Case Title: Klinicki v. Lundgren

Citation: 298 Or. 662, 695 P.2d 906

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1985-02-20T00:00:00Z

Document:
695 P.2d 906 (1985)
298 Or. 662
F.R. KLINICKI, Petitioner On Review,
v.
Kim S. LUNDGREN, Berlinair, Inc., an Oregon Corporation, and Air Berlin Charter Company, an Oregon Corporation, Respondents On Review. F.R. Klinicki, Respondent On Review,
v.
Kim S. Lundgren, Berlinair, Inc., an Oregon Corporation, Cross-Respondent, and Air Berlin Charter Company, an Oregon Corporation, Petitioner On Review.
TC A7810-16086/CA A20084.

Supreme Court of Oregon, In Banc.
Argued and Submitted September 5, 1984.
Decided February 20, 1985.
*908 Brad Littlefield, of Goldsmith, Siegel, Engel & Littlefield, Portland, and Lloyd B. Egenes, of O'Gara, Friedman, Egenes & Burke, San Francisco, Cal., argued the cause and filed a petition and response for petitioner on review/respondent on review F.R. Klinicki.
Janet A. Metcalf, of English & Metcalf, Portland, argued the cause and filed a petition and response for petitioner on review/respondent on review Air Berlin Charter Co.
JONES, Justice.
The factual and legal background of this complicated litigation was succinctly set forth by Chief Judge Joseph in the Court of Appeals opinion as follows:
ABC appealed to the Court of Appeals contending that it did not usurp a corporate opportunity of Berlinair. Plaintiff cross-appealed from the trial court's dismissal of the punitive damages claim and from the entry of judgment in favor of Lundgren notwithstanding the verdict on that issue. The Court of Appeals affirmed the trial court on all issues.
ABC petitions for review to this court contending that the concealment and diversion of the BFR contract was not a usurpation of a corporate opportunity, because Berlinair did not have the financial ability to undertake that contract. ABC argues that proof of financial ability is a necessary part of a corporate opportunity case and that plaintiff had the burden of proof on that issue and did not carry that burden.
There is no dispute that the corporate opportunity doctrine precludes corporate fiduciaries from diverting to themselves business opportunities in which the corporation has an expectancy, property interest or right, or which in fairness should otherwise belong to the corporation. See Henn & Alexander, Laws of Corporations 632-37, § 237 (3rd ed. 1983). The doctrine follows from a corporate fiduciary's duty of undivided loyalty to the corporation.[2] ABC agrees that, unless Berlinair's financial inability to undertake the contract makes a difference, the BFR contract was a corporate opportunity of Berlinair.[3]
We first address the issue, resolved by the Court of Appeals in Berlinair's favor, of the relevance of a corporation's financial ability to undertake a business opportunity to proving a diversion of corporate opportunity *911 claim. This is an issue of first impression in Oregon.
The Court of Appeals held that a corporation's financial ability to undertake a business opportunity is not a factor in determining the existence of a corporate opportunity unless the defendant demonstrates that the corporation is technically or de facto insolvent. Without defining these terms, the Court of Appeals specifically placed the burden of proof[4] as to this issue on the fiduciary by saying: "To avoid liability for usurping a corporate opportunity on the basis that the corporation was insolvent, the fiduciary must prove insolvency." 67 Or. App. at 165, 678 P.2d  at 1254. The Court of Appeals then concluded "that ABC usurped a corporate opportunity belonging to Berlinair when, acting through Lundgren, the BFR contract was diverted" because nothing in Lundgren's testimony or otherwise in the record suggested that Berlinair was insolvent or was no longer a viable corporate entity. 67 Or. App. at 166, 678 P.2d  at 1254. Accordingly, the Court of Appeals held that the constructive trust, injunction, duty to account and other relief granted by the trial court against ABC were appropriate remedies.
