1. Dorsey and two corporations he controls initially

asserted various state-law counterclaims against Davis.

After the pretrial hearing in this case, Dorsey dismissed

the counterclaims.

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

DONNA DORSEY DAVIS, as an )

individual and derivatively )

upon behalf of I-65 )

PROPERTIES, INC. )

)

Plaintiff, )

) CIVIL ACTION NO.

v. ) 2:06cv766-MHT

) (WO) 

RICHARD M. DORSEY, )

)

Defendant. )

OPINION AND ORDER

Plaintiff Donna Dorsey Davis brings this civil action

individually and derivatively on behalf of I-65

Properties, Inc. against defendant Richard M. Dorsey.

Davis asserts various state-law claims regarding Dorsey’s

alleged mismanagement of I-65 and mistreatment of her as

minority shareholder.1 Davis asserts diversity

jurisdiction under 28 U.S.C. § 1332. This case is now

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2

before the court on Dorsey’s motion for summary judgment.

For the reasons that follow, the motion will be granted in

part and denied in part.

I. SUMMARY-JUDGMENT STANDARD

Summary judgment is appropriate “if the pleadings,

depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of

law.” Fed. R. Civ. P. 56(c). Under Rule 56, the party

seeking summary judgment must first inform the court of

the basis for the motion, and the burden then shifts to

the non-moving party to demonstrate why summary judgment

would not be proper. Celotex Corp. v. Catrett, 477 U.S.

317, 323 (1986); see also Fitzpatrick v. City of Atlanta,

2 F.3d 1112, 1115-17 (11th Cir. 1993) (discussing burdenshifting under Rule 56). The non-moving party must

affirmatively set forth specific facts showing a genuine

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3

issue for trial and may not rest upon the mere allegations

or denials in the pleadings. Fed. R. Civ. P. 56(e).

The court’s role at the summary-judgment stage is not

to weigh the evidence or to determine the truth of the

matter, but rather to determine only whether a genuine

issue exists for trial. Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 249 (1986). In doing so, the court must

view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor

of that party. Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986).

II. FACTUAL BACKGROUND

Viewed in the light most favorable to Davis, the

admissible evidence reflects the following facts. Dorsey

and Davis, who are siblings, have been the sole

shareholders of I-65 Properties, Inc. since that

corporation was founded in 1990. Dorsey is the majority

and controlling shareholder, with 70 % ownership, and

Davis is the minority shareholder, with 30 %. Dorsey is

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4

also president of the corporation and chair of the board

of directors; Davis is vice-president.

I-65 was incorporated when Dorsey and his parents, who

together owned and operated Dorsey Motor Sales, Inc.,

determined that the ownership of a vacant plot of land

near Interstate 65 in Elmore County, Alabama should be

transferred out of Dorsey Motor Sales and into the

possession of a new entity. To that end, I-65 Properties,

Inc. was incorporated on October 1, 1990, at which point

it immediately purchased the vacant land from Dorsey Motor

Sales for $ 250,000. The property sale was fully sellerfinanced with a promissory note from I-65 to Dorsey Motor

Sales, at a 12 % interest rate, due and payable on demand.

Although the land was initially owned by Dorsey Motor

Sales, a corporation in which Davis had no interest aside

from the fact that it was wholly owned and operated by her

parents and brother, Dorsey told Davis that their parents

wanted to give them some of their inheritance early and

had therefore determined that she should be a minority

shareholder in I-65.

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5

Davis did not initially object to her brother running

I-65 exclusively. Dorsey and his father apparently had

experience running Dorsey Motor Sales, whereas Davis

pursued a career in education. Davis did make one request

of Dorsey and her father regarding I-65: that they should

inform her if she owed any money.

To date, the land I-65 purchased in 1990 remains

almost entirely undeveloped and its only asset. I-65 has

had very little revenue since its inception, and its

expenses have been limited to basic maintenance and upkeep

of the property. I-65 has made no payments, neither

toward interest nor equity, on the promissory note held by

Dorsey Motor Sales. (Since Davis and Dorsey’s parents’

deaths, Dorsey has been the president and controlling

shareholder of Dorsey Motor Sales.)

Several events have occurred since 1990 that appear to

be relevant to Davis’s claims. Shortly after I-65

obtained the property, Dorsey and his parents pursued a

financial deal whereby Nissan would lease I-65’s land and

install a car dealership on the property. In 1991, and in

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6

preparation for the deal, Dorsey built a road through the

property. However, the deal fell through and I-65 was

never able to lease the land.

After the Nissan deal fell through, CD & O, LLC, a

limited liability company owned by Dorsey and his wife and

controlled by Dorsey, purchased several parcels of land

nearby or adjacent to I-65’s property. Although the

record is somewhat murky on this point, it appears that I65 obtained purchase options on the adjacent property,

which it then sold to CD & O so that CD & O could purchase

the property instead. CD & O’s land purchases occurred in

1991.

At some point after the Nissan deal fell through, I-65

entertained another possible arrangement that involved

opening a Cracker Barrel restaurant on the property.

These negotiations, too, never amounted to an agreement.

In 1999, I-65 obtained a billboard permit and began a

billboard-leasing agreement with TD & O, Inc., another

company owned and controlled by Dorsey. TD & O leases the

billboard from I-65 for $ 600 per year and subleases it to

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7

an advertising company, Lamar Advertising, for $ 5,400 per

year. The billboard deal apparently continues to this

day.

In 1999 or 2000, Davis gave her husband John H. Davis,

Jr. power of attorney regarding her interest in I-65.

Around this time the Davises began to take a more active

interest in the affairs of I-65. Davis’s husband sought

information and documentation regarding the corporation on

her behalf from Dorsey and from I-65’s accountant, J. Alan

Taunton. Dorsey and Taunton replied and provided most of

the information Davis’s husband requested.

During the course of that communication, the Davises

suggested that the corporation look into refinancing the

terms of the promissory note to obtain an interest rate

more favorable than 12 %. Dorsey replied that he could

not see how the seller-financing constituted a conflict of

interest on his part, but that he had no objection to

Davis obtaining commercial-mortgage financing at a lower

interest rate. It is undisputed, however, that Davis did

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8

not follow up on this idea and did not actively seek to

change the terms of the financing arrangement.

The Davises’ inquiries continued in 2003. Taunton, at

Dorsey’s direction, sent Davis copies of I-65’s income tax

returns for the previous five years.

