I N T H E SUPR EM E C O UR T O F M I SS I SS I PPI NO. 2 0 0 8 - CA- 0 0 6 2 0 - S CT V EN N IT B . M A T H IS, II
v. ERA FRANCHI

S E S YS TEMS, I

NC. , H. S TUART I RBY , M ARK W ARR EN , REA L ESTATE P R O F ES S ION A L SO F C EN T RA L M ISS ISS IP P I, L L C A ND R EA L ES T

AT E P RO FES S IONA L SOF TH E PI NE BELT, LLC
D A T E O F JU D G M E N T : 03/ 10/ 2008 T RI AL J UDGE : HON. RO BE RT G. E VANS COURT F ROM W HI CH APP EAL ED: COVI NGTON COU NTY CI RCUI T COURT A TTO RN EY S FO R A PPELL A N T: SA M STA RN ES TH O M A S EDD I E J AC OB AB DEEN A T T O R N E Y S F O R A P P E L L E E S : JO S E P H A N T H O N Y S C L A F A N I CH RI S T OP HE R A
. S HAP L E Y DE NNI S L
. HORN RI CK D. PATT NA TUR E OF THE C ASE: CI VI L - OTH ER D I SPO SI T I O N : A FFIRM E D - 11/ 12/ 2009 M OT I ON F OR RE HE AR I NG F I L E D: M ANDAT E I S S UE D: B E F O R E C A R L SO N , P . J. , K I T C H E N S A N D C H A N D L E R , JJ. KI TCHEN S , J UST I CE, FOR TH E COU RT: ¶ 1
. T h is is a c a se in v o lv in g th e a ttem p t o f a sh a re h o ld e r in a c lo se ly -h e ld c o rp o ra tio n to b rin g d e riv a tiv e c laim s a s a d ire c t ac tio n . F in d in g th a t th e trial ju d g e d id n o t er r in d i s mi s s i n g th e p l a i n t i f

f’ s d e r i v a t i v e c l a i ms f

o rl a c k o f

s t a n d i n g , we a f

f i r m.

### 2 F act s and P roce dural H i s t ory ¶ 2
. In 2 0 0 0 , V e n n it B
. M a th is, II, p u rc h a se d a fifty p e rc e n t e q u ity in ter e st in R e a l E sta te P ro fe ss io n a ls, L L C (“R E P ”), a real estate b rok era g e firm
. A t th e ti m e o f M athis’s acqui s i t i on, R E P w as a l i cens ed E R A f r anchi s e. I n connec t i on w i th a f r anchi s e agr eement b e tw e e n R E P a n d E R A F ra n c h ise S y ste m s, In c ., M a th is e x e c u ted a p e rso n a l g u a ra n ty
c o v e ri n g R E P ’s o b lig a tio n s to E R A
. ¶ 3
. T h e re m a in in g fifty p e rc e n t sta k e in th e c o m p a n y b e lo n g e d to C h ip a n d P a m e la H ill
. A c c o rd in g to M a th is’s c o m p lain t, C h ip H ill in d u c e d M a th is to len d lar g e su m s o f m o n e y to M r . H i l l and R E P, and al s o i nduced M athi s t o pl edge hi s per s onal ass et s as s ecur i ty f orl oans th a t M r. H ill a n d R E P h a d o b ta in e d fr o m th ir d p a rt ie s . ¶4
. M a th is a lleg e d tha t i n M arc h 2 0 0 2 , the H il ls tran sferred their fi fty p erc e n t e q u ity i nt er es ti n RE P t o H
. StuartI rby butr emai ned R E P empl oyees . A ccor di ng t o M athi s , i n an att empt t o excl ude hi m f r om the bus i nes s , Chi p H i l l a nd I rby f r audul ent l y tr ans f

err ed al l of R E P’ s as s et s t o tw o othercompani es , R eal Est at e Pr of es s i onal s of

