Kurtz v. Clark
2012 OK CIV APP 103
| Okla. Civ. App. | 2012Background
- Shareholders of Efftee International, Inc. sue derivatively on behalf of Efftee/ETI alleging misuse of trade secrets to form a rival entity.
- Events occurred in Oklahoma; Clark and Bradley were ETI officers/shareholders involved in the dispute; plaintiffs claim knowledge and misrepresentations about demand on the corporations.
- TRO issued December 24, 2008 restraining destruction of evidence and disclosure of trade secrets; TRO dissolved April 3, 2009 for lack of undertaking.
- Arbitrations and a district court summary judgment centered on standing and whether a demand was communicated/refused, leading to a ruling that plaintiffs lacked standing to pursue derivative claims.
- District court awarded attorney fees to defendants under 12 O.S. 2011 § 1384.2; plaintiffs challenged both the summary judgment and the fee award; the appellate court reverses in part and remands for fee reconsideration.
- On appeal, court clarifies that standing issues and the proper use of the business judgment rule require further fact-finding on remand; overall holdings include reversal of summary judgment and vacatur of fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs had standing to pursue a derivative action | Plaintiffs claim a proper demand was made and refused; ETI later allegedly supported the suit. | Corporations were not properly subjected to a valid demand; even if demand existed, corporate action negated standing. | Summary judgment reversed; standing issue remanded in limited form for fee determination. |
| Whether summary judgment was proper given the demand and business judgment considerations | The board failed to conduct a proper investigation; genuine issues of material fact exist about the board's consideration after demand. | The business judgment rule should shield dismissal based on lack of standing and undisputed lack of proper investigation. | Summary judgment reversed; issues remain regarding board investigation and decision-making on remand. |
| Whether the district court properly awarded attorney fees under § 1384.2 | Statute does not mandate fees simply because TRO was found not to have been properly granted; discretion applies. | Fees may be recoverable where TRO should not have been entered, supporting a fee award. | Fee award vacated and remanded for proper discretion and calculation of reasonable fees under the statute. |
Key Cases Cited
- Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981) (business judgment context and derivative action standards)
- Hargrave v. Canadian Valley Elec. Coop., Inc., 792 P.2d 50 (Okla. 1990) (standing and derivative suit prerequisites emphasize corporate action frame)
- In re American Int'l Group, Inc., 965 A.2d 763 (Del. Ch. 2009) (demand as a protective device and board investigation standards)
- Spiegel v. Buntrock, 571 A.2d 767 (Del. 1990) (business judgment rule considerations in derivative actions)
- Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726 (Del. 1988) (demand rule and management prerogative in derivative suits)