until after the shareholder sold his stock and after the merger of the corporation into a surviving corporation.
Plaintiff Weil is a former stockholder of defendant Northwest Industries, Inc. He brought this action on behalf of himself and the class of Northwest shareholders; however, the class was never certified. Plaintiff alleges that in 1983 Northwest was considering selling its wholly owned subsidiary, Microdot, Inc. Albert Mendez, a prospective purchaser, communicated to Richard Strubel, Northwest's president, his desire to purchase Microdot for a price approximately equal to its book value of $145 million. During July and August 1983, Strubel and Mendez negotiated over the price for which Microdot could be purchased; Strubel informed Mendez that no offer less than book value would be considered.
In October 1983, Northwest contracted with defendant Goldman, Sachs & Co. to have that company prepare a financial analysis of Microdot in order to determine its fair market value. Defendant John Roberson, of Goldman, Sachs' Chicago office, was to compile and transmit Microdot's financial information to Goldman, Sachs' New York office; but Roberson never did so. As a result, Goldman, Sachs never completed the valuation of Microdot, and neither Northwest nor plaintiff was advised of Microdot's fair market value. In October 1983, Strubel terminated all communications with Mendez.
On January 4, 1984, Northwest announced that it had sold Microdot in a leveraged buyout to Strubel and his investor group of Microdot executives for $121 million, approximately $24 million less than its fair market value. Northwest took a $24 million write-off on the sale of Microdot, and John Roberson left Goldman, Sachs, to become a director of Microdot.
Northwest's shareholders were not informed that a prospective purchaser was willing to pay book value for the company, nor were they told of Strubel's statement that no offer less than book value would be accepted. On June 26, 1984, plaintiff sold his shares of Northwest on the open market. During July 1985, Northwest was merged into Farley/Northwest Acquisition Corporation and Farley/Northwest Subsidiary Corporation (collectively Farley).
The trial Judge dismissed plaintiff's second amended complaint in March 1987, holding that he failed to allege facts indicating that he was bringing an action for personal claims rather than for corporate claims against the defendants. Plaintiff appeals from that order.
Plaintiff claims that he has been injured by the diminution in the value of his stock as a result of the sale of Microdot for less than its fair market value. In his complaint he alleges conflict of interest, the taking of a corporate opportunity, waste of corporate assets, breach of fiduciary duty and breach of the contract between Northwest and Goldman, Sachs. The trial court dismissed plaintiff's second amended complaint, holding that plaintiff's loss was one which was suffered in common with other shareholders and thus the cause of action belonged to the corporation. A shareholders derivative suit was thus the proper procedure to follow. The trial court relied on Zokoych v. Spalding (1976), 36 Ill. App. 3d 654, 344 N.E.2d 805, in making its decision.
"Where there is no showing that plaintiff himself had been injured in any capacity other than in common with his fellow stockholders, the cause of action belongs to the corporation [Citations], and a stockholder may not seek relief on his own behalf. However, this general principle has no application where the wrongful acts are not only against the corporation but are also violations of a duty arising from a contract or otherwise, and owed directly by the wrongdoer to the stockholder. [Citation.] A suit brought by a stockholder upon a personal claim is by its nature distinguishable from a proceeding to recover damages or other relief for the corporation [Citation.] Not every allegation of wrongdoing is a Simon-pure charge of individual injury, but a court must preliminarily determine if the ...