In December 2005, a board or shareholders meeting

appears to have been the catalyst for the instant

litigation. When the Davises arrived at the meeting,

Dorsey was present along with an attorney, who taperecorded the meeting. Davis’s husband was told he was not

permitted inside the meeting, so Davis entered alone. At

that point, Dorsey handed Davis several documents and told

her that she owed him over $ 500,000. Dorsey told Davis

that I-65 was heavily in debt, and that Davis, as 30 %

shareholder of the corporation, was responsible for her

share. After Davis left the meeting, she was “in a state

of shock and scared and petrified.” Davis Depo. (doc. no.

43-2) at 69.

Frightened that she could lose her home, Davis called

Dorsey and asked him if she could sell him her I-65 stock

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9

in exchange for one dollar and forgiveness of the debt.

Dorsey told Davis that “it sounded good to him,” id., but

that he would need to check with his attorney and

accountant. Approximately one week later, having not

heard back from her brother and having consulted an

attorney, Davis faxed Dorsey a letter rescinding her

verbal offer. Dorsey replied with a letter of his own,

suggesting that “it is time to stop fighting and move

ahead with our lives.” Def. Ex. 16 (doc. no. 22-17).

Apparently that did not occur. Davis’s attorney

followed up with a request for additional information and

documentation regarding I-65, and Taunton sent a letter

offering Davis “anything she asks for that we may have

relative to this company.” Def. Ex. 17 (doc. no. 22-18).

This lawsuit soon followed.

III. DISCUSSION

Davis, both individually and derivatively on behalf of

I-65, brings seven state-law claims against Dorsey:

oppression and squeeze-out; breach of fiduciary duty to

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10

shareholder; breach of fiduciary duty to I-65; negligence;

willful and wanton conduct; conversion; and fraud. Dorsey

asserts several challenges to these claims: lack of

subject-matter jurisdiction; statute of limitations;

Davis’s failure to bring all her claims derivatively on

behalf of the corporation; non-compliance with Federal

Rule of Civil Procedure 23.1; and the claims’ lack of

merit as a matter of law.

The court will begin by addressing the threshold

question of subject-matter jurisdiction. Next, the court

will assess each of Davis’s claims and Dorsey’s defenses

to them.

A. Jurisdiction

Having previously denied Dorsey’s motion to dismiss

for lack of subject-matter jurisdiction, the court again

rejects his jurisdictional challenge, this time with the

following comments.

Davis has properly invoked diversity jurisdiction

under 28 U.S.C. § 1332. That statute requires ‘complete

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11

diversity,’ which means that no party on one side of the

suit can be from the same State as any party on the other

side. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267

(1806). Here, Davis is a citizen of South Carolina, and

Dorsey is a citizen of Alabama.

Although Dorsey does not raise the issue of I-65’s

citizenship, the court adds that the derivative nature of

several of Davis’s claims (as explained later) does not

destroy diversity jurisdiction. In a derivative lawsuit,

the corporation is the “real party in interest,” Liddy v.

Urbanek, 707 F.2d 1222, 1224 (11th Cir. 1983), and I-65 is

deemed a citizen of Alabama, see 28 U.S.C. § 1332(c)

(corporation shall be deemed a citizen of all States by

which it has been incorporated and of the State where it

has its principal place of business). However, I-65’s

status as a citizen of Alabama does not destroy diversity

jurisdiction because “the corporation properly remains a

defendant in a stockholder’s derivative action whenever

the corporate management is ‘antagonistic’ to the

plaintiff shareholder.” Liddy, 707 F.2d at 1224. As the

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2. Subsection III.B.3, infra.

12

court observes below, Davis erred in failing to join I-65

as a necessary party.2 For now, it is sufficient to note

that I-65’s interest in this case, whether it is a named

party or not, does not deprive this court of subjectmatter jurisdiction.

Diversity jurisdiction under § 1332 also requires that

the amount in controversy exceed $ 75,000, exclusive of

interest and costs. “[W]here jurisdiction is based on a

claim for indeterminate damages ... the party seeking to

invoke federal jurisdiction bears the burden of proving by

a preponderance of the evidence that the claim on which it

is basing jurisdiction meets the jurisdictional minimum.”

Federated Mut. Ins. Co. v. McKinnon Motors, LLC, 329 F.3d

805, 807 (11th Cir. 2003). Here, the dispute concerns

Dorsey’s alleged mismanagement of a corporation whose

asset is property purchased for $ 250,000 in 1990 and

whose liabilities, 30 % of which Dorsey allegedly would

impose on Davis personally, allegedly exceed $ 1.5

million. By way of relief, Davis asks the court to set

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13

aside the mortgage between I-65 and Dorsey Motor Sales,

the value of which greatly exceeds $ 75,000. The court

therefore concludes that the amount-in-controversy

requirement of § 1332 is met and that this court has

subject-matter jurisdiction over this case.

B. Davis’s Claims

1. Oppression and Squeeze-Out

Davis’s first claim is for oppression and squeeze-out.

This cause of action was first recognized by the Alabama

Supreme Court in Burt v. Burt Boiler Works, Inc., 360

So.2d 327 (Ala. 1978), and has been repeatedly reaffirmed

since then. Brooks v. Hill, 717 So.2d 759 (Ala. 1998);

Stallworth v. AmSouth Bank, 709 So.2d 458 (Ala. 1997);

Michaud v. Morris, 603 So.2d 886 (Ala. 1992); Ex parte

Brown, 562 So.2d 485 (Ala. 1990); Galbreath v. Scott, 433

So.2d 454 (Ala. 1983). Although Dorsey argues that

Davis’s oppression-and-squeeze-out claim should be

dismissed as a matter of law because she brings it

directly as an individual rather than derivatively on

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14

behalf of the corporation, in fact Alabama courts

recognize oppression and squeeze-out as a distinctly

individual and direct cause of action.

As the Alabama Supreme Court explains in Brooks v.

Hill, corporate governance in a close corporation presents

a distinct risk that a controlling shareholder will

manipulate the corporate structure to harm minority

interests without necessarily harming the corporation

itself. “In forming a close corporation, the shareholders

themselves naturally often view their relationship as akin

to that of partners, who will each share equitably in the

income derived from the enterprise. However, the

corporate form that governs their legal relationship

assigns control of the corporation to the majority, who,

by virtue of that power, would be able to frustrate the

minority’s basic expectation to share proportionally in

corporate gains by excluding the minority from salaried

employment as officers, directors, or employees; refusing

to declare dividends; and eliminating other privileges

that might flow to the minority from the corporation.”