One commentator, Daniel Walker, in Legal Handles Used to Open or Close the Corporate Opportunity Door, 56 NW UL Rev 608 (1961), wrote that few areas of the law are as plagued with platitudes as the fiduciary responsibility of corporate officers and directors. He noted that the Supreme Court of the United States, seemingly caught up in its enthusiasm for such platitudes, strings together a whole series of them quoting from Pepper v. Litton, 308 U.S. 295, 311, 60 S. Ct. 238, 247, 84 L. Ed. 281, 291-92 (1939):
Walker then commented:
Before proceeding further our initial task must be to define what is meant by "corporate opportunity," and to determine when, if ever, a corporate fiduciary may take personal advantage of such an opportunity. Our resolution of this case will be limited to announcing a rule to be applied when allegations of usurpation of a corporate opportunity are made against a director of a close corporation. The determination of a rule to apply to similar situations arising between a director and a publicly held corporation presents problems and concepts which may not necessarily require us to apply an identical rule in that similar but distinguishable context.
As we mentioned at the outset, this issue is a matter of first impression in this state. While courts universally stress the high standard of fiduciary duty owed by directors and officers to their corporation, there are distinct schools of thought on the circumstances in which business opportunities may be taken for personal advantage. One group of jurisdictions severely restricts the corporate official's freedom to take advantage of opportunities by saying that the ability to undertake the opportunity is irrelevant and usurpation is essentially prohibited; other jurisdictions use a test which gives relatively wide latitude to the corporate official on the theory that financial ability to undertake a corporate opportunity is a prerequisite to the existence of a corporate opportunity.
A rigid rule was applied in Irving Trust Co. v. Deutsch, 73 F.2d 121 (2nd Cir.1934). In that case a syndicate made up of directors of Acoustic Products Co. purchased for themselves from another corporation the rights to manufacture under certain radio patents which were concededly essential to Acoustic. They justified this on the ground that Acoustic was not financially able to purchase the patents on which the defendants later made very substantial profits. The court refused to inquire whether the conclusion of financial inability was justified. Referring to the facts which raised a question whether Acoustic actually did lack the funds or credit necessary to make the acquisition, the court said:
An oft-cited Harvard Law Review note discussed executive appropriation of corporate opportunities and the Irving Trust case as follows:
In 1962, Professor Victor Brudney wrote in the Michigan Law Review:
He then noted the Irving Trust case, saying with apparent approval:
Representing a more relaxed view of a corporate official's responsibility, in Guth v. Loft, Inc., 23 Del. Ch. 255, 272-73, 5 A.2d 503, 511 (1939), the Supreme Court of Delaware said:
The language in Guth implies that financial ability to undertake a corporate opportunity is not only relevant, but perhaps a condition precedent to the existence of a corporate opportunity. But the language in Guth was dictum because that famous case, involving the creation of the PepsiCola enterprise, did not involve the issue of financial ability to undertake the opportunity. The court may have thought that a lack of funds short of insolvency was relevant because it discussed Guth's defense in this area, finding that "Loft's net asset position at that time was amply sufficient to finance the enterprise."[6] But other language in Guth raises the question whether the terms "ability to undertake" and "ability to take advantage of" have broader concerns than mere financial capacity or incapacity:
On the other end of the legal spectrum from Irving Trust Co. v. Deutsch, supra, are two Minnesota cases: Miller v. Miller, 301 Minn. 207, 222 N.W.2d 71, 77 A.L.R.3d 941 (1974), and A.C. Peters v. St. Cloud Enterprises, Inc., 301 Minn. 261, 222 N.W.2d 83 (1974). In Miller, the Minnesota Supreme Court stated a two-step test to be applied in corporate opportunity cases. The first step, the "line of business" part of the test, was described as follows:
In other words, the court found that financial ability is a prerequisite to establishing a corporate opportunity. The court went on to hold that, where the facts were in dispute, the burden of proof on the financial issue rests upon the "party attacking the acquisition":
The companion case of A.C. Petters v. St. Cloud Enterprises, Inc., supra, applied the rule of Miller v. Miller, supra. See also Ellzey v. Fyr-Pruf, Inc. 376 So. 2d 1328 (Miss. 1979).