the Pi ne B el t( R E P- Pi ne B el t ) and R eal E st at e P rof essi o n als o f C entr al M i ssi ssi pp i , L L C (R E P -C entr al ). T hese
e n tit ies w e re o w n e d b y C h ip H ill , Irb y , an d M a rk W a rre n , an o th e r R E P e m p lo y e e . M a th is
a lleg e d tha t th e H ill s, Irb y , a n d W a rre n ind u c e d R E P ’s re a l es tate ag e n ts to ter m in a te th e ir
con tract s w i th R E P a n d b ec o m e agen t s f or R E P -C entr al and / or R E P -Pi ne B el t . H e al so al l eged thatR E P- C entr al and R E P- Pi ne B el tbegan ut i l i zi ng the ER A tr ademar k and ther eby
m is a p p ro p ri a te d R E P ’s fr a n c h is e ri g h ts .

### At the tim e Mathi s f il ed hi s c ompl aint, ERA hadan ac ti on pending in t he Uni te d 1 

### State s Di stri ct

Court f or theSout

her n Di stri ct of Mi ss is sippi against

REP, REP- Centra l, the 3 ¶ 5
. I n M a y 20 03 , M a t h i s f i l e d s u i ta g a i n s tChi p a n d Pa me l a Hi l l , I rb y , W a rr e n , RE PC entr al , R E P- Pi ne B el t , and ER A i n t he C hance ry C our tof C ovi ngt on C ounty, al l egi ng
s ever al caus es of

act i on and s eeki ng va r i ous f or m s of r ecove ry. R ecogni zi ng thats om e of h is c laim s w e re o f a d e riv a tiv e n a tu re a n d b e lo n g e d to th e c o rp o ra tio n , M a th is s o u g h t to
o b tai n an ind ividu al reco v ery to the ex clus ion o f Irb y , the o ther sh are h o lder. ¶6
. A ll o f th e d efe n d an ts, w ith the e x ce p ti o n o f th e H il ls, ti m ely fil ed an sw ers to M athis’s
c o m p lain t. E R A , W a rre n , a n d R E P -C e n tra l all a ss e rte d a ffirm a tiv e d e fe n se s th a t M a th is lac k e d stan d ing
. A ll o f th e d efe n d an ts al so d ispu ted M athis’s claim that h e o w n ed a fifty p e rc e n t eq u ity in ter e st in R E P . A c c o rd in g to Irb y , Irb y h a d p u rc h a se d M a th is’s in ter e st in th e c o m p a n y fo r $ 2 5 0 ,0 0 0 . A c c o rd in g to E R A , W a rre n , an d R E P -P in e B e lt, M a th is h a d so ld h is in te re s t in th e c o m p a n y to th e H ills
. ¶7. E R A al s o f

i l ed count er cl ai m s agai ns tM athi s a nd cr os s - cl ai m s agai ns tthe H i l l s and I rby. E R A al l eged thatM athi s had sol d hi s i nt er es tt o the H i l l s and thatM athi s w as di s put i ng the vali dity of t he sal e in an att em pt t o o btai n a favo rabl e set t l em ent of a separat e bu si ness di s put e w i th C hi p H i l l
. E R A al s o cl ai m ed thati tw as ow ed m or e than $300, 000 by RE P and that it s m em b ers w e re p erso n all y li ab le for this am o u n t. In th e e v en t th at th e c o u rt det erm i ned thatM athi s had nots ol d hi s i nt er es ti n R E P, E R A al l eged thati thad a c aus e of act i on agai ns tthe H i l l s and I rby f orf r aud, negl i gentm i s r epr es ent at i on, and f r audul ent conveya nce. 1

### Hil ls , Irby, and Mathi s. ERA sought to s tay thest at e c ourt

ac ti on, but

the fe deralsuit

was dismissedonAu gu st 29 , 20 03
. The Hi ll s arenot partie s t o thi s a ppea l. In Oc tobe r 2003, theHil ls ’ attorne y 2 