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15

Brooks, 717 So.2d at 765 (internal citations, quotation

marks, brackets, ellipses, and footnote omitted). But

unlike a minority interest in a partnership, a minority

shareholder cannot easily exit from a disagreeable

corporate relationship by dissolving the corporation. And

unlike a disgruntled holder of stock in a publicly traded

corporation, a minority shareholder in a close corporation

frequently cannot find an investor to purchase his stock,

other than the controlling shareholder. Thus, the

oppressive and unfair ‘squeeze-out’: the majority

shareholder uses its right of control “to put the minority

shareholder into a situation where he had only two,

equally unappealing, options: ‘(1) hold his stock in

perpetuity while receiving no earnings thereon, or (2)

sell out at an unreasonably low price to the majority

shareholder.’” Id. at 766 (quoting Andrew P. Campbell,

Litigating Minority Shareholder Rights and the New Tort of

Oppression, 53 Ala. Law. 108 (1992)). The oppression-andsqueeze-out cause of action is corporate law’s remedy for

this “specific kind of unfairness, whereby the majority of

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16

the shareholders in a close corporation is able to use its

right of control to exert pressure upon, i.e., to

‘squeeze,’ the minority by reducing or eliminating its

income, coupled with the minority’s practical inability to

withdraw.” Id.

In this case, the record does not indicate that Dorsey

has used his position of control at I-65 to frustrate

Davis’s expectation to share proportionally in corporate

gains. Quite simply, the record does not reflect that

there have been any corporate gains. Therefore, under the

circumstances, Davis cannot complain that Dorsey has not

declared dividends, provided her with salaried employment,

or eliminated other privileges that Davis might expect

from owning a share of I-65. It is important to note

that, although Davis might allege that Dorsey’s

mismanagement of the corporation caused the lack of

corporate gains, such allegations are the basis for a

derivative claim on behalf of the corporation, not a

direct squeeze-out claim. “[A] minority shareholder

cannot parlay a wrong committed primarily against the

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17

corporation, which gives rise to a derivative claim only,

into a personal recovery of damages under a squeeze-out

theory by simply stating that the injury to the

corporation is also ‘unfair’ to him as well.” Stallworth,

709 So.2d at 467. Along the same lines, Davis may

disagree with some of the business decisions Dorsey has

made in his capacity as president and chair of the board

of directors, but the fact that the majority will not

accede to the wishes of the minority on matters of

corporate management does not, by itself, give rise to a

claim of oppression and squeeze-out. Id. at 468. In

order to make out a squeeze-out claim, Davis must

demonstrate that Dorsey used his position of control in a

manner that harmed her as a shareholder independent of

anything that Dorsey did to harm the corporation itself.

It might be argued that Dorsey attempted a

‘squeeze-out’ when he told Davis that she was personally

liable for the debt of the corporation in proportion to

her share of ownership. It is understandable why Davis

would feel aggrieved by this incident: Dorsey’s statement

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18

was almost certainly false, as it is a universally

accepted basic axiom of corporate law that a corporation’s

shareholders are not personally liable for its debts. It

is truly difficult to understand how Dorsey could have

been unaware of this defining feature of the corporation

as a legal entity, but evidently Davis did not

misunderstand him at the meeting because he has continued

to insist on her personal liability in his deposition and

in recently withdrawn counterclaims. However, even if

Davis is alleging that Dorsey, by threatening her with

personal liability for the corporation’s debt, intended to

induce her into offering to sell her shares for an

unreasonably low price, that allegation does not amount to

an actionable claim for squeeze-out. Because Davis

rescinded her offer before Dorsey accepted it, Davis

incurred no damages. 

Furthermore, even if the deal had gone through,

Davis’s cause of action would be based on Dorsey’s

material misrepresentation regarding her liability for the

corporate debt, which is entirely unrelated to his powers

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19

as controlling shareholder. See Brooks, 717 So.2d at 767

(“One could certainly deem it ‘unfair’ for a majority

shareholder of a close corporation to misrepresent a

material fact to a minority shareholder in connection with

a purchase of his shares. But while such wrongdoing

suggests that a minority shareholder might have been

defrauded, it does not suggest that the minority

shareholder has also been ‘squeezed out’ of the

corporation.... [T]he duty to refrain from making false

representations does not spring from the vulnerability of

a minority shareholder in the context of a close

corporation.”).

In sum, although the oppression-and-squeeze-out cause

of action recognizes that minority shareholders have “a

right to fairness by the majority,” Michaud, 603 So.2d at

888, the scope of that right is limited to the majority’s

abuse of its right of control. The oppression-andsqueeze-out claim, in other words, does not extend to the

majority’s mismanagement of or harm to the corporation

itself, nor to the majority’s unfair acts toward the

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20

minority that do not stem from the power of control.

Here, Davis points to no evidence in the record that

Dorsey abused his position as controlling shareholder to

take any action against her that might give rise to an

oppression-and-squeeze-out claim. Accordingly, summary

judgment will be granted on count 1 of Davis’s complaint.

2. Fiduciary Duty to Shareholder

Davis’s second claim is that Dorsey breached his

fiduciary duty to her as minority shareholder. This court

is unaware of any fiduciary duty owed to shareholders

individually, as distinct from the fiduciary duty owed to

the corporation itself, other than the fiduciary duty to

shareholders recognized in the cause of action for

oppression and squeeze-out. See Burt, 360 So.2d at 331-

32. Therefore, for the same reasons the court grants

summary judgment on Davis’s oppression-and-squeeze-out

claim, summary judgment will be granted on count 2 of

Davis’s complaint as well.

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21

3. Fiduciary Duty to Corporation

Davis’s third claim, brought derivatively on behalf of

I-65, is that Dorsey breached his fiduciary duty to the

corporation. At the outset, and even though Dorsey has

not raised this point, the court notes that I-65 itself

must be joined as a defendant in this case. See Liddy v.

Urbanek, 707 F.2d 1222, 1224 (11th Cir. 1983) (“There is

no question that a corporation is an indispensable party

in a derivative action brought by one of its

shareholders.”). However, rather than reject Davis’s

derivative claim outright, the court will permit Davis to

amend her pleading to join I-65 as a party. Cf. 2 O’Neal

& Thompson, Close Corporations and LLCs: Law & Practice

§ 9:22, at 9-133 (rev. 3d ed. 2004) (“Courts need not

ignore the reality that the litigation is really a dispute

among shareholders ... when the only interested parties

are two individuals or sets of shareholders, one who is in

control and the other who is not.”). Late joinder of I-65

will result in no prejudice to Dorsey or I-65, nor will

it, as explained earlier, destroy diversity jurisdiction.

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22

Generally speaking, a director or officer owes both a

duty of care and a duty of loyalty to the corporation.

Richard A. Thigpen, Alabama Corporation Law § 10:2 (3d ed.

