A corporate officer or director may not take a business opportunity for his own if: (1) the corporation is financially able to exploit the opportunity; (2) the opportunity is within the corporation's line of business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimicable to his duties to the corporation.
After a corporate director purchased a cellular telephone service license that would have operated for the benefit of the corporation, the corporation brought an action against the director to seek equitable relief on the grounds that the purchase constituted a usurpation of a corporate opportunity that allegedly belonged to the corporation. The trial court ruled in favor of the corporation and imposed a constructive trust against the agreement. The director sought review.
Did the corporate director have the duty to formally present the purchase opportunity to the corporation's board?
The Court held that the lower court erred as a matter of law when it held that appellant corporate director had a duty to formally present the purchase opportunity to appellee's board. The court also held that the trial court erred in its application of the corporate opportunity doctrine under the facts of the case, where appellee had no interest or financial ability to acquire the opportunity. The court held that appellant corporate director was not required to consider the contingent and uncertain plans of a third party that sought to acquire appellee in reaching his determination of how to proceed.