Ostrowski v. Avery

Avery Abrasives, Inc. (Abrasives) manufactured cutting wheels. Abrasives manufactured cutting wheels smaller than five inches in diameter until Raymond Avery directed Abrasives to focus on larger wheels, with a concentration on wheels 20 inches or more in diameter. Several years after this decision, Craig Avery (defendant), an elected director of Abrasives, and Michael Passaro (defendant), a supervisor for Abrasives, sought permission from Craig’s father, Raymond, to manufacture small cutting wheels while continuing in their respective capacities at Abrasives. Raymond consented to this request, at which time Craig and Passaro formed International Small Wheels (ISW). ISW manufactured cutting wheels four inches or less in diameter. The minority shareholders of Abrasives were not informed of ISW’s activities. ISW operated for about 13 years, comingling its business with that of Abrasives in several ways. Craig and Passaro bought wheels from and sold wheels to Abrasives. They conducted business while present at Abrasives. They shared customers with Abrasives. They also hired Abrasives employees. The minority shareholders of Abrasives brought a lawsuit claiming ISW usurped a corporate opportunity to which Abrasives was entitled. The trial court did not impose liability on ISW for usurpation of a corporate opportunity, reasoning that Raymond had consented to ISW’s formation. The minority shareholders appealed to the Connecticut Supreme Court.