2003); see also Massey v. Disc Mfg., Inc., 601 So.2d 449,

456 (Ala. 1992). Because Davis’s next claim is for

negligence, the court will treat count 3 as a claim for a

violation of the duty of loyalty and count 4 as a claim

for a violation of the duty of care. See Thigpen, supra,

§ 10:2 (“duty of care is essentially a negligence cause of

action”).

The duty of loyalty is the “duty to act honestly for

the corporation’s best interest and to avoid acts of selfdealing.” Id. § 10:12. “[A]n officer-director of a

corporation owes a duty of managing the corporate affairs

honestly and impartially and he may not achieve personal

advantage, profit, or gain from his position.” Jefferson

County Truck Growers Ass’n v. Tanner, 341 So.2d 485, 487

(Ala. 1977).

Two types of claims frequently arise under the duty of

loyalty: the conflicting-interest transaction and the

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23

corporate-opportunity doctrine. A conflicting-interest

transaction occurs when a director (or a close relation to

a director or an entity in which the director has a

financial interest) is a party to a transaction effected

by the corporation. 1975 Ala. Code § 10-2B.8.60; see

Jones v. Ellis, 551 So.2d 396, 403-04 (Ala. 1989); see

also 19 C.J.S. Corporations § 596 (2007); Thigpen, supra,

§ 10:12. The corporate-opportunity doctrine is invoked

when a director or officer appropriates for personal

benefit a business opportunity that belongs to or should

have been offered to the corporation. Banks v. Bryant,

497 So.2d 460, 463-65 (Ala. 1986); Morad v. Coupounas, 361

So.2d 6, 8-9 (Ala. 1978); see also 19 C.J.S. Corporations

§ 604; Thigpen, supra, § 10:17. In other words, the

conflicting-interest transaction calls into question the

director or officer’s loyalty regarding a transaction that

the corporation did make but possibly should not have

made; whereas the corporate-opportunity doctrine calls

into question the director or officer’s loyalty regarding

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24

a transaction that the corporation did not make but

possibly should have made.

a. Promissory Note

The court first addresses the promissory note between

I-65 and Dorsey Motor Sales. Dorsey stands to benefit

personally from the interest on the loan owed by I-65 to

Dorsey Motor Sales. In Jones, 551 So.2d at 403-04, the

Alabama Supreme Court recognized the conflict of interest

inherent in a similar arrangement involving a loan, at

12 % interest, by the director’s corporation to the

plaintiff corporation. Therefore, the court has no

trouble concluding that the promissory note is a

conflicting-interest transaction for Dorsey.

However, Dorsey raises a statute-of-limitations

defense. There is a two-year statute of limitations on a

cause of action for breach of fiduciary duty. Hensley v.

Poole, 910 So.2d 96, 101 (Ala. 2005); Sys. Dynamics Int’l,

Inc. v. Boykin, 384 So.2d 419, 419 (Ala. 1996); 1975 Ala.

Code § 6-2-38(l). Dorsey argues that, because the

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25

promissory note was executed in 1990, Davis’s claim

arising from it is time-barred.

The court agrees with Dorsey that this claim is timebarred. Although the promissory note was executed in

1990, the statute of limitations was arguably tolled by

Davis’s ignorance of its terms. See Jefferson County

Truck Growers Ass’n v. Tanner, 341 So.2d 485, 488 (Ala.

1977) (statute of limitations does not run against claim

based on a self-dealing director who is “responsible for

the concealment of facts upon which a claim could be based

and where knowledge of those facts were solely within the

director’s control”); see also Belcher v. Birmingham Trust

Nat’l Bank, 348 F. Supp. 61, 82 (N.D. Ala. 1968) (Grooms,

J.) (“A corporate officer charged with wrongdoing of which

the other directors and officers know nothing and whom he

knows to be ignorant of the wrongdoing cannot escape

liability under the shelter of the statute of

limitations.” (internal quotation marks omitted)). But

this argument, even if compelling, does not carry the day

for Davis. Viewing the facts in the light most favorable

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3. At the pretrial hearing on this case, Davis’s

attorney raised the somewhat different argument that

Dorsey’s insistence that the note is still payable on

demand is incorrect as a matter of law. See 1975 Ala.

Code § 7-3-118(b) (ten-year statute of limitations on

promissory note where debtor has paid no principal or

interest and creditor has not demanded such). Although

this point was briefed in the context of Dorsey’s

recently withdrawn counterclaims and not in the specific

context of Dorsey’s fiduciary duty to I-65, Dorsey’s

insistence that the note is still good arguably

represents a breach of his duty to I-65 because of his

(continued...)

26

to her, she was aware of the promissory note, its high

interest rate, and Dorsey’s conflict of interest in 2000,

when Davis’s husband inquired on her behalf about

refinancing the loan and Dorsey replied to Davis stating

that he had no objection to refinancing if a more

favorable interest rate could be obtained. Davis admits

that she did not pursue the issue and did not actively

seek to change the terms of the financing arrangement.

Therefore, even if Davis’s cause of action did not accrue

until she learned that Dorsey was on both sides of the

financing arrangement, she did learn of this fact in 2000.

Accordingly, Davis’s claim as it pertains to the

promissory note is time-barred.3

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(...continued)

conflicting interest regarding the note. However, for

the same reasons Davis’s claim regarding the 12 %

interest rate is barred by the two-year statute of

limitations on fiduciary-duty claims, any claim regarding

his failure to recognize a limitations period on the

validity of the note itself is time-barred as well.

Assuming without deciding that a demand for payment on

the note would be time-barred ten years after it was

issued, Davis’s cause of action against Dorsey regarding

his alleged fiduciary duty to I-65 not to cancel the note

accrued in 2000 and expired in 2002, before this lawsuit

commenced. Davis also asks this court to enter a

declaratory judgment that the note is invalid, but the

court is without power to do so because Davis did not

join Dorsey Motor Sales, the holder of the note, as a

defendant to this action.

27

b. CD & O Land Purchase

The court next addresses CD & O’s purchase of several

parcels of land nearby or adjacent to I-65’s property.

The question is whether those purchases violated the

corporate-opportunity doctrine. “Stated succinctly, the

rule is this: ‘Corporate personnel may not for personal

gain divert unto themselves the opportunities which in

equity and fairness belong to their corporation.’” Banks

v. Bryant, 497 So.2d 460, 465 (Ala. 1986) (quoting H.

Henn, Handbook of the Law of Corporations § 237 (2d ed.

