Opinion ID: 852988
Heading Depth: 2
Heading Rank: 2

Heading: Murray's Claim for Damages

Text: Murray argues that the Board's action in removing him was grounded in improper motives. The Court of Appeals concluded that the Board was authorized to remove one of its members, and therefore there was no issue as to its motivation. We agree that under most circumstances shareholders are entitled to vote their shares as they see fit in their self interest. A publicly traded corporation presents no issue of the duties of officers, directors or shareholders in a close corporation as discussed in Barth v. Barth, 659 N.E.2d 559 (Ind.1995). Accordingly, if Conseco's shareholders had chosen to exercise their rights to remove Murray for any reason or for no reason at all, or for a reason grounded solely in their own perceived interests, Murray would have no claim. Removal by directors is another story, however. By adding directors to the entities authorized to remove a board member, the Indiana statute did not exempt the directors from the standards applicable to directors in any action they take. Directors are obligated to act in the interest of the corporation. Ind.Code § 23-1-35-1. If it is in the interest of the corporation as a whole to remove Murray, then Murray has no claim against the corporation or its Board for the implementation of that action, unless it constitutes a breach of contract. There is no implied contract not to remove him as director simply by reasons of his election. Moreover, as the Court of Appeals noted, Indiana's BCL is extremely deferential to directors' judgment as to what is in the corporation's interest. It erects a number of barriers to successful challenges to directors' actions, including notably a strong endorsement of the business judgment rule and a standard of good faith for director conduct. Id. The directors are not defendants in this case and their liability is not an issue. However, an action taken by them in good faith after reasonable investigation is conclusively presumed to be valid. I.C. § 23-1-35-1(g). If valid, the removal is by definition not wrongful and forms no basis for a claim in the absence of a breach of contract. The standard of good faith and reasonable investigation remains, however, before this principle is invoked. Murray claims that even if the Board has the power to remove him without cause, this case must nevertheless be remanded for trial of his damages claim. He cites several items he describes as damages, all of which may have cost him loss, or at least lost expectations. These include termination of non-vested options and deferred compensation, as well as several other lost forms of director compensation. It is unclear whether he claims these items as contract breach or some sort of wrongful action by the corporation. Neither theory is viable on the facts before us. To the extent Murray claims a contract, he cites no written agreement between him and Conseco, and none is pleaded as required by Trial Rule 9.2(A). There is no implied contract that Murray will not be removed by the Board if it concludes that that action is appropriate. To the contrary, the Indiana BCL contemplates that the possibility of removal and the terms of every director's employment are subject to its provisions unless some relevant document provides otherwise. In short, Murray's removal may have caused him loss, but he fails to allege compensable damages. Finally, on appeal Murray seems to rely on a contract theory to recover his claimed damages. In the trial court his claim was solely that the removal was wrongful because it was contrary to statute and because it was beyond the power of the Board. He pleaded no other theory and alleged no improper motive. Specifically, he made no claim that the directors were not acting in good faith or acted without reasonable investigation. Accordingly, he has presented no claims that the Board acted other than in exercise of its judgment as to the corporation's interests. Accordingly, summary judgment was properly granted by the trial court on all issues raised by Murray's complaint.