### withdre w f

rom the ca se , and by thetimeof the he aring on t he m oti on to di sm is s, the y had not obt ained ne w couns el . Chip Hil l a ppeare d pro s e at t

he m oti on hearing, but

ma de no arguments. 4 ¶8. I rby and R E P- Pi ne B el t al s o f i l ed var i ous count er cl ai m s agai ns t M athi s ar i s i ng f r om the al l eged s al e of

M athi s ’ s one- hal f

i nt er es ti n R E P t o Irby. T hes e cl ai m s i ncl uded t or t i ous i nt er f er ence w i th busi nes s re l at i ons , bre ach of contr act , f

r aud, negl i gentm i s r epr es ent at i on,
a n d tr a d e m a rk d ilu tio n a n d in fr in g e m e n t. ¶9. I n N ovember2003, a di s put e ar os e overj ur i s di ct i on . T he H i l l s had fi l ed a C hapt er 1 1 p e tit io n in th e U n ite d S tate s B a n k ru p tcy C o u rt fo r th e S o u th e rn D istric t o f M iss iss ip p i. E R A at t em pted t o h ave the act i on rem ov ed, bu tthe b an k rup t cy co urtdecli ned t o ex erci se j ur i s di ct i on and r emanded the ca s e t o chanc ery court . Fol l ow i ng r ema nd , E R A f i l ed a
m ot i on t o tr ans f

erthe cas e t o the C ovi ngt on C ounty C i r cui tC our t . T he mot i on w as deni ed,
an d th is C o u rtag ree d t o co n side r th e issue on interl o cu tory ap p ea l. In Ju n e 2 0 0 6 , this C o u rt h e ld th a t ju ri s d ic tio n w a s p ro p e r in th e c ir c u it c o u rt . ER A Franchis e Sys tem s, I nc. v. Mathis ( Mathis I) , 9 3 1 S o . 2 d 1 2 7 8 (M is s . 2 0 0 6 ). ¶10. I n J ul y 2007, m or e than f ouryear s af

t erM athi s comm ence d thi s l i t i gat i on, E R A f i l ed a M ot i on t o D i s m i s s f

orLack of

St andi ng, pur s uantt o Rul e 12( b) ( 6) of the M i s s i s s i ppi R ul es of C i vi l Pr ocedur e, ci t i ng the der i vat i ve natur e of M athi s ’ s cl ai m s . In du e cour s e, eac h of the a p p ell ee s joine d the m o tio n . M athis re sp o n d ed b y arg u ing that, u n d er D er ouen v. 2

### 5

Murr ay , 6 0 4 S o . 2 d 1 0 8 6 (M iss. 1 9 9 2 ), as a sh are h o lder in a clos ely-h eld lim it ed li ab ili ty
c o rp o r a t i o n , h e wa s e n t i t l e d t o b r i n g c l a i ms o f a d e r i v a t i v e n a tu r e i n a d i r e c ta c t i o n . On M a r c h 1 0 , 2 0 0 8 , th e tr i a l j u d g e h e l d th a tM a th i s “ l a c k [ e d ] s t a n d i n g t o p u r s u e a n y c l a i ms
a g a in st a n y D e fe n d a n t th a t ar e in th e n a tu re o f d e riv a tiv e c laim s b e lo n g in g to R e a l E sta te Pr of es s i onal s , L L C , and thatal l of [ M athi s ] ’ s cl ai m s agai ns tE R A ar e . . . der i vat i ve. ” ¶1 1
. F rom that jud g m en t, M athis ti m ely fi led this ap p ea l, raisi n g sev era l p o ints o f error. M athi s ’ s m ai n ar gum enti s thathe shoul d be al l ow ed t o pur s ue der i vat i ve cl ai m s i n a di r ect
a c tio n an d o b tain rec o v e ry p e rso n a lly
. In the alte rn a tiv e , sh o u ld this C o u rt fin d th a t M a th is lac k e d sta n d in g to p u rsu e d e riv a tiv e c laim s, M a th is a rg u e s th a t th e d e fe n d a n ts w a iv e d th e ir rig h t to a ss e rt th a t M a th is la c k e d sta n d in g o r th a t h e sh o u ld b e a llo w e d to a m e n d h is
c o mp l a i n tt o a s s e r ta d e r i v a t i v e a c t i o n . F i n a l l y , M a th i s a r g u e s th a tn o ta l l o f h i s c l a i ms agai ns tE R A ar e der i vat i ve i n natur e, and he s houl d be al l ow ed t o purs ue thos e cl ai m s that bel ong t o hi m i ndi vi dual l y. I. ¶12. I n gener al , “an act i on t o r edr es s i nj ur i es t o a corpor at i on, w hether ar i s i ng i n contr act
ori n t ortcannotbe mai nt ai ned by a s t ockhol deri n hi s ow n na m e, butm us tbe br oughtby the
co rpo rati o n b ec au se th e a cti o n b elon g s to the co rpo rati o n an d n o t th e ind ividu al st o ck h o lders
w hos e r i ght s ar e mer el y der i vat i ve. ” Longa ne c ke rv. Di am ondhe ad Countr y Club , 760 So. 2d 764, 768 ( M i s s . 2000) ( quot i ng B r uno v. Southeas tern Ser vs . , I nc. , 385 So. 2d 620, 622 (M iss. 1 9 8 0 )). H o w e v er, M athis arg u es th at su ch o f his claim s as a re d eriva ti v e in n ature
m ay be br oughti n a di r ecta ct i on unde rthe doctr i ne announce d i n D er ouen v. Murr ay , 604

