McLaughlin v. Schenk
299 P.3d 1139
Utah2013Background
- Greg Schenk purchased Cookietree shares in 1999 in violation of the 1991 Shareholder Agreement.
- 2005 Board and shareholder waivers (the 2005 Waivers) purported to waive provisions precluding the transfer.
- McLaughlin, a minority shareholder, sued; district court granted summary judgment based on the 2005 Waivers.
- This Court remanded in 2009 for a fairness determination due to tainted conflict of interest in the waivers.
- Post-remand actions (2009 Board ratification and 2010 shareholder actions) aimed to resolve the conflict; Legislature amended 16-10a-622(3) in 2010 indicating no fiduciary duties among shareholder-capacity acts, nonretroactively.
- The central legal questions include law-of-the-case limits on reconsideration, fiduciary duties now superseded by statute, and whether post-remand actions mooted the fairness hearing requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Law-of-the-case reconsideration | McLaughlin: retired ruling on fairness hearing binding law of the case. | Cookietree/Schenk: replacement judge may reconsider under law-of-the-case exceptions. | Replacement judge could reconsider; not bound by the prior order. |
| Fiduciary duties vs. statute | McLaughlin: McLaughlin I’s fiduciary duties apply to closely held shares. | Statute 16-10a-622(3) supersedes fiduciary duties among shareholders. | Statute supersedes McLaughlin I but is not retroactive, thus not dispositive here. |
| Mandate and post-remand actions | McLaughlin: remand required a fairness hearing, not post-remand actions. | Court could allow post-remand actions to resolve conflict of interest. | District court did not violate the mandate by considering post-remand actions. |
| Fairness hearing vs. ratification sufficiency | Post-remand actions could not cure conflict; fairness hearing required. | 2009 Board ratification mooted the need for a fairness hearing; summary judgment proper. | 2009 ratification mooted the need for a fairness hearing; summary judgment proper. |
Key Cases Cited
- McLaughlin v. Schenk, 2009 UT 64 (Utah (2009)) (held shareholders in closely held corps owe fiduciary duties; remanded for fairness analysis)
- Mid-Am. Pipeline Co. v. Four-Four, Inc., 2009 UT 43 (Utah (2009)) (law-of-the-case exceptions; discretionary vs mandatory reconsideration)
- IHC Health Servs., Inc. v. D & K Mgmt., 2008 UT 73 (Utah (2008)) (law-of-the-case as a discretionary tool; exceptions exist)
- Amax Magnesium Corp. v. State Tax Comm’n, 874 P.2d 840 (Utah 1994) (questions of mandate and correctness standard of review)
- Warne v. Warne, 2012 UT 13 (Utah (2012)) (statutory retroactivity considerations)