Counsel for defendant, relying on Miller, contends there is no corporate opportunity if there is no capacity to take advantage of the corporate opportunity. We reject this argument. By the same token, we reject plaintiff's contention, relying on Irving Trust, that financial ability is totally irrelevant in an unlawful taking of a corporate opportunity.
In this opinion we previously quoted from an article written by Professor Victor Brudney in 1962 when he was advocating a strict view on usurpation of corporate opportunities in closely held corporations, Brudney, Insider Securities Dealings During Corporate Crises, supra. Almost 20 years later, this same noted authority on Corporation Law, joined by Professor Robert Charles Clark, wrote in the Harvard Law Review that the law of corporate opportunities is still among the least satisfactory limbs of doctrine in the corpus of corporate law. After criticizing the Minnesota court's approach in Miller as adding "only a new layer of confusion to an already murky area of law, without forwarding the analysis in any significant fashion," the authors assert that "[n]ot only are the common formulations vague, but the courts have articulated no theory that could serve as a blueprint for constructing meaningful rules." Brudney and Clark, A New Look at Corporate Opportunities, 94 Harv.L.Rev. 997, 998 (1981). In that article, Professors Brudney and Clark argue that a principled doctrine should distinguish between publicly held corporations and close corporations. They suggest that in the former case a categorical ban on diversions is usually appropriate, but that separate rules should be developed for fulltime *916 executives, outside directors and parent companies. They assert, however, that in cases involving close corporations, a more flexible, selective approach should govern in light of the essentially contractual nature of the close corporate venture. They reason:
The authors then suggest guidelines for the taking of business opportunities by participants in closely held corporations:
They conclude that the burden should be on the diverter to prove that the particular diversion was originally consented to by the venturers.
Brudney and Clark then address the specific issue in this case  the relevance of corporate incapacity to undertake a corporate opportunity to usurpation of a corporate opportunity by a fiduciary:
The authors conclude:
On April 13, 1984, the American Law Institute published its "Tentative Draft No. 3" concerning "Principles of Corporate Governance: Analysis and Recommendations." The draft, of course, does not represent the position of the ALI, but it does contain definitions and rules which we find helpful in resolving the main issue in this case. Section 5.12 of the draft, which contains the proposed general rule and definition, reads as follows:
Section 5.12 presents an approach very similar to that suggested by Chief Judge Joseph in the Court of Appeals decision rendered in this case. Section 5.12 generally would require an opportunity that could be advantageous to the corporation to be offered to the corporation by a director or principal senior executive before he takes it for himself. Section 5.12 declines to adopt the rigid rule expressed in Irving Trust Co. v. Deutsch, supra, which precludes a person subject to the duty of loyalty from pursuing a rejected opportunity. The proposed rule permits a director or principal senior executive to deal with his corporation so long as he deals fairly with full disclosure and bears the burden of proving fairness unless the corporate opportunity was rejected by disinterested directors or shareholders.
The comment to Section 5.12(a) reads:
and that
The comment to Section 5.12(b) reads:
Section 5.12(c) would allocate the burden of proof in corporate opportunity cases as follows:
The comment to Section 5.12(c) reads in part:
Whether the rejection was fair or not includes consideration of whether the corporation was financially or otherwise incapacitated from undertaking the corporate opportunity. We agree with the proposed ALI Principles of Corporate Governance, supra, as to the following rules for application in close corporation corporate opportunity cases.[9]
Where a director or principal senior executive of a close corporation wishes to take personal advantage of a "corporate opportunity," as defined by the proposed rule, the director or principal senior executive must comply strictly with the following procedure:
(1) the director or principal senior executive must promptly offer the opportunity and disclose all material facts known regarding the opportunity to the disinterested directors[10] or, if there is no disinterested director, to the disinterested shareholders.[11] If the director or principal senior *920 executive learns of other material facts after such disclosure, the director or principal senior executive must disclose these additional facts in a like manner before personally taking the opportunity.