1970)). Unfortunately, that succinct statement of the

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28

corporate-opportunity doctrine does not answer the most

relevant question here: whether the sale of the land was,

in fact, a corporate opportunity which in equity and

fairness belonged to I-65.

The Alabama Supreme Court has noted that the “presence

or absence of any single factor is not determinative of

the issue of corporate opportunity.” Morad, 361 So.2d at

9 (quoting Paulman v. Kritzer, 219 N.E.2d 541 (Ill.

1966)); see also Banks, 497 So.2d at 465 (attributing

quote to 3 W. Fletcher, Cyclopedia of the Law of Private

Corporations § 861.1 (perm. ed. 1975, cum. supp. at 34)).

In its most extended discussion on corporate opportunity,

the Alabama Supreme Court approved of the following

statement of the rule:

“When acting in good faith, a director

or officer is not precluded from

engaging in distinct enterprises of the

same general class of business as the

corporation is engaged in; but he may

not wrongfully use the corporation’s

resources therein, nor may he enter into

an opposition business of such a nature

as to cripple or injure the

corporation.... [D]irectors, officers,

or agents, while ostensibly acting for

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29

the company, are not at liberty to

divert to their own favor, or for the

benefit of competitive corporations,

business which should properly belong to

the company which they represent; and

this is true, even though their company

is unable to finance the transaction,

and although the directors, in good

faith and because of such financial

inability, have rejected the proposition

for the corporation and have accepted it

for themselves, using their own funds

exclusively....”

Banks, 497 So.2d at 463 (quoting 19 C.J.S. Corporations

§ 785 (1940)).

In this case, viewed in the light most favorable to

Davis, the evidence reflects that I-65 obtained the option

to purchase certain adjacent or nearby properties and that

Dorsey, using his control of I-65, transferred those

options to CD & O, a corporation he owned with his wife,

so that CD & O could exercise the options, purchase the

property, and pursue business interests thereon. See

Dorsey Depo. (doc. no. 43-3) at 96, 183-90. Dorsey did

not inform Davis of the opportunity to purchase the land.

Based on these facts, the court cannot grant summary

judgment on Davis’s claim for breach of fiduciary duty as

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30

it pertains to the CD & O land purchase. Because I-65

held purchase options on the adjacent land, it had an

interest or expectancy in the opportunity to purchase the

surrounding properties. See 19 C.J.S. Corporations § 606.

Dorsey used the resources of I-65--namely, the purchase

options--to divert that opportunity to his other

corporation, CD & O. Where the director or officer uses

the resources of the corporation to obtain and take

advantage of an opportunity for himself, he has breached

his duty of loyalty under the corporate-opportunity

doctrine.

Dorsey argues that he was not required to inform Davis

of the opportunity because I-65 did not have the financial

resources to purchase any property. The law does not

support Dorsey’s position. Banks, quoting 19 C.J.S.

Corporations, supra, § 785, states that the corporate

opportunity applies “‘even though [the] company is unable

to finance the transaction.’” 497 So.2d at 463. And the

Fletcher Cyclopedia of the Law of Corporations, while

recognizing that “the effect of financial inability varies

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31

from one jurisdiction to another,” states that “courts are

unlikely to permit an officer to exploit the opportunity

without full disclosure” to the corporation’s

disinterested directors. 3 Wm. Meade Fletcher, Fletcher

Cyclopedia of the Law of Corporations § 862.10, at 307-08

(perm. ed. 2002). See also id. § 862.05, at 304 (“The

director must disclose the existence of the opportunity to

the [disinterested] directors and let them decide whether

the corporation will pursue or reject the opportunity....

Whether or not a valid corporate rejection occurs is

contingent upon full disclosure of all material facts and

circumstances, including the fiduciary’s interest in

personally taking the opportunity.” (emphasis added)); id.

§ 862.10, at 308 (“mere financial inability is inadequate

to exonerate an executive who appropriates an

opportunity”); id. § 861.10, at 279 (“If a fiduciary uses

corporate assets to develop a business opportunity, the

fiduciary will be estopped from denying that it was a

corporate opportunity, regardless of the corporation’s

ability to exploit it.” (emphasis added)). Here, Dorsey

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32

used I-65’s assets--namely, the purchase options--for his

own benefit by transferring them to his other corporation,

CD & O, without fully disclosing to Davis the nature of

the opportunity or the circumstances under which he was

seizing that opportunity for himself. Given those facts,

Dorsey cannot insulate himself from liability by arguing

that I-65 lacked the financial resources to exercise the

purchase options itself.

Before denying summary judgment on the claim regarding

CD & O’s purchase of adjacent property, the court must

address two additional arguments Dorsey makes. First,

Dorsey raises the statute-of-limitations defense. The

court concludes that Dorsey’s statute-of-limitations

defense is not supported by the record. Dorsey’s brief in

support of summary judgment does not provide a citation to

the record that specifically demonstrates that Davis knew

or had reason to know that Dorsey usurped a corporate

opportunity by causing CD & O to purchase the options and

the nearby lands, and in fact Davis states she was unaware

of these facts. Although Alabama law allows the statute

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33

of limitations to be tolled only in cases of fraud, Henson

v. Celtic Life Ins. Co., 621 So.2d 1268, 1274 (Ala. 1993)

(citing 1975 Ala. Code § 6-2-3), courts have noted that

where there is a “fiduciary relation between the parties,

imposing the moral and legal duty to disclose,” that duty

“may render silence fraudulent.” Belcher, 348 F.Supp. at

61 (tolling the limitations period and quoting Fletcher v.

First Nat’l Bank of Opelika, 11 So.2d 854, 860 (Ala. 1943)

and Hudson v. Moore, 194 So. 147, 149 (Ala. 1940)); see

also Thigpen, supra, § 11:12 (stating that 1975 Ala. Code

§ 6-2-3 “is of special interest, in view of the frequent

characterization of actionable corporate misconduct by

Alabama cases as ‘fraud or maladministration.’”);

Fletcher, supra, § 861.10, at 280-81 (“Since a director is

under a duty to inform the corporation of the full

circumstances of the transaction, mere disclosure of the

transaction, without revealing the surrounding

circumstances, is not sufficient, and failure to make

complete disclosure constitutes constructive fraud,

thereby tolling the statute of limitations.”). Here,

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4. “In a derivative action ..., the complaint shall

... allege with particularity the efforts, if any, made

by the plaintiff to obtain the action the plaintiff

desires from the directors or comparable authority and,

if necessary, from the shareholders or members, and the

reasons for the plaintiff’s failure to obtain the action

or for not making the effort.” Fed. R. Civ. P. 23.1.

