Opinion ID: 736234
Heading Depth: 2
Heading Rank: 2

Heading: the nature of the misappropriation claims

Text: 31 After the closing arguments at trial, the district court instructed the jury that Palmer could recover his pro rata share of any injury to the corporation. The appellants say this was erroneous, because it allowed recovery of derivative relief after the district court had granted the appellants' summary judgment motion on the derivative claims. Citing Griffin v. Michigan Dep't of Corrections, 5 F.3d 186, 190 (6th Cir.1993), they claim this violated the law of the case. 32 Appellants' reliance on Griffin is misplaced. There, we made it clear that the prior order that constituted the law of the case was a final order that the state had a duty to appeal timely. Here, the order of partial summary judgment, although the law of the case, was not final until the district court entered its judgment disposing of the entire case. However, that order, although not a final order for purposes of appeal at the time it was entered, nonetheless dismissed the derivative claims in the complaint, and became final when the district court entered the judgment from which defendants and plaintiff now appeal. Although he could have done so, the plaintiff does not challenge that order dismissing the derivative claims in this appeal. 33 The district court's order did not consider whether the plaintiff's claims were derivative; rather, the court assumed that they were derivative and dismissed them because the plaintiff was not properly representative of the other allegedly wronged shareholders. Although the plaintiff has not challenged that order, we think that to decide this appeal properly, we must consider whether the complaint raises derivative claims only or whether it has raised claims that the plaintiff may bring directly. We address first the misappropriation claims in Count I. 34 The general rule in Ohio is stated in Adair v. Wozniak, 23 Ohio St.3d 174, 492 N.E.2d 426 (1986) (syllabus): 35 [O]nly a corporation and not its shareholders can complain of an injury sustained by, or a wrong done to, the corporation. However, this general principle has no application where the wrongful acts are not only against the corporation but are also violations of a duty arising from contract or otherwise owed directly by the wrongdoer to the shareholder. 36 Id. at 176, 492 N.E.2d at 428 (internal citations omitted). 37 In Crosby v. Beam, 47 Ohio St.3d 105, 548 N.E.2d 217 (1989), the Ohio Supreme Court announced an exception to the general rule for actions brought by minority shareholders in close corporations. There, the court held that majority shareholders owe a fiduciary duty to minority shareholders, and where the majority shareholders use their control to prevent the minority from having equal opportunity in the corporation, and the minority shareholder is injured in a way that is separate and distinct from the injury to the corporation, the complaining shareholder has a direct, as opposed to a derivative, action. Id. at 108-110, 548 N.E.2d at 220-21. Subsequently, in Weston v. Weston Paper & Mfg. Co., 74 Ohio St.3d 377, 379-80, 658 N.E.2d 1058, 1060-61 (1996), the Ohio Supreme Court reaffirmed that the Crosby exception to the general rule was an exception peculiar to closely held corporations, and would not be extended to corporations not closely held. 38 The Ohio Supreme Court has not addressed the issue of direct versus derivative actions in the circumstances presented by the case before us. The essence of Palmer's claim is that LaValley, another minority shareholder in Fox Research, used his position as chairman of Fox Research to advance the interests of his own separate companies, to the detriment of Fox Research, and thus injured Palmer as a minority shareholder. The actions of which Palmer complains were not the actions of a majority or controlling shareholder at all; neither did the actions complained of injure Palmer in a way that was separate and distinct from the injury to the corporation. To the contrary, Palmer specifically complains that LaValley injured Fox Research by taking from it opportunities that Palmer contends belonged to it, and by preventing the corporation from making profits. Those injuries were shared by all of the other shareholders, including LaValley, whose minority shares were diminished in value to the same extent as all other shares. 39 We note that at least one appellate court in Ohio has extended the Crosby rationale to apply to actions by a controlling shareholder who was not a majority shareholder. See McLaughlin v. Beeghly, 84 Ohio App.3d 502, 506-07, 617 N.E.2d 703, 705-06 (1992). The facts in that case, however, are sufficiently different from those here, that we cannot conclude that the Ohio Supreme Court would extend McLaughlin to this case. 5 40 We hold that Palmer's claims of misappropriation in Count I are wholly derivative. Having granted judgment to the defendants on the derivative claim prior to trial, the district court erred in permitting the jury to consider any evidence relative to that count, and the judgment as to Count I must be reversed. 41 The jury made no finding on the claims in Count II--unjust enrichment and constructive trust. But as the district court correctly noted in its order of February 4, 1994, Count II raises no basis for recovery in addition to what the plaintiff asserted in Count I. Therefore, because the plaintiff may not recover on Count I, neither may he recover on Count II.