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Gagliardi v. TriFoods International, Inc.

Delaware Court of Chancery
683 A.2d 1049 (1996)



Eugene Gagliardi (plaintiff) founded TriFoods International, Inc. (TriFoods). Gagliardi was fired from the company in 1993, but he continued to own 13 percent of the company’s stock. Following Gagliardi’s termination, Gagliardi claimed that TriFoods had severely deteriorated due to several poor business decisions by the board of directors (defendants) and management. First, Gagliardi was unhappy that TriFoods had purchased a manufacturing plant in Pomfret, Connecticut and borrowed funds to do so. Second, TriFoods had purchased and renovated a new research facility that Gagliardi claimed was a duplication of an existing research facility. Third, in 1994, TriFoods purchased the exclusive rights to produce and sell a food product known as Steak-umms. Gagliardi claimed that TriFoods had overpaid for Steak-umms. Fourth, TriFoods had instituted a sales commission to increase volume, and Gagliardi claimed this action was reckless or grossly negligent. Fifth, Gagliardi claimed TriFoods failed to pay key suppliers. Sixth, Gagliardi contended that TriFoods had destroyed customer relationships by selling inferior products. Finally, Gagliardi was unhappy that TriFoods had spent $125,000 for a new name, logo, and packaging. In his capacity as an existing shareholder, Gagliardi sued the board of directors, alleging negligent mismanagement of the company. The board members filed a motion to dismiss the negligent-mismanagement claim.

Rule of Law


Holding and Reasoning (Allen, J.)

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