34

because Dorsey’s failure to disclose the facts surrounding

the CD & O purchase would toll the statute of limitations

on Davis’s fiduciary-duty claim, there is a genuine issue

of material fact regarding the statute-of-limitations

defense that precludes the court from granting summary

judgment.

Second, Dorsey argues that Davis did not comply with

the requirements of Rule 23.1 of the Federal Rules of

Civil Procedure,4

 which sets forth the procedural pleading

requirements for, among other things, the substantive

state-law rules of ‘pre-suit demand’ and ‘demand

futility’: “Before a shareholder can be awarded damages on

a derivative claim, the shareholder must make a presuit

demand on the board of directors of the corporation to

correct the wrongs alleged, so that the corporation can

deal with the problems internally if possible. However,

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35

if the demand on the directors would be futile, then the

demand requirement is excused.” James v. James, 768 So.2d

356, 360 (Ala. 2000); cf. 5 James Wm. Moore, Moore’s

Federal Practice § 23.1.04[2] (3d ed. 2007) (federal

courts interpret Rule 23.1 in accordance with state

substantive law). Here, it is undisputed that Davis did

not make a pre-suit demand, so the question is whether she

can demonstrate demand futility. The Alabama Supreme

Court has held that “to show futility the shareholder or

policyholder must demonstrate such a degree of antagonism

between the directors and the corporate interest that the

directors would be incapable of performing their duty.”

Elgin v. Alfa Corp., 598 So.2d 807, 815 (Ala. 1992). In

its assessment, “a court may consider evidence underlying

the contention that a majority of the directors are

wrongdoers against whom the action is based in support of

the plaintiffs’ argument of futility.” Id. “Generally,

the requirement is deemed satisfied if the directors or a

majority thereof are shown to have been under the control

of the alleged wrongdoers.” Thigpen, supra, § 11:8, at

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36

537 (citing Goldman v. Jameson, 275 So.2d 108 (1973)).

Because the evidence, viewed in the light most favorable

to Davis, is that Dorsey controlled the corporation

entirely and engaged in self-dealing, the court concludes

that any pre-suit demand by Davis on Dorsey would have

been futile. Accordingly, Davis may proceed on her claim

regarding CD & O’s purchase of adjacent lands.

c. TD & O Billboard Lease

The next duty-of-loyalty issue relates to TD & O’s

billboard lease on I-65’s property. The facts surrounding

TD & O were not alleged in the complaint; they emerged in

deposition testimony, and Davis marshaled them in her

brief opposing Dorsey’s motion for summary judgment.

Because these facts form a similar basis for the

derivative fiduciary-duty claim as the promissory-note and

CD & O allegations, the court will consider them as part

of her derivative fiduciary-duty claim.

TD & O, another company controlled by Dorsey, leases

a billboard from I-65 for $ 600 per year and subleases it

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37

to an advertising company, Lamar Advertising, for $ 5,400

per year. Like the promissory note, this agreement

represents a conflicting-interest transaction. Dorsey, as

the sole shareholder of TD & O, personally benefits from

the transaction in which TD & O pays I-65 only $ 600 for

the right to sublease the billboard for $ 5,400. Dorsey

stands on both sides of the contract and evidently has the

ability to proportion Lamar’s rental fee between I-65 and

TD & O as he sees fit.

Under the Revised Alabama Business Corporation Act, a

conflicting-interest transaction is permissible if (1) it

is approved by a majority of disinterested and fullyinformed directors, (2) it is approved by a majority of

disinterested and fully-informed shareholders, or (3)

“[t]he transaction, judged according to the circumstances

at the time of commitment, is established to have been

fair to the corporation.” 1975 Ala. Code § 10-2B-8.61(b).

Because I-65 has only two directors and two shareholders,

it is not possible that a majority of disinterested

directors or shareholders approved the TD & O

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38

transactions. The question, then, is whether the terms of

the lease are fair to the corporation. Although it is

possible that Alabama courts have never expressly

allocated the burden of proof in demonstrating fairness to

the corporation, traditionally that burden rests with the

director or officer defending the conflicting-interest

transaction. E.g., Pepper v. Litton, 308 U.S. 295, 306

(1939) (the burden is on the director or stockholder whose

transactions with the corporation are challenged “not only

to prove the good faith of the transaction but also to

show its inherent fairness from the viewpoint of the

corporation and those interested therein.”); Kahn v. Lynch

Communication Sys., Inc., 638 A.2d 1110, 1115 (Del. 1994)

(“A controlling or dominating shareholder standing on both

sides of a transaction, as in a parent-subsidiary context,

bears the burden of proving its entire fairness.”); see

also Phoenix Airline Servs. v. Metro Airlines, 397 S.E.2d

699, 703 (Ga. 1990).

The court can find no arguments in Dorsey’s briefs,

nor evidence in the record, satisfying his burden to

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39

demonstrate that the transactions with TD & O are fair to

I-65. Indeed, absent evidence to the contrary, a markup

from $ 600 to $ 5400 appears on its face to be quite

unfair. Based on these facts, the court concludes that

summary judgment is due to be denied on Davis’s claim for

breach of fiduciary duty as it pertains to the billboard

lease.

Furthermore, having already addressed the statute of

limitations and demand futility, the court readopts its

conclusions on those issues and finds that they do not

preclude Davis from proceeding on this claim. With

respect to the statute of limitations, Dorsey had a

fiduciary duty to disclose his conflicting-interest

transaction with TD & O, and the record does not indicate

that he did so. As for demand futility, Dorsey’s

domination of the corporation and direct responsibility

for the wrongdoing, as reflected by the evidence viewed in

the light most favorable to Davis, would have made any

pre-suit demand by Davis futile. Accordingly, Davis may

proceed on her claim regarding TD & O’s billboard lease.

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40

d. Summary

In sum, and viewing the facts in the light most

favorable to Davis, the court concludes that Davis’s

fiduciary-duty claim regarding Dorsey Motor Sales’s

promissory note is time-barred, but that there are genuine

issues of material fact as to whether Dorsey breached his

fiduciary duty of loyalty to I-65 regarding CD & O’s

purchase of nearby land and TD & O’s billboard lease.

Accordingly, summary judgment on count 3 will be granted

with respect to the promissory note and denied with

respect to the CD & O land purchase and TD & O billboard

lease.

4. Negligence

Davis’s fourth claim is a derivative claim on behalf

of the corporation for negligence. Davis’s complaint

indicates that the transactions and allegations at issue

in her negligence claim are the same as in her derivative

fiduciary-duty claim. The court has already analyzed

three sets of allegations--the promissory note, the CD & O

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41

land purchase, and the TD & O billboard lease--in terms of

Dorsey’s duty of loyalty to I-65. The question is whether

these acts also give rise to a derivative-negligence

claim. The court concludes that they do.