(2) The director or principal senior executive may take advantage of the corporate opportunity only after full disclosure and only if the opportunity is rejected by a majority of the disinterested directors or, if there are no disinterested directors, by a majority of the disinterested shareholders[12] If, after full disclosure, the disinterested directors or shareholders unreasonably fail to reject the offer,[13] the interested director or principal senior executive may proceed to take the opportunity if he can prove the taking was otherwise "fair" to the corporation. Full disclosure to the appropriate corporate body is, however, an absolute condition precedent to the validity of any forthcoming rejection as well as to the availability to the director or principal senior executive of the defense of fairness.
(3) An appropriation of a corporate opportunity may be ratified by rejection of the opportunity by a majority of disinterested directors or a majority of disinterested shareholders, after full disclosure subject to the same rules as set out above for prior offer, disclosure and rejection. Where a director or principal senior executive of a close corporation appropriates a corporate opportunity without first fully disclosing the opportunity and offering it to the corporation, absent ratification, that director or principal senior executive holds the opportunity in trust for the corporation.
Applying these rules to the facts in this case, we conclude:
(1) Lundgren, as director and principal executive officer of Berlinair, owed a fiduciary duty to Berlinair.
(2) The BFR contract was a "corporate opportunity" of Berlinair.
(3) Lundgren formed ABC for the purpose of usurping the opportunity presented to Berlinair by the BFR contract.
(4) Lundgren did not offer Berlinair the BFR contract.
(5) Lundgren did not attempt to obtain the consent of Berlinair to his taking of the BFR corporate opportunity.
(6) Lundgren did not fully disclose to Berlinair his intent to appropriate the opportunity for himself and ABC.
(7) Berlinair never rejected the opportunity presented by the BFR contract.
(8) Berlinair never ratified the appropriation of the BFR contract.
(9) Lundgren, acting for ABC, misappropriated the BFR contract.
Because of the above, the defendant may not now contend that Berlinair did not have the financial ability to successfully pursue the BFR contract. As stated in proposed Section 5.12(c) of the Principles of Corporate Governance, supra, "If the challenging party satisfies the burden of proving that a corporate opportunity was taken without being offered to the corporation, the challenging party will prevail."
This specific conclusion is also backed by what some might call a legal platitude and others might call a legal classic. When *921 placing special burdens on those in positions of trust, it is worthwhile to recall the well-known admonition of Chief Justice Cardozo speaking for the New York Court of Appeals:
We now turn to plaintiff's cross-appeal. In this case plaintiff brought equitable suits for a constructive trust, accounting and injunction against all defendants, and a personal claim against Lundgren. Plaintiff sought actual and punitive damages against Lundgren, but not against the other defendants. The court made no award of actual damages against Lundgren. The punitive damages issue was segregated and tried before a jury. The jury then returned a verdict for $750,000 punitive damages on February 19, 1979.
On May 6, 1980, some four months after the verdict of $750,000 punitive damages, the defendants moved under ORCP 21 A. to dismiss the fourth cause of action in its entirety upon the ground that it failed to state facts constituting a claim. Defendants' main contention in that motion was that Klinicki was not entitled to general damages and therefore could not recover punitive damages.
On July 7, 1980, further proceedings took place in which the trial judge announced his ruling setting aside the punitive damages verdict as a matter of law.[14] The trial judge ruled that (1) a corporate opportunity existed, (2) the opportunity was in the line of business of Berlinair, (3) defendants had not borne the burden of proving Berlinair was financially unable to undertake the opportunity, and (4) defendant Lundgren breached his fiduciary duty.
