Sojitz America Capital Corp. v. Kaufman
141 Conn. App. 486
Conn. App. Ct.2013Background
- Sojitz America Capital Corporation sues derivative on Keystone against Kaufman.
- Keystone board: Kaufman, Alan Kaufman, Amazeen, Hammock; alleged false certifications to lenders.
- Plaintiff demanded board action; board rejected pursuing litigation as not in Keystone’s best interests.
- Derivation statute §33-724 governs dismissal if majority of qualified directors determine in good faith after inquiry that suit isn’t in best interests.
- Court treated §33-724 as mixed question of law and fact; board inquiry and qualifications central to dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether majority of qualified directors acted in good faith after reasonable inquiry. | Plaintiff argues directors were not qualified or did not act in good faith. | Defendants contend qualified directors determined in good faith after reasonable inquiry that suit wasn’t in Keystone’s best interests. | Yes; majority were qualified and acted in good faith after inquiry. |
| Whether the directors were independent/disinterested for qualification. | Plaintiff asserts directors had conflicts and were not disinterested. | Defendants contend pleadings insufficient to prove lack of qualification. | Directors Kaufman and Amazeen found qualified; Hammock potentially not but quorum satisfied. |
| Standard and scope of review for § 33-724 dismissal. | Court should scrutinize board process and independence more rigorously. | Section 33-724 is a business judgment rule analogue; limited review warranted. | Mixed question of law and fact; limited review consistent with business judgment framework. |
| Whether plaintiff adequately pleaded lack of good faith and reasonable inquiry under §33-724(c). | Plaintiff alleges lack of independent inquiry and reliance on defendant’s attorney. | Record shows board engaged counsel and reviewed documents; pleadings insufficient. | Plaintiff failed to meet heightened pleading standard; directors were qualified. |
Key Cases Cited
- Halebian v. Berv, 644 F.3d 122 (2d Cir. 2011) (discusses mixed review and independence in §7.44/MBA Act context)
- Frank v. LoVetere, 363 F. Supp. 2d 327 (D. Conn. 2006) (discusses limited inquiry and reliance on corporate officials)
- Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (pleading standards for derivative actions after demand)
- Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981) (classification of §7.44 motions as hybrid—summary judgment-like)
- Auerbach v. Bennett, 47 N.Y.2d 619 (N.Y. 1979) (business judgment rule does not bar independent inquiry of directors)
- Rosenfield v. Metals Selling Corp., 229 Conn. 771, 643 A.2d 1253 (1994) (expounds business judgment rule breadth in Connecticut)