The Alabama legislature has designated the duty of

care owed by directors and officers to the corporation:

they must exercise their duties in good faith, with the

care an ordinarily prudent person in a like position would

exercise under similar circumstances, and in a manner they

believe to be in the best interests of the corporation.

1975 Ala. Code §§ 10-2B-8.30, -8.42. When shareholders

allege a violation of the duty of care, defendant

directors and officers are protected by the so-called

business-judgment rule: “If in the course of management,

directors arrive at a decision, within the corporation’s

powers, for which there is a reasonable basis, and they

act in good faith, as the result of their independent

discretion and judgment, and uninfluenced by any

consideration other than what they honestly believe to be

the best interests of the corporation, a court will not

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42

interfere with internal management and substitute its

judgment for that of the directors to enjoin or set aside

the transaction or to surcharge the directors for any

resulting loss.” Roberts v. Alabama Power Co., 404 So.2d

629, 631 (Ala. 1981), quoted with approval in Hensley v.

Poole, 910 So.2d 96, 104 (Ala. 2005), and Michaud v.

Morris, 603 So.2d 886, 888 (Ala. 1992).

The business-judgment rule, however, does not operate

to protect self-dealing by directors and officers. 3A

Fletcher, supra, § 1040; Cede & Co. v. Technicolor, Inc.,

634 A.2d 345, 360-61 (Del. 1993); see also Jones v. Ellis,

551 So.2d 396, 400-01 (Ala. 1989); Ingalls Iron Works Co.

v. Ingalls Found., 98 So.2d 30, 39 (Ala. 1957). In other

words, if the defendant has engaged the corporation in a

conflicting-interest transaction or has usurped a

corporate opportunity, the business-judgment rule will not

bar a claim based on the duty of care.

The Supreme Court of Delaware has described the

business-judgment rule as part-procedural and partsubstantive. Cede, 634 A.2d at 360. Substantively, the

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43

rule prohibits courts from second-guessing the good-faith

business judgments of corporate management. Id.

Procedurally, the rule creates a burden-shifting

mechanism: a corporate decision carries a presumption of

due care; but if the plaintiff demonstrates fraud, bad

faith, or self-dealing by management, the presumption is

rebutted and the burden shifts to the defendant to show

that the challenged decision was fair to the corporation.

Id. at 361.

Here, because Dorsey’s actions regarding the

promissory note, the CD & O land purchase, and the TD & O

billboard lease were not disinterested, Davis is able to

rebut the presumption of due care that would otherwise

attach to these decisions. For reasons previously

discussed in the duty-of-loyalty analysis, the court finds

that the statute of limitations bars Davis’s claim as it

pertains to the promissory note but that genuine issues of

material fact preclude summary judgment on her claim as it

pertains to the CD & O land purchase and the TD & O

billboard lease. Also, for reasons previously discussed,

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44

Dorsey has not met his burden of showing that these

decisions were fair to the corporation as a matter of law.

Furthermore, the court concludes that a reasonable jury

could find that these decisions violated Dorsey’s duty of

care to the corporation: that they were discharged either

not in good faith, not with the care an ordinarily prudent

person in a like position would exercise under similar

circumstances, or not in a manner he reasonably believed

to be in the best interests of the corporation. 1975 Ala.

Code §§ 10-2B-8.30, -8.42.

In sum, the court concludes that Davis may proceed to

a jury on a negligence theory regarding the same conduct

she challenges on a duty-of-loyalty theory. Accordingly,

summary judgment on count 4 will be denied to the same

extent it is denied on count 3.

5. Willful and Wanton Conduct

Davis’s fifth claim is also a derivative claim on

behalf of the corporation, this time for willful and

wanton conduct in failing to exercise due care in his

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45

management of the corporation. Again, Davis’s complaint

indicates that the transactions and allegations at issue

in her willful-and-wanton claim are the same as in her

derivative fiduciary-duty claim and her negligence claim.

Alabama courts have recognized a claim for wanton

breach of fiduciary duty brought derivatively on behalf of

the corporation. See Fulton v. Callahan, 621 So.2d 1235,

1244 (Ala. 1993). Of critical importance here, however,

is that this count of Davis’s complaint alleges willful

and wanton conduct. The Alabama Supreme Court has held

that a count alleging willful and wanton conduct, as

opposed to willful or wanton conduct, requires proof of

both prongs. Lyons v. Walker Reg’l Med. Ctr., Inc., 868

So.2d 1071, 1089 (Ala. 2003) (citing Dickey v. Russell,

105 So.2d 649, 651 (Ala. 1958). To prove willfulness,

Davis must show that Dorsey violated his duty with a

design or purpose to inflict injury on the corporation.

Ex parte Nall, 879 So.2d 541, 546 (Ala. 2003). To prove

wantonness, Davis must show that Dorsey violated his duty

with reckless indifference to the consequences of his

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46

action or inaction. Armstrong Bus. Servs., Inc. v.

AmSouth Bank, 817 So.2d 665, 679-80 (Ala. 2001). 

Based on the evidence now before the court, a jury

could reasonably conclude that Dorsey acted wantonly, that

he violated his fiduciary duty to the corporation with

reckless indifference to the consequences of doing so.

However, there is no evidence to suggest that Dorsey did

so willfully, that he violated his duty with a design or

purpose to inflict injury on the corporation. Dorsey was

majority-owner of I-65. Because he was also the owner of

CD & O and TD & O, a jury could reasonably conclude that

he acted to benefit his other corporations with reckless

indifference to I-65’s fate. However, it is a different

matter entirely to conclude that it was his design or

purpose to harm I-65, and the record contains no evidence

to suggest that it was.

Therefore, because a claim for willful and wanton

conduct requires proof of both willfulness and wantonness,

and because the record is devoid of any genuine issue of

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47

material fact as to willfulness, summary judgment will be

granted on count 5.

6. Conversion

Davis’s sixth claim is for conversion. Unlike the

claims for breach of fiduciary duty to the corporation,

negligence, and willful and wanton conduct, Davis brings

the conversion claim directly and individually, not

derivatively on behalf of the corporation. According to

Davis’s complaint, Dorsey’s “misappropriation and use of

the assets of the corporation ... constitutes the wrongful

and willful conversion of personal property in which

[Davis] has an interest.” Compl. ¶ 34. 

