Giacopelli v. Guiducci

James Giacopelli (plaintiff) and Dino Guiducci (defendant) were the sole directors of a closely held corporation, Madison Plaza Homes, Inc. (MPH) (defendant), a real-estate company that owned several rental properties. Giacopelli and his wife, Doris Giacopelli (plaintiff), owned 25 percent of MPH stock, and Guiducci owned the other 75 percent of the stock. Per the terms of MPH’s bylaws, all corporate action required unanimous consent of the two directors. Over the years, MPH accumulated substantial earnings. Although Giacopelli wanted to declare dividends for the shareholders, Guiducci refused to consent to the same. Accordingly, the shareholders did not receive any distributions for several years. Considering, among other things, that the Giacopellis were obligated to pay personal income taxes on the corporate profits in proportion with their stock ownership, the Giacopellis filed both direct and derivative claims against Guiducci and MPH. The lawsuit sought, in relevant part, to compel the distribution of MPH’s retained earnings to the shareholders based on Guiducci’s failure to do so in purported bad faith. During the proceedings, Guiducci contended that retained earnings could be used to buy another rental property and expand the business. The Giacopellis moved for partial summary judgment but did not support the motion with evidence of bad-faith conduct by Guiducci.