Miller v. U.S. Foodservice, Inc.
United States District Court for the District of Maryland
361 F. Supp 2d 470 (2005)
James Miller (plaintiff) was President, Chairman, and CEO of United States Foodservice, Inc. (USF) (defendant), and also served as a director of USF’s parent company, Koninklijke Ahold N.V. (Royal Ahold) (defendant). In July 2000, Miller received a letter from USF’s external auditor Deloitte & Touche stating that USF’s internal accounting controls were problematic. In 2003, Miller was forced to resign all his positions amid an accounting scandal. An internal investigation revealed irregularities and Royal Ahold had to revise downward and restate its earnings for the previous year. After resigning, Miller sued USF and Royal Ahold, seeking post-termination benefits he alleged he was entitled to according to his employment contract. USF and Royal Ahold countersued, alleging that Miller had breached his duties of care, good faith, and loyalty to the corporations, and that he was therefore not entitled to the benefits. The companies claimed that Miller had failed to implement proper internal systems despite warning signs, and that he intentionally misled USF’s audit committee for three years. Miller argued that he was being scapegoated. He moved to dismiss the counterclaims on the grounds that his actions were protected by the business judgment rule.
Rule of Law
Holding and Reasoning (Blake, J.)