Pers. Touch Holding Corp. v. Glaubach - No. 11199-CB, 2019 Del. Ch. LEXIS 66 (Ch. Feb. 25, 2019)

Rule:

Consistent with its doctrinal moorings in the duty of loyalty, the line of business concept was intended to be applied flexibly. In Guth, the Delaware Supreme Court has stated that the phrase is not within the field of precise definition, nor is it one that can be bounded by a set formula. Rather, it has a flexible meaning, which is to be applied reasonably and sensibly to the facts and circumstances of the particular case, and latitude should be allowed for development and expansion. Delaware courts accordingly have broadly interpreted the nature of the corporation's business when determining whether a corporation has an interest in a line of business. 

Facts:

This action involves a series of disputes between Personal Touch Holding Corp., a provider of home healthcare services, and one of its co-founders, Felix Glaubach. In April 2015, after tensions had been mounting between Glaubach and his fellow directors for some time over the company's management, Glaubach announced to the company's board of directors that he had purchased a building the company was interested in acquiring (the "AAA Building") and then offered to lease the building to the company. About two months later, the company terminated Glaubach's employment agreement and removed him as President of the company for allegedly usurping a corporate opportunity and other reasons. Personal Touch then filed this action, seeking a declaration that Glaubach was validly removed from office, damages for his alleged breaches of fiduciary duty, and disgorgement of three years of his compensation under the New York faithless servant doctrine.

Issue:

Did Glaubach breach his fiduciary duty of loyalty?

Answer:

Yes.

Conclusion:

The court concluded that Glaubach breached his fiduciary duty of loyalty in several respects, including through his usurpation of the opportunity to acquire the AAA Building, and that the company is entitled to a declaration that Glaubach was validly removed as President of the company and to $2,735,000 in damages. With respect to a number of other claims the company advanced against Glaubach, the court concludes that Glaubach did not breach his fiduciary duties and that disgorgement of his compensation under the faithless servant doctrine is not warranted.