The trial court struck the punitive damages relying on Pedah Company v. Hunt, 265 Or. 433, 509 P.2d 1197 (1973). In Pedah, this court held that a court of equity cannot award punitive damages incident to the granting of injunctive relief. However, in Rexnord, Inc. v. Ferris, 294 Or. 392, 657 P.2d 673 (1983), decided after the trial in this case, this court overruled Pedah and held that a court may award actual and punitive damages as well as equitable relief in a single action if the plaintiff pleads and proves a claim which factually would permit an award of actual and punitive damages. In Rexnord actual and punitive damages were sought and obtained in addition to equitable relief against the same defendants flowing from the same defendants' tortious conduct. In this case no actual damages were awarded, but punitive damages were awarded against Lundgren personally and certain equitable relief was granted against Lundgren and ABC. We point out that the accounting and injunction *922 against transferring assets was directed against all defendants, but the constructive trust was only decreed against ABC and its officers, directors and their successors.
This case is similar to Rexnord, Inc. v. Ferris, supra, in that both claims were based on tortious conduct. In Rexnord, the complaint claimed defendants engaged in unfair competition, converted plaintiff's trade secrets, confidential information, plans, etc., and interfered with plaintiff's contractual relations. In this case, Lundgren was charged with a course of conduct in secretly diverting the BFR contract to his own company, ABC, constituting a breach of fiduciary duty.
We recently restated that in this state an award of punitive damages coupled with an award of only nominal damages is proper when the case involves special circumstances such as a breach of a fiduciary duty by a public officer. Lane County v. Wood, 298 Or. 191, 691 P.2d 473 (1984). We said in Lane County that there is no logical connection between actual damages and punitive damages because actual damages are to compensate the injured party, whereas punitive damages are "to give bad actors a legal spanking." 298 Or. at 203, 691 P.2d  at 479. Nevertheless we feel, absent breach of public trust or cases in which damages are presumed,[15] punitive damages claims cannot be awarded merely to punish; the plaintiff must also plead and prove he or she was somehow actually hurt and damaged by the defendant's conduct. In other words, a proven discrete, discernible harm must underlie any punitive damages award.
The question remains whether that proven harm may be manifested by a decree granting certain equitable remedies or whether actual damages must be awarded. In Belleville v. Davis, 262 Or. 387, 405, 498 P.2d 744, 752 (1972), the author of the opinion stated, "We have not previously decided whether an award of punitive damages is proper in an equity case." We have now resolved that issue in Rexnord, Inc. v. Ferris, supra. The author continued, "We have held, however, that an award of punitive damages is not proper in the absence of proof that plaintiff is entitled to an award of actual damages." 262 Or. at 405, 498 P.2d  at 752. Citing Crouter v. United Adjusters, Inc., 259 Or. 348, 364, 485 P.2d 1208 (1971), and Carnation Lbr. Co. v. McKenney, 224 Or. 541, 546-47, 356 P.2d 932 (1960), the court then concluded that under the record in Belleville plaintiff was not entitled to an award of actual damages in addition to the equitable relief of specific performance and, therefore, set aside an award of punitive damages.
This court, since ORCP 24 A. was adopted, has not had the opportunity to decide whether an award of punitive damages without an award of actual damages can be supported by a decree of affirmative equitable relief and, if so, what type of equitable remedy will support a claim for punitive damages.
ORCP 24 A. permits the joinder of legal and equitable claims. It provides:
We analyze this legal problem on this basis:
(1) Punitive damages cannot exist alone.
(2) Punitive damages cannot be awarded without proof of a harm.
(3) Harm may be presumed in cases of wrongful attachment of property, invasion of privacy and trespass, or when there is a certain type of breach of fiduciary duty by a public officer.
(4) The granting of certain types of equitable relief may or may not demonstrate some harm to a person who does not have an adequate remedy at law.
*923 In this case plaintiff Klinicki was unable to prove actual dollar damages against Lundgren and the only equitable relief granted against Lundgren in Klinicki's favor was for an accounting and an injunction against transferring assets. The constructive trust was decreed solely in favor of Berlinair. Plaintiff's claim of actual damage against Lundgren was dismissed by the court. Klinicki's claim for punitive damages existed alone.