Where a claim seeks recovery for harm done primarily

to the corporation itself, it must be brought as a

derivative action on behalf of the corporation and not

directly by the shareholder. James v. James, 768 So.2d

356, 358 (Ala. 2000). Although Davis alleges that

Dorsey’s misappropriation of the corporation’s assets

constitutes the conversion of personal property in which

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48

she has an interest, the Alabama Supreme Court has held

that the individual shareholder cannot “parlay a wrong

committed primarily against the corporation,” Galbreath v.

Scott, 433 So.2d 454, 457 (Ala. 1983), into a direct cause

of action simply by stating that the injury to the

corporation was an injury to the individual as well. See

also James, 768 So.2d at 358; Stallworth, 709 So.2d at

467. Therefore, even if Davis’s allegations regarding

Dorsey’s misappropriation of corporate assets were

correct, Dorsey would be liable only to the corporation

itself, not to Davis simply because she is a shareholder.

Simply put, the record contains no evidence that

Dorsey converted Davis’s personal assets. Accordingly,

summary judgment will be granted on count 6.

7. Fraud

Davis’s final claim is for fraud. Like the conversion

claim, she has brought the fraud claim directly and

individually, not derivatively. Fraud requires that the

plaintiff reasonably rely to her detriment on the

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49

defendant’s material misrepresentation of an existing

fact. Ex parte Randall, ___ So.2d ____, 2007 WL 1229208

(Ala. 2007). “In fraud actions, damages must be shown

because injury is an essential element of the cause of

action.” Gloor v. BancorpSouth Bank, 925 So.2d 984 (Ala.

Ct. Civ. App. 2005).

In this case, there is no evidence that Dorsey made

any misrepresentation that caused damage to Davis. Davis

alleges that Dorsey committed fraud when he told Davis

that she was personally liable for 30 % of the debt of the

corporation, allegedly in an attempt to squeeze her out of

the corporation. But Davis never actually sold her

shares, and she remains in the same position she would

have occupied had Dorsey never made the misrepresentation.

The court discerns no other evidence in the record that

Davis was defrauded by Dorsey. Summary judgment,

therefore, will be granted on count 7 as well.

* * *

For the foregoing reasons, the court concludes that

summary judgment is due to be granted in part and denied

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in part. Davis’s non-time-barred derivative claims on

behalf of I-65 against Dorsey for breach of fiduciary duty

and negligence may proceed to trial.

Accordingly, it is ORDERED as follows:

(1) Defendant Richard M. Dorsey’s motion for summary

judgment (doc. no. 22) is granted on counts 1, 2,

5, 6, and 7 in full, and on counts 3 and 4 with

respect to the promissory-note allegations, of

plaintiff Donna Davis Dorsey’s complaint.

(2) Said motion is denied as to counts 3 and 4 with

respect to the CD & O land-purchase and TD & O

billboard-lease allegations.

(3) Plaintiff Davis has until July 16, 2007, to join

I-65 Properties, Inc. as an indispensable party to

this action. Liddy v. Urbanek, 707 F.2d 1222

(11th Cir. 1983).

DONE, this the 6th day of July, 2007.

 /s/ Myron H. Thompson 

UNITED STATES DISTRICT JUDGE

Case 2:06-cv-00766-MHT-TFM Document 59 Filed 07/06/2007 Page 50 of 50
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certification is not itself appealable.

(e) Appeals pursuant to judicially created exceptions to the finality rule: Limited

exceptions are discussed in cases including, but not limited to: Cohen v. Beneficial

Indus. Loan Corp., 337 U.S. 541, 546, 69S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949);

Atlantic Fed. Sav. & Loan Ass’n v. Blythe Eastman Paine Webber, Inc., 890 F.2d

371, 376 (11th Cir. 1989); Gillespie v. United States Steel Corp., 379 U.S. 148, 157,

85 S.Ct. 308, 312, 13 L.Ed.2d 199 (1964).

 Rev.: 4/04

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2. Time for Filing: The timely filing of a notice of appeal is mandatory and jurisdictional.

Rinaldo v. Corbett, 256 F.3d 1276, 1278 (11th Cir. 2001). In civil cases, Fed.R.App.P. 4(a)

and (c) set the following time limits:

(a) Fed.R.App.P. 4(a)(1): A notice of appeal in compliance with the requirements set

forth in Fed.R.App.P. 3 must be filed in the district court within 30 days after the

entry of the order or judgment appealed from. However, if the United States or an

officer or agency thereof is a party, the notice of appeal must be filed in the district

court within 60 days after such entry. THE NOTICE MUST BE RECEIVED AND

FILED IN THE DISTRICT COURT NO LATER THAN THE LAST DAY OF

THE APPEAL PERIOD – no additional days are provided for mailing. Special

filing provisions for inmates are discussed below.

(b) Fed.R.App.P. 4(a)(3): “If one party timely files a notice of appeal, any other party

may file a notice of appeal within 14 days after the date when the first notice was

filed, or within the time otherwise prescribed by this Rule 4(a), whichever period

ends later.”

(c) Fed.R.App.P. 4(a)(4): If any party makes a timely motion in the district court under

the Federal Rules of Civil Procedure of a type specified in this rule, the time for

appeal for all parties runs from the date of entry of the order disposing of the last

such timely filed motion.

(d) Fed.R.App.P. 4(a)(5) and 4(a)(6): Under certain limited circumstances, the district

court may extend the time to file a notice of appeal. Under Rule 4(a)(5), the time may

be extended if a motion for an extension is filed within 30 days after expiration of the

time otherwise provided to file a notice of appeal, upon a showing of excusable

neglect or good cause. Under Rule 4(a)(6), the time may be extended if the district

court finds upon motion that a party did not timely receive notice of the entry of the

judgment or order, and that no party would be prejudiced by an extension.

(e) Fed.R.App.P. 4(c): If an inmate confined to an institution files a notice of appeal in

either a civil case or a criminal case, the notice of appeal is timely if it is deposited in

the institution’s internal mail system on or before the last day for filing. Timely filing

may be shown by a declaration in compliance with 28 U.S.C. § 1746 or a notarized

statement, either of which must set forth the date of deposit and state that first-class

postage has been prepaid.

3. Format of the notice of appeal: Form 1, Appendix of Forms to the Federal Rules of

Appellate Procedure, is a suitable format. See also Fed.R.App.P. 3(c). A pro se notice of

appeal must be signed by the appellant.

4. Effect of a notice of appeal: A district court loses jurisdiction (authority) to act after the

filing of a timely notice of appeal, except for actions in aid of appellate jurisdiction or to rule

on a timely motion of the type specified in Fed.R.App.P. 4(a)(4).

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