Lugenbeal v. Stupak
2016 Ohio 7408
| Ohio Ct. App. | 2016Background
- Randall Lugenbeal was a minority shareholder of DEI Incorporated; in 2013 he signed over his shares to DEI after they were seized to satisfy a judgment—those shares were effectively worthless when transferred.
- In 2015 Lugenbeal sued DEI and two officers (CFO Jeff Stupak and EVP William Speelman), alleging breach of fiduciary duty, civil conspiracy, and violation of R.C. 1701.93 (issuing false documents about shares).
- Defendants moved for summary judgment; plaintiff submitted certain domestic-relations transcripts and a court decision, which the trial court excluded as hearsay but admitted Stupak’s testimony/affidavit as party admissions.
- Trial court granted summary judgment: held fiduciary-duty and conspiracy claims were shareholder-derivative (plaintiff was no longer a shareholder), and plaintiff failed to show a statutory violation under R.C. 1701.93.
- On appeal the court affirmed: plaintiff could not bring derivative claims as a nonshareholder, Crosby v. Beam’s minority-shareholder exception did not apply because defendants were not majority shareholders, and plaintiff presented no evidence that officers knowingly issued false K-1s.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach-of-fiduciary-duty claim could proceed individually | Lugenbeal: officers’ bad-faith management rendered his interest worthless and harmed him individually | Defendants: claim attacks corporate injury and is derivative; plaintiff is not a shareholder | Claim is derivative; nonshareholder cannot maintain it; summary judgment affirmed |
| Whether civil-conspiracy claim could proceed individually | Lugenbeal: officers conspired to injure him and DEI | Defendants: conspiracy claim targets corporate injury and is derivative | Claim is derivative; summary judgment affirmed |
| Whether R.C. 1701.93 was violated (false tax/share documents) | Lugenbeal: K-1s falsely showed his shares had value despite being worthless when transferred | Defendants: K-1s were truthful; officers lacked knowledge/intent to deceive | No evidence officers knowingly issued false documents; summary judgment for defendants |
Key Cases Cited
- Adair v. Wozniak, 23 Ohio St.3d 174, 492 N.E.2d 426 (Ohio 1986) (only the corporation may complain of injuries sustained by the corporation; shareholder suits that seek redress for corporate injury are derivative)
- Crosby v. Beam, 47 Ohio St.3d 105, 548 N.E.2d 217 (Ohio 1989) (minority shareholders may bring direct fiduciary-duty claims against majority shareholders who exploit their control; exception to derivative rule)