The fact that the court granted Klinicki equitable relief against Lundgren and ABC in the form of an accounting and an injunction under other counts in the complaint did not prove any independent harm or damage to Klinicki caused by Lundgren's conduct. A decree ordering an accounting does not prove damage or harm. The accounting may balance in favor of the defendant or the plaintiff, or may demonstrate nothing. An injunction or restraining order not to transfer assets also does not prove that Klinicki was personally harmed or damaged by Lundgren's breach of fiduciary duty. Such a decree is designed to prevent harm, not redress harm. Because the constructive trust was imposed only upon ABC, its officers and directors, and not Lundgren personally, and only in favor of Berlinair and not Klinicki, we do not reach the question whether a decree granting a constructive trust will support an award of punitive damages. The punitive damages award stood alone, and was not inextricably tied to proof by plaintiff that he had suffered an invasion of a legally protected interest. Under the circumstances of this case, the punitive damages claim was properly stricken by the court.
The Court of Appeals is affirmed.
[1]  The named plaintiff in the complaint is F.R. Klinicki. The named defendants are Kim Lundgren, Berlinair, Inc., an Oregon corporation, and Air Berlin Charter Company, an Oregon corporation. The complaint set forth four causes of suit summarized as follows:

(A) The first cause of suit was brought by plaintiff as a derivative stockholders suit in his own behalf and on behalf of all other stockholders of Berlinair, Inc. "and in the right of Berlinair, Inc. and for its benefit" seeking a constructive trust against Lundgren and ABC jointly and severally, an accounting by all defendants and an injunction and attorney fees.
(B) The second cause of suit involves a personal claim by Klinicki requesting the court to require Lundgren to purchase the stock of plaintiff in Berlinair after the BFR corporate opportunity held by ABC is restored to Berlinair, Inc.
(C) The third cause of suit  Count I  is an individual claim of Klinicki for an accounting from Lundgren and ABC.
(D) The third cause of suit  Count II  is plaintiff's individual claim for unjust enrichment against Lundgren.
(E) The third cause of suit  Count III  is a personal claim by plaintiff against Lundgren for breach of implied covenant of good faith and fair dealing to plaintiff. For the third cause of suit plaintiff sought a constructive trust and accounting decree against Lundgren and ABC covering any "monies, funds, assets, facilities and properties received and acquired as a result of Lundgren's breach of fiduciary duty."
(F) The fourth cause of action is an individual suit by Klinicki solely against Lundgren for breach of fiduciary duty seeking general damages of $50,000 and $1 million in punitive damages.
[2]  * * [Officers and directors] must devote themselves to the corporate affairs with a view to promote the common interests and not their own, and they cannot, either directly or indirectly, utilize their position to obtain any personal profit or advantage other than that enjoyed also by their fellow shareholders [citations omitted]. In short, there is demanded of the officer or director of a corporation that he furnish to it his undivided loyalty; if there is presented to him a business opportunity which is within the scope of its own activities and of present or potential advantage to it, the law will not permit him to seize the opportunity for himself; if he does so, the corporation may elect to claim all of the benefits of the transaction. Nor is it material that his dealings may not have caused a loss or been harmful to the corporation; the test of his liability is whether he has unjustly gained enrichment. Bailey v. Jacobs, 325 Pa. 187, 194, 189 A. 320, 324 [(1937)].' * * * see generally Fletcher, Cyclopedia Corporations § 861.1 (rev. ed. 1965); * * * Note, `Corporate Opportunity', 74 Harv.L.Rev. 765 (1961)." Seaboard Industries, Inc. v. Monaco, 442 Pa. 256, 261-62, 276 A.2d 305, 309 (1971).
The Corporate Directors' Guidebook (pp 1599-1600) defines the duty of loyalty:
"I. Duty of Loyalty. By assuming his office, the corporate director commits allegiance to the enterprise and acknowledges that the best interests of the corporation and its shareholders must prevail over any individual interest of his own. The basic principle to be observed is that the director should not use his corporate position to make a personal profit or gain to his personal advantage. * * *"
This definition reflects the fiduciary duties which generally attach to directors of close corporations. See, e.g., Delaney v. Georgia-Pacific Corp., 278 Or. 305, 564 P.2d 277 (1977); Baker v. Commercial Body Builders, 264 Or. 614, 507 P.2d 387 (1973).