### Th e d efend ants argu e th at th is w as mere d icta andthat th is Co urt h as nev er exp licitly 3 

### adopt ed the r

ule . Whe n theappe alwas f il ed, this Cour

t had not dis cus se d the doc trineothe r thanin Ma this I

, 9 31 S o. 2 d at

1 28 1- 82
. Ho we ve r , v e ry r e c e ntly, thi s C ourt ha s he ld, “Mi ss is sippi c as el aw hol ds that in de rivatives uit s involving cl ose ly hel d cor porati ons, the trial court may aw ard damag es o n an ind ividual basis, pro vid ed certain safeg uard s are met.” Investo r Res. Servs., Inc. v. C ato , 15 So. 3d 412, (Mi ss . 2009) (c iting Derouen , 604 So. 2d at 10 91 n.2 ). 6 So. 2d 1086 ( M i s s . 1992)
. I n D er ouen , thi s C our tdet erm i ned that an act i on by one sh a re h o ld e r ag a in st a n o th e r w a s a d e riv a tiv e ac tio n ev e n tho u g h the p lain tiff d id n o t lab e l it
a s s u c h
. I

d . at1090- 91. A l though the C our tf ound thatthe act i on w as der i vat i ve, the opi ni on sta ted in a fo o tn o te th a t i t co u ld h a v e b e e n b ro u g h t as a d ire c t ac tio n . I d. at1091 n. 2. A ccor di ng t o D er ouen , I n the ca s e of

a cl os el y- hel d corpor at i on . . . the [ tr i al ] courtin i t s di s cr et i on m ay tr eatan ac t i on r ai s i ng der i vat i ve cl ai m s as a di r ectact i on, exem pti tf r om thos e r es tr i ct i ons and def ens es appl i cabl e onl y t o der i vat i ve ac t i ons , and or der an i ndi vi dual r ecove ry, i f i tf i nds thatt o do s o w i l l not( i ) unf ai r l y expos e the c o rp o ra tio n o r th e d e fe n d a n ts to a m u lti p licity o f a c tio n s, (ii) m a ter ially p re ju d ice th e in ter e sts o f th e c re d ito rs o f th e c o rp o ra tio n , o r ( iii ) in ter fe re w ith a fai r di stri bu t i on of the recov ery am on g all i nter est ed p art i es. I d. ( q u o tin g A m e ri c a n L a w In s titu te , P r i nci pl es of C or por at e G overnance: A nal ys is and R ecom m endat i ons § 7
. 0 1 (d) (1 9 9 2 )). 3 ¶13. K eepi ng i n m i nd that thi s i s a ques t i on l ef t t o the di s cr et i on of the tr i al j udge, w e f i nd t hat the compl exi ty of

