Samuel R. McLaughlin and John Does 1-10, Plaintiffs and Appellants, v. Greg Schenk, Estate of Boyd Schenk, Anna Schenk, Cookietree, Inc., a Utah corporation, Harold Rosemann, and Gayle Schenk, Defendants and Appellees., 2009 UT 64

Summary

On review, the shareholder raised several issues contending the district court erred in rendering the summary judgment. The supreme court held that the president, as a close corporation shareholder, owed the minority shareholder individually a duty to act in the utmost good faith, but that he did not violate this duty because his actions did not thwart the minority shareholder's reasonable expectations; the minority shareholder was not a founding member who created the company with the expectation of employment, and while it was likely that his initial stock purchase allowance and the later stock purchase agreement were offered as an incentive or reward for his work performance, the purchase allowances were not inextricably tied to his employment, but a separate investment in the company. Additionally, waivers executed by the board and the shareholders of the corporation were contaminated by a conflict of interest, and the case needed to be remanded for a determination of whether the ...