[3]  ABC asserts in its brief that the single issue in the corporate opportunity portion of this appeal is the financial ability of Berlinair to undertake the BFR contract. It makes no point of the fact that the trial court found Kim Lundgren usurped the corporate opportunity for himself, yet ABC was controlled and owned by Kim Lundgren, his father, Leonard Lundgren, and their attorney.
[4]  This case was tried before the effective date of the Oregon Evidence Code. The code now provides:

"OEC 305. Allocation of the burden of persuasion. A party has the burden of persuasion as to each fact the existence or nonexistence of which the law declares essential to the claim for relief or defense the party is asserting."
"OEC 307. Allocation of the burden or producing evidence. (1) The burden or producing evidence as to a particular issue is on the party against whom a finding on the issue would be required in the absence of further evidence.
"(2) The burden of producing evidence as to a particular issue is initially on the party with the burden of persuasion as to that issue."
[5]  "See Carrington & McElroy, The Doctrine of Corporate Opportunity, 14 Bus.Law. 957 (1959); Fuller, Restrictions Imposed by Directorship Status on Personal Business Activities of Directors, 26 Wash.L.Rev. 189 (1941); Ramsey, Directors Power to Compete with His Corporation, 18 Ind.L.J. 293 (1943); Walker, Legal Handles Used to Open or Close the Corporate Opportunity Door, 56 NW.U.L.Rev. 608 (1961); Comment, 31 Calif.L.Rev. 188 (1943); Note, 39 Colum.L.Rev. 219 (1939); Note, Corporate Opportunity, 74 Harv.L.Rev. 765 (1961); Note, 54 Harv.L.Rev. 1191 (1941); Note, Statutory Sanctions for Conduct of Corporate Directors, 26 Iowa L.Rev. 334 (1941); Note, 84 U.Pa.L.Rev. 1008 (1936); Note, 2 U.Chi.L.Rev. 323 (1935); Note, 44 Yale L.J. 527 (1935)."
[6]  In Guth v. Loft, Inc., 23 Del. Ch. 255, 270, 5 A.2d 503, 510 (1939), the court held that determination of the issue of breach of duty should be made from a consideration of all the circumstances of the transactions, noting the accepted rule that corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests:

"* * * The standard of loyalty is measured by no fixed scale.
"If an officer or director of a corporation, in violation of his duty as such, acquires gain or advantage for himself, the law charges the interest so acquired with a trust for the benefit of the corporation, at its election, while it denies to the betrayer all benefit and profit. The rule, inveterate and uncompromising in its rigidity, does not rest upon the narrow ground of injury or damage to the corporation resulting from a betrayal of confidence, but upon a broader foundation of a wise public policy that, for the purpose of removing all temptation, extinguishes all possibility of profit flowing from a breach of the confidence imposed by the fiduciary relation. Given the relation between the parties, a certain result follows; and a constructive trust is the remedial device through which precedence of self is compelled to give way to the stern demands of loyalty. [Citations omitted.]"
[7]  "City of Miami Beach v. Smith, 551 F.2d 1370 (5th Cir.1977); Presidio Mining Co. v. Overton, 261 F. 933 (9th Cir.1919), aff'd, 270 F. 388 (9th Cir.), cert. denied, 256 U.S. 694, 41 S. Ct. 535, 65 L. Ed. 1175 (1921); Rankin v. Frebank Co., 47 Cal. App. 3d 75, 121 Cal. Rptr. 348 (1975); Katz Corp. v. T.H. Canty & Co., 168 Conn. 201, 362 A.2d 975 (1975); A.C. Petters Co. v. St. Cloud Enterprises, Inc., 301 Minn. 261, 222 N.W.2d 83 (1974) (per curiam); Gauger v. Hintz, 262 Wis. 333, 55 N.W.2d 426 (1952)."