thi s cas e mi l i t at es agai ns tappl i cat i on of the doctr i ne. A r evi ew of
c a se s fr o m o th e r ju risd ictio n s re v e a ls th a t th e d o c trin e is a lm o st a lw a y s e m p lo y e d in p u re ly in tr a c o rp o ra te d is p u te s . See, e. g. , T hom as v. D i cks on , 7 7 4 , 3 0 1 S
. E
. 2 d 4 9 , 5 1 (G a. 19 8 3 ); B a rth v. B a rth , 6 5 9 N .E .2 d 5 5 9 (In d . 1 9 9 5 ); M y n a tt v. Co lli

s , 5 7 P
. 3 d 5 1 3 (K an . 2 0 0 2 );

### 7

T riew eiler v. S ears , 6 8 9 N
. W
. 2 d 8 0 7 (N eb
. 2 0 0 4 ); Schum acherv. Schum acher , 469 N .W .2 d 7 9 3 (N .D . 1 9 9 1 ); D urham v. D urham , 8 7 1 A .2 d 4 1 , 4 6 (N .H . 2 0 0 5 ); A u ro ra Cre dit S ervs. v. L ibert

y W est , 970 P. 2d 127 3 (U t ah 1 99 8). A l tho ug h M athis has fi l ed suitagainst hi s curr entand f

or m erbus i nes s partner s , ther e ar e f ourdef endant s w ho are no tand have
neverbeen ow ner s orm ember s of R E P
. G i ven t he numberof part i es i nvol ved and the
e x iste n c e o f s e v e ra l co u n ter c laim s a n d c ro ss -c laim s, it is like ly th a t a d ire c t re c o v e ry w o u ld in ter fe re w ith a fa ir d istrib u tio n o f th e rec o v e ry o r ex p o se the co rp o ra tio n to a m u ltip lic ity
o f a c tio n s. M o re o v e r, E R A h a s a s s e rte d th a t itis o w e d $ 3 0 0 ,0 0 0 fro m R E P , m a k in g it a pot ent i al c r edi t orthatw oul d be pr ej udi ced i f M athi s w er e t o r ece i ve an i ndi vi dual r ecove ry. ¶14
. A lth o u g h the tr i al j ud ge d i d n ot expl i ci t l y ad dress D er ouen i n the j ud gmen t , i tw as the ce ntr al l egal i s s ue bef or e the tr i al court . C ons i der i ng the compl exi ty of the ca s e and the
n u m b e r o f c laim s a n d p a rties in v o lv e d , w e fin d th a t th e trial ju d g e d id n o t a b u se h is di s cr et i on i n hol di ng thatM athi s coul d notpur s ue hi s der i vat i ve cl ai m s i n a di r ectact i on. II. ¶1 5. M a thi s a l s o a r gu e s tha ti f h e i s n ota l l owed t o pr oc e e d di r ect l y on t he der i vat i ve cl ai m s , he s houl d be gi ven l eave to am end hi s compl ai ntt o as s erta der i vat i ve ac t i on on behal f of R E P. H e ar gues that“had a l l of the A ppel l ees t i m el y pur s ued thei r ‘ l ack of sta n d in g ’ d e fe n se th ro u g h a m o tio n to d ism iss , M a th is c o u ld h a v e c u re d a n d /o r a m e n d e d h is compl ai ntt o as s erta der i vat i ve ac t i on as an al t ernat e theory of recovery. ” H e al s o ar gues thathe s hou l d no tb e r equi r ed t o m ake de m and upon the LL C underM i s s i s s i ppi C ode

