Opinion ID: 2633558
Heading Depth: 1
Heading Rank: 4

Heading: The proposed consolidated complaint

Text: The proposed consolidated complaint asserts eight causes of action, involving alleged breaches of fiduciary duties and violations of corporate and tort laws. In that complaint, appellants assert that, before the SAC entities were formed, AMERCO aggressively pursued opportunities to add self-storage facilities to its portfolio. Since then, however, they claim, those efforts have been refocused to benefit Mark and the SAC entities, rather than AMERCO. In particular, the proposed consolidated complaint asserts that Mark and the SAC entities have improperly profited in the following three ways. First, appellants allege that AMERCO's public filings show that AMERCO or its subsidiaries sold self-storage properties to the SAC entities at acquisition cost plus capitalized expenses, or at prices ultimately determined by Joe. The prices were allegedly unfairly low because they did not include added value resulting from AMERCO having leased the property, goodwill associated with use of the U-Haul name, and the properties' locations near U-Haul centers where customers can obtain and return moving vehicles. Second, appellants allege that AMERCO financed the self-storage property transactions by giving the SAC entities over $400 million in nonrecourse loans. As a result, AMERCO was left with the financial risk, while the SAC entities reaped appreciation, tax benefits, and net cash flow. For instance, appellants assert that, in 1995, when AMERCO needed capital itself, it loaned the SAC entities $54,671,000 to purchase forty-four self-storage properties, twenty-four of which were purchased from AMERCO or AREC at the profitless price of $26,287,000. Allegedly, as the SAC entities continued to construct and purchase (from AMERCO and others) self-storage properties in direct competition with U-Haul, and as AMERCO's financial position deteriorated, comparable loans-for-purchases (or loans-for-construction) transactions occurred in 1995 and 1996, and in the years from 1998 to 2001, each of which are similarly detailed in the complaint. Once the SAC entities obtained the properties, they assertedly entered into agreements with U-Haul, under which U-Haul manages the properties in the U-Haul name. The proposed complaint maintains that the management agreements are actually triple-net leases and that U-Haul's management fee is subordinate to payments owed to the properties' primary lenders. And third, the proposed complaint alleges that the SAC entities profited from the use of AREC's employee resources to locate, purchase, develop, and lease self-storage facilities, without, on information and belief, justly compensating AREC or AMERCO. According to the proposed complaint, none of the AMERCO-SAC entities transactions, or the use of AREC employees, was presented to or ever approved by AMERCO's board of directors. And, allegedly, none of AMERCO's financial statements fully explained the SAC entities' involvement with AMERCO. Consequently, the proposed complaint alleges, the board respondents knowingly signed false, incomplete and misleading public disclosure statements. As support for this proposition, the proposed complaint notes that AMERCO's external auditor later required disclosure of AMERCO's relationship with the SAC entities, which resulted in negative financial showings, plummeting stock prices, and the firing of the external auditor. And, the proposed complaint asserts, in 2002, the SAC entities began to move into U-Haul's core business  moving vehicle rentals  by acting as independent dealers at 276 locations. With regard to the allegations against former and current members of AMERCO's eight-member board of directors, the proposed consolidated complaint asserts that they breached their fiduciary duties of loyalty and care by authorizing or permitting the authorization of, or failing to monitor, the practices and conduct which resulted in [the acts complained of]. The directors and/or officers were allegedly involved in the planning and creating (or causing to be planned and created)[,] proposing (or causing the proposal of)[,] and authorizing, approving and acquiescing in the illegal conduct complained of herein. The proposed complaint asserts that each of the respondent directors, [3] through his position on an AMERCO committee and/or as a director or officer of the AMERCO subsidiary that was involved in the wrongful acts, had knowledge of and actively participated in and approved of the wrongdoings alleged or abdicated his responsibilities with respect to these wrongdoings. Appellants assert that efforts to conceal AMERCO's true financial status  by the former board's intentional signing of the false and misleading public financial statements and the current board's failure to clarify those statements  amount to conspiracy to defraud. The proposed consolidated complaint was never filed.