Riblet Products Corp. v. Nagy

683 A.2d 37 (1996)

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Riblet Products Corp. v. Nagy

Delaware Supreme Court
683 A.2d 37 (1996)

  • Written by Jenny Perry, JD

Facts

Ernest Nagy (plaintiff) was the chief executive officer of and a minority shareholder in Riblet Products Corporation (Riblet) (defendant), a closely held corporation. Riblet employed Nagy pursuant to a written employment agreement. Riblet terminated Nagy’s employment, and Nagy filed suit. The jury found that Riblet breached the employment agreement and that Nagy’s termination constituted a breach of fiduciary duties owed by Riblet’s majority shareholders to Nagy as a minority shareholder. The United States Court of Appeals for the Seventh Circuit affirmed the verdict as to the breach-of-contract claim and certified a question to the Delaware Supreme Court regarding the breach-of-fiduciary-duty claim.

Rule of Law

Issue

Holding and Reasoning (Veasey, C.J.)

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Casebooks

Business Associations

Key Terms

  • Fiduciary DutyAn individual’s obligation to act in the best interests of another party with whom a special relationship exists.
  • Closely Held CorporationA corporation whose shares are held by a small management group and not available for public trading.
  • Shareholder Derivative SuitA lawsuit in which one or more shareholders of a corporation sue to assert a claim on behalf of the corporation itself or the shareholders at large, usually because the corporation has failed to assert the claim. An example of a shareholder derivative suit is a claim for usurping a corporate opportunity or other breach of fiduciary duty to the corporation. A shareholder derivative suit may also be called a shareholder derivative action.
  • Certified QuestionAn issue of law as to which one court seeks guidance from another, e.g., a federal court seeking guidance from a state court regarding an issue of state law or a lower court seeking guidance from a higher court in the same jurisdiction.
  • FreezeoutAction taken by majority shareholders in a close corporation to oppress minority shareholders, such as withholding dividends, terminating employment, or otherwise excluding them from the benefits of the corporation. A freezeout is also known as a squeeze-out.
  • Controlling Shareholder Fiduciary DutyThe duty of a majority shareholder in a closely held corporation, or a minority shareholder who nonetheless controls the corporation’s business affairs, to deal fairly with the other shareholders.

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