Thomas Horras v. American Capital Strategies
2013 U.S. App. LEXIS 18232
8th Cir.2013Background
- Horras, an Iowa citizen, merged his home health care business with Auxi, Inc. and received 417,734 Auxi shares.
- ACS acquired control of Auxi around 2000–2001; in 2007 ACS began selling Auxi to Harden Health Care, without informing Horras.
- Horras did not receive compensation for his Auxi shares when the sale to HHC occurred.
- Horras asserted two claims: breach of fiduciary duty (Count I) and breach of contract (Count II) related to the sale and ACS’s role as majority shareholder.
- The district court granted ACS’s Rule 12(b)(6) motion to dismiss both claims and later denied Horras’s post-judgment motions for relief and leave to amend.
- On appeal, the court upheld dismissal of both counts, and denied Horras’s request for post-judgment leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ACS owed Horras a fiduciary duty and breached it | Horras contends majority-shareholder duties were breached by non-disclosure and sale. | ACS argues there is no pleading of a breach or of a fiduciary duty owed to Horras under Iowa law. | Breach claim dismissed; fiduciary duties not plausibly pled. |
| Whether Horras pled a contract between ACS and Horras or a valid third-party beneficiary contract | Horras argues he is a third-party beneficiary to a contract between ACS and HHC and was damaged by the sale. | No contract between ACS and Horras or intent to benefit Horras is alleged. | Contract claim dismissed. |
| Whether the district court abused its discretion in denying post-judgment leave to amend | Horras sought to amend post-judgment to cure deficiencies. | Amendment would be futile; delay and prior notice issues weigh against amendment. | No abuse of discretion; denial affirmed. |
| Application of Iowa law to the fiduciary duties in a majority-vs-minority context | Horras relies on Iowa authorities recognizing fiduciary duties of majority to minority in close corporations. | Conclude no established breach as pled; duties not sufficiently defined here. | Court treats duties as potentially applicable but finds pleading insufficient. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Supreme Court 2007) (pleading requires more than mere labels; plausibility standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (Supreme Court 2009) (plausibility requires factual content showing defendant liable)
- Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222 (Iowa 1998) (elements of contract claim required)
- Linge v. Ralston Purina Co., 293 N.W.2d 191 (Iowa 1980) (majority shareholders owe fiduciary duties to minority)
- Cookies Food Prods., Inc. v. Lakes Warehouse Distrib., Inc., 430 N.W.2d 447 (Iowa 1988) (majority fiduciary duties in corporate context)
- Baur v. Baur Farms, Inc., 832 N.W.2d 663 (Iowa 2013) (oppression, duty of care/loyalty, and minority protections)
- Midwest Dredging Co. v. McAninch Corp., 424 N.W.2d 216 (Iowa 1988) (intent to benefit third party in contract matters)
- Swierkiewicz v. Sorema N.A., 534 U.S. 506 (Supreme Court 2002) (notice pleading remains viable for certain claims)