### 8

Sect i on 79- 29- 1102 beca us e demand w oul d have be en f ut i l e and the appel l ees have w ai ved thei rr i ghtt o as s ertl ack of compl i ance w i th the demand s t atut e as a def ens e. ¶16. H ow ever , M athi s never pr es ent ed thes e ar gum ents t o t he tr i al court , and has never asked p ri or t o thi s appea l t o p roceed deri vati vely. T hroug ho ut the co urse of the p roceedings, M athi s m ade c l earthathe w as i nt er es t ed i n pur s ui ng a di r ectact i on onl y. H i s s ol e ar gum ent in re sp o n se to th e m o tio n to d ism iss fo r la c k o f sta n d in g w a s th a t h e c o u ld p ro c e e d d ire c tly
u n d er D er ouen . A tor al a r gum ent , hi s a t t orne y r ei t er at ed thi s pos i t i on: “M r . M athi s does not
w a n t th e re to b e a re c o v e ry tha t go e s to the co rp o ra tio n . . . . M r. M a th is is n o t p u rp o rtin g to br i ng a der i vat i ve act i on. . . . I t ’ s a very narr ow i s s ue. ” H i s att orney al s o s t at ed t o the tr i al
c o u rt th a t if M a th is c o u ld n o t p ro c e e d d ire c tly , “M r. M a th is is g o in g to h a v e to liv e w ith that
. ” ¶17. It is a fu n d am en tal rul e of app el l at e proced ure t hat, absent ex tr ao rdin ary
c ir c u m s ta n c e s , th is C o u rtw ill n o t c o n s id e r is s u e s ra is e d fo r t h e fi rs t tim e o n a p p e a l. See e
. g. , A nglin v. G ul

f G uar. L i f e Ins . Co. , 956 So. 2d 853, 864 ( M i s s . 2007) ( quot i ng A lexander
v. D ani el , 904 So. 2d 172, 183 ( M i s s . 2005) )
. W e ca nnothol d the tr i al courti n err oron an i s s ue thatw as neverputbef or e i t . B eca us e M athi s neverr eques t ed t o pr ocee d der i vat i vel y, the tr i al courtdi d noterri n di s m i s s i ng the der i vat i ve cl ai m s w i th pr ej udi ce. III . ¶18. M athi s ’ s f

i nal cont ent i on i s that , beca us e nota l l of hi s c l ai m s a r e der i vat i ve i n natur e, he s houl d be al l ow ed t o pur s ue the cl ai m s thatbel ong to him i ndi vi dual l y. T he tr i al j udge

### 9

hel d thatal l der i vat i ve cl ai m s w er e di s m i s s ed, butdi d nots peci f y t o w hi ch cl ai m s hi s rul i ng
a p p lie d
. ¶19. T her e i s l i t t l e cas e l aw i n M i ssi ssi pp i w hich add res ses the d i ff erence betw een der i vat i ve and di r ectact i ons , butt he gener al rul e i s thatder i vat i ve ac t i ons s eek r ecove ry f or in ju ri e s to th e c o rp o ra tio n . Bruno , 3 8 5 S o . 2 d a t 6 2 2 -2 3
. T h e A m e ric a n L a w In stitu te provides a hel pful analysi s i n d i st i ng uis hing betw een d i rectact i on s and d eri vati ve acti on s. Sect i on 7. 01 of

the P r i nci

pl es of C or por at e G overnance st at es: ( a) A der i vat i ve ac t i on m ay be br oughti n t he nam e orr i ghtof a corpor at i on b y a h o ld e r . . . to re d re s s a n in ju ry su s ta in e d b y , o r e n fo rc e a d u ty o w e d to , a corpor at i on. A n act i on i n w hi ch the hol dercan pr evai l onl y by s how i ng an i nj ury or b rea ch of

duty t o the corpor at i on s houl d be tr eat ed as a der i vat i ve act i on. (b) A dir ectact i on m ay b e broug ht i n the nam e and r i gh tof a holdert o redress a n in ju ry su sta in e d b y , o r e n fo rc e a d u ty o w e d to , the h o ld e r. A n a c tio n in w h ich th e h o ld e r c a n p re v a il w ith o u t sh o w in g a n in ju ry o r b re a c h o f d u ty to the corpor at i on s houl d be tr eat ed as a di r ectact i on t hatm ay be mai nt ai ned by th e h o ld e r i n a n in d iv id u a l c a p a c ity
. A si m i l ar anal ysi s can be found i n F l et cher’ s C yclopedi a of

