In Roels v. Valkenaar, a shareholder filed a shareholder derivative suit against former and current officers and directors of the company based on multiple claims of breach of fiduciary duty. No. 03-19-00502-CV, 2020 Tex. App. LEXIS 6684 (Tex. App.—Austin August 20, 2020, no pet. history). The defendants filed a motion to dismiss, and the trial court denied it. The defendants appealed, and the court of appeals reversed in part and affirmed in part.

The plaintiffs’ first claim dealt with certain interested-direction transactions that were loans from the company. The court dismissed these claims because the evidence showed that regarding one transaction that there was director consent to the loan and regarding the other loans that there was not sufficient evidence of damages. The court stated:

Self-dealing (i.e., an “interested transaction”) may constitute breach of an officer’s or director’s fiduciary duty to the corporation. However, we need not determine whether the shareholders met their prima facie burden as to the element of breach because we conclude that they have not met the burden as to the element of damages. To prove the damage-to-plaintiff or benefit-to defendant element of a claim for breach of fiduciary duty based on self-dealing, a plaintiff must demonstrate that the fiduciary obtained a benefit for itself either at the expense of its principal or without equally sharing the benefit with the principal. While the shareholders have alleged in conclusory fashion that the loans contained “non-market terms” and have “disproportionately benefitted” Roels and Barshop, they have not identified any specific harm to the Company or benefit to the defendants as a direct result of the loans.

Continue Reading Court Addressed A Shareholder Derivative Suit Against Officers And Directors For Self-Interested Transactions, Misuse Of Company Assets, And Dereliction Of Duties

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