Kollman v. Cell Tech International, Inc.
250 Or. App. 163
| Or. Ct. App. | 2012Background
- Kollman, a Cell Tech shareholder, sued Carpenter (CEO) and Hateley (board chair) for fiduciary breaches, bringing direct and derivative claims; Cell Tech was a defendant in the trial court.
- A jury verdict yielded a $40 million direct-fiduciary-duty judgment against Carpenter and Hateley; Kollman did not prevail on other claims.
- Carpenter and Hateley orchestrated a HumaScan reverse merger and related steps to finance tax issues, impact Kollman’s role, and increase Carpenter’s control and compensation.
- Carpenter and Hateley allegedly concealed the nature of the Kazi share sale, failed to complete SEC registration, and diluted Kollman’s ownership, harming him personally rather than the corporation overall.
- Kollman alleged the harm was direct to him as an individual shareholder, not merely a dilution of corporate value; the defense argued the claim was derivative (equity dilution).
- This appeal addressed standing/justiciability issues, a desired substitution of the Special Litigation Committee for derivative claims, and whether the court correctly treated the claim as direct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the claim a direct or derivative action? | Kollman contends the harm was to him individually as a shareholder, not to the corporation. | Carpenter asserts a dilution-type claim is derivative. | The claim was properly treated as direct. |
| Should the direct claim have been tried in equity or at law? | Kollman maintained the trial court correctly allowed jury consideration; the claim was legal damages. | Carpenter urged equity treatment. | Trial court properly submitted to the jury; damages claims pursued at law. |
| Did Kollman need to prevail on causation/damages for the direct claim? | Kollman provided evidence of causation linking the Kazi transaction to his damages. | Carpenter challenged the sufficiency of causation proof. | Evidence supported the causation for the direct claim. |
| Is Cell Tech's appeal justiciable or adversarially real to Carpenters/Hateley claims on derivative issues? | Kollman/Cross-appeal position on derivative claims should proceed; the Special Litigation Committee substituted for Kollman on derivative claims. | Cell Tech cannot assert a cross-claim absent proper adversity and standing; issues are not justiciable. | The derivative-claim cross-appeal issue is not justiciable for Cell Tech as presented. |
| Did the Special Litigation Committee have standing to pursue derivative claims on appeal after substitution? | The Committee substituted for Kollman should pursue the derivative claims on behalf of Cell Tech’s shareholders. | Settlement and substitution issues render the Committee’s cross-appeal moot or misaligned with the record. | As presented, the Committee’s derivative-claims posture is not viable on appeal. |
Key Cases Cited
- Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (test distinguishing direct vs. derivative actions by who suffered harm and who benefits)
- Lipton v. News International, Plc., 514 A.2d 1075 (Del. 1986) (illustrates 'special injury' concept, later abandoned in Tooley)
- Tri-Star Pictures, Inc., 634 A.2d 319 (Del. 1993) (direct vs derivative analysis based on harm to the stockholders)
- Rosette v. Gentile, 906 A.2d 91 (Del. 2006) (exception to dilution rule where controlling shareholder expropriates for benefit at minority expense)
- Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007) (explains when expropriation and dilution may support a direct claim despite lack of increased ownership)
- In re Oracle Corp. Derivative Litigation, 808 A.2d 1206 (Del. Ch. 2002) (special litigation committee mechanism for derivative litigation)