Broz v. Cellular Information Systems, Inc.
673 A.2d 148 (1996)


Facts: Broz (D) was the president and sole stockholder of KFBC, a corporation engaged in the business of providing cellular service in the midwest. D was also a director of Cellular Information Systems, Inc, (P), a publicly held Delaware corporation and a competitor of KFBC. D's efforts have been devoted primarily to the business operations of KFBC. In April 1994, Mackinac Cellular Corp. sought to divest itself of Michigan-2 license in the area immediately adjacent to Michigan-4 which was operated by KFBC. A brokerage firm was contacted and it sought a list of potential purchasers. KFBC was put on that list as a potential buyer. The broker did not consider P to be a viable purchaser in light of recent difficult financial problems. At the time that the license was offered to D, P had just emerged from lengthy and contentious insolvency reorganization. During this time, P divested itself of fifteen separate cellular licenses and had even recently put up four more licenses for sale in 1994 leaving it with only five remaining licenses, all outside the midwest. D spoke to the CEO of P and it was indicated to D that P was not interested in the license. Another director was contacted and that director indicated that there was no interest on P's part. Even the corporate counsel and director of P was contacted to represent D on the pending purchase, and clearly let it be known that P was not interested in the purchase. Then six directors of P entered into a deal with PriCellular to sell their shares at $2 per share. The closing date for the purchase of P by PriCellular was delayed until November 9, 1994 and all during this time D negotiated to buy Michigan-2.

Issue: Does a corporate fiduciary breach his or her fiduciary duty by not considering the interests of a corporation proposing to acquire the corporation in reaching a decision to make a corporate purchase?

Rule:Under the corporate opportunity doctrine, it is not required that the director in question formally present the opportunity to his corporation’s board of directors if the corporation does not have an interest in or the financial ability to undertake the opportunity.

Holding:The Supreme Court, Veasey, C.J., held that: (1) determination of whether corporate fiduciary usurped corporate opportunity is fact-intensive and turns on, inter alia, ability of corporation to make use of opportunity and corporation's intent to do so; (2) there is no per se requiring presentation to board prior to acceptance of opportunity, if corporation does not have interest, expectancy or financial ability to pursue opportunity; and (3) on facts of case director was not required to consider interests of corporation proposing to acquire corporation in reaching decision whether or not to purchase license in question.

Analysis: The court reversed the judgment in favor of appellee corporation and the imposition of a constructive trust because appellant corporate director did not divert a corporate opportunity that properly belonged to appellee.