[8]  Section 4.01 provides in pertinent part:

"A director has a duty to his corporation to perform his functions in good faith, in a manner that he reasonably believes to be in the best interests of the corporation * * * and with the care that an ordinarily prudent person would reasonably be expected to exercise in a like profession and under similar circumstances."
See, Devlin v. Moore, 64 Or. 433, 462, 130 P. 35, 45 (1913).
[9]  We have approved other ALI Tentative Drafts. See, Troutman v. Erlandson, 287 Or. 187, 598 P.2d 1211 (1979).
[10]  The term "disinterested director" is not specifically defined in the tentative proposal for ALI's "Principles of Corporate Governance and Structure" (1984). Instead, an "interested director" is defined in Section 1.15(1) of the ALI's Principles of Corporate Governance and Structure (Tent.Draft No. 2 1984):

"(1) a director or officer is `interested' in a transaction if:
(a) the director or officer is a party to the transaction, or
(b) the director or officer or an associate of the director or officer has a pecuniary interest in the transaction, or the director or officer has a financial or familial relationship to a party to the transaction, that is sufficiently substantial that it would reasonably be expected to affect the director's or officer's judgment with respect to the transaction in a manner adverse to the corporation." (Bracketed section references omitted.)
Section 5.04 of Tentative Draft No. 3 provides:
"A provision that gives a specified effect to action by disinterested directors requires the affirmative votes of a majority of the directors on the board or an appropriate committee who are not interested [§ 1.15] in the transaction in question."
Thus we define a "disinterested director" as any director other than one "interested" as defined by Section 1.15(1).
[11]  The term "disinterested shareholder" is not specifically defined in the ALI tentative drafts. Section 1.09 reads:

"[This definition will be written in connection with Part V. On what constitutes a majority of disinterested shareholders, see [§ 1.27(2)].]"
However, no definition of "disinterested shareholder" was written in Part V. Our definition of "disinterested shareholder" is derived from Section 1.15 of the ALI's Second Tentative Draft, supra. Subsection (2) of Section 1.15 provides:
"A shareholder is interested in a transaction if either the shareholder or, to his knowledge, an associate of the shareholder, is a party to the transaction."
Section 5.05 of the Third Tentative Draft, supra, provides:
"A provision that gives a specified effect to action by disinterested shareholders requires approval of the proposal by a majority of the votes cast by shareholders who are not interested [§ 1.15] in the transaction in question."
Thus, we define a "disinterested shareholder" as one who is not a party nor an associate of a party to the transaction in question.
[12]  A simple majority of disinterested directors or shareholders is sufficient to authorize or ratify an appropriation of a corporate opportunity by a director or principal executive officer.
[13]  A valid acceptance of the offer by the disinterested directors or shareholders would bar the fiduciary from appropriating the opportunity. An acceptance of the offer by the disinterested directors which failed to meet the standards of the business judgment rule, or an acceptance by the disinterested shareholders which was the equivalent of a waste of corporate assets would have the same effect as an unreasonable failure to reject. The corporate fiduciary could appropriate the opportunity only upon a showing that the taking was fair to the corporation. See ALI, Principles of Corporate Governance and Structure § 5.12(a)(2) (Tent.Draft No. 3 1984).
[14]  ORCP 63 A. requires that a judgment now be granted "on motion":

"* * * [T]he court may, on motion, render a judgment notwithstanding the verdict, or set aside any judgment which may have been entered and render another judgment, as the case may require." (Emphasis added.)
In this case Count IV of the complaint was stricken under a Rule 21 A.(8) motion (insufficient facts to constitute a claim), therefore rendering an ORCP 63 A. motion moot.
[15]  These include conduct involving invasion of the right of privacy, Hinish v. Meier and Frank Co., 166 Or. 482, 113 P.2d 438 (1941); wrongful attachment of property, Crouter v. United Adjusters, Inc., 259 Or. 348, 485 P.2d 1208 (1971); and trespass, Rhodes v. Harwood, 273 Or. 903, 544 P.2d 147 (1975).