the Law of

C or por at i ons : T he ac t i on i s deri vat i ve i f the gr avamen of

the compl ai nti s i nj ury t o the corpor at i on, ort o the w hol e body of i t s s t ock orpr oper t y w i thoutany se v e ra n c e o r d istrib u tio n a m o n g in d iv id u a l sh a re h o ld e rs, o r if it se e k s to recover ass et s f

or the co rporat i on or t o p reventthe d i ssi pati on of i t s ass et s. 1 2 B W illia m M e a d e F le tc h e r, C yclopedi a of

the Law of

C or por at i ons § 5 9 1 1 (rev
. ed
. 2 0 0 9 ). T hu s, i n det erm i ni ng w hetherthe ac t i on bel ongs t o the corpor at i on orthe i ndi vi dual , the f ocus of the i nqui ry i s w hetherthe corpor at i on orthe i ndi vi dual s uf f er ed i nj ury. ¶ 2 0
. C o n sid e rin g th e se p rin c ip les , w e e x a m in e th e c laim s a lleg e d in M a th is’s c o m p lain t:

### 10

C o u n t I : M athis s oughta dec l ar at ory j udgm ent( a) thathe coul d pur s ue any der i vati ve cl ai m s bel ongi ng t o R E P as a di r ectact i on and obt ai n i ndi vi dual r ecove ry f

orthes e cl ai m s ; ( b) thatE R A m ay notenf or ce a ny r i ght s underthe per s onal guar anty s i gned by M athi s ; and ( c) thatM athi s ow ns f i f ty per centof RE P- Centr a l a nd RE P- Pi ne Bel ta s c orpo r a t e op po r tun i t i e s of RE P. C o u n t I I : T h e H ill s, W a rre n , an d Irb y b re a c h e d th e ir fid u c iar y d u ties to M a th is a nd RE P. C o u n t I II : E R A , W a rre n , R E P -C e n tra l, an d R E P -P in e B e lt as sis ted th e H ill s a nd I rby i n b r e a c hi ng the i rf i du c i a ry d ut i e s t o M a thi s a nd RE P. C o u n t I V: A ll th e d e fe n d a n ts v io late d th e ir d u ties o f c a re , loy a lty , an d fa ir deal i ng ow ed t o both M athi s and R E P , and al l def endant s us urped the c o rp o ra te o p p o rt u n itie s o f R E P
. C o u n t V: A l l def

endant s t or t i ous l y i nt er f er ed w i th t he contr actual r el at i ons of M a thi s a nd / orRE P. Coun tVI : A l l defend ants t ort i ou sl y int erf ered w i th the prospect i ve b usi ness a dv a nt a ge of

M a thi s a nd / orRE P. C o u n t V II : A l l def

endant s cons pi r ed and/ orai ded and abett ed i n the w r ongf ul a c tio n s a lleg e d in th e c o m p lain t. C o u n t V III : M a th is s o u g h t an a c c o u n tin g o f g a in s fr o m a ll d e fe n d a n ts ste m m in g fro m th e a lleg e d w ro n g fu l co n d u c t. C o u n t I X: A l l def

endant s hol d any pr of

i t s ga i ned f

r om thei rw r ongf

ul conduct i n a cons truct i ve trus tf orM at hi s . I n addi t i on, C hi p H i l l hol ds cert ai n r eal property in a con struct i ve trustforM athis
. C o u n t X: C h ip H ill b re a c h e d h is a g re e m e n t to tra n sfe r c e rta in re a l p ro p e rty to M at his , and M at his i s ent i t l ed to speci fi c perf orm ance o f these ag reem ents . Cou n tXI : C h ip H ill e q u itab ly c o n v e rte d so m e o f th e se p a rc e ls o f r e a l p ro p e rty pr omi s e d t o M a thi s , a nd M a thi s i s the r e f or e e nt i t l e d t o c ompe ns a t ory a nd pu nit i ve d am ages as w el l as at t orneys fees.

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C o u n t X II: E R A bre ache d t he f

r anchi s e agr eementw i th R E P, and M athi s w as enti t l ed to al l of R E P ’s ri gh t s und er the ag reem ent, both i nd i vidual l y and as a membe rof

RE P. C o u n t X III: C hip H i l l breached the l oan ag reem ents b etw een H i l l and M athis
. C o u n t X IV: M athis ag ree d to p ledg e c erti fi ca tes o f de p o sitas c o ll ateral for a l oan fr om a thi r d party t o R E P, and H i l l and I rby br eac hed thei ragr eement w i th M athi s t o r epay thi s l oan. ¶ 2 1
. Ha v i n g r e v i e we d th e c o mp l a i n t , we a g r e e wi th th e t r i a l j u d g e t h a t a l l o f th e c l a i ms
a g a in st E R A w e re d e riv a tiv e in n a tu re . A lth o u g h M a th is c laim s th a t h is p e rso n a l g u a ra n ty g iv e s h im the rig h t t o p u rsu e a d ire c t ac tio n ag a in st E R A , th e g u a ra n ty w a s sig n e d in
con necti on w i th a fr anch i se agreem ent betw een R E P and E R A w h ich M athi s si gn ed as a
m e m b e r o f R E P , a n d th e b a s is fo r h is c la im is E R A ’s b re a c h o f t h e fr a n c h is e a g re e m e n t. ¶ 2 2
. T h e o n ly c laim s a ss e rte d b y M a th is w h ich w o u ld n o t re q u ire a sh o w in g o f in ju ry to R E P ar e thos e r ai s ed aga i ns tC hi p H i l l , i ndi vi dual l y, i ncl udi ng w hetherhe br eac hed an agr e e mentt o tr a ns f

e rc e r t a i n r e a l p r op e r ty t o M a thi s , a nd whethe rh e b r e a c he d l oan agr eement s be tw een H i l l a nd M athi s . A l l otherc l ai m s as s ert ed by M athi s , how ever , ar e of such n ature that any all eged harm suff ered by M athis w ou l d h ave b een indi rect , as a sh a re h o ld e r o f R E P , fo r w h ich M a th is c o u ld m a k e n o re c o v e ry a b se n t a s h o w in g o f h a rm to R E P. I n otherw or ds , “the gr avamen of the ac t i on is a w r ong t o the corpor at i on. ” Bruno , 3 8 5 S o . 2 d a t 6 2 3
. CO NC L US I ON ¶ 2 3
. T he tr i al j udge di d noterri n decl i ni ng t o appl y the D er ouen doctr i ne and di s m i s s i ng

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M athis ’s clai m s w hich w ere deri vati ve i n natur e. A l tho ug h M athis n ow seeks t o b ri ng tho se
c l a i ms o n b e h a l f

o f t h e c o rp o r a t i o n , h e i s b a rr e d f r o m t a k i n g t h i s p o s i t i o n f o rth e f i r s tt i me
o n a p p e a l
. F u r th e r mo r e , th e tr i a l j u d g e d i d n o te rri n f i n d i n g th a ta l l th e c l a i ms a g a i n s tERA
w e re d e riv a tiv e in n a tu re , an d th e o n ly re m a in in g c laim s a re th o se a ss e rte d a g a in st C h ip H ill forbreach o f pr i vate agreem ents betw een H i l l and M athis
. ¶ 2 4
. AF F I RM ED . W ALLER, C. J . , CARL S ON AND GRAV ES , P . J J . , DI CKI NS ON, LA M AR, CH AN DL ER AND PI ER CE , J J . , CONCUR. RANDOL P H, J . , NO T P AR T I CI P AT I NG .