Sletteland v. Roberts

James Sletteland (plaintiff) and R. Lee Roberts (defendant) were shareholders and directors in Billings Generation, Inc. (BGI) along with Jeff Smith, Ron Blendu, and Owen Orndorff. Each owned 20 percent of the corporation’s outstanding shares. At the time of the litigation, Orndorff, Roberts, and Smith were also officers of BGI, having used their combined majority interest to remove Sletteland and Blendu from their positions as officers. There was significant animosity among the BGI shareholders associated with their business dealings, which involved numerous related business entities. Roberts and Orndoff were both attorneys who provided legal services to the related businesses in connection with certain transactions. Sletteland was also an attorney and an investment banker. One of the parties’ projects involved an entity called the Yellowstone Energy Limited Partnership (YELP). BGI was the general partner in YELP. Sletteland filed a lawsuit individually and on behalf of BGI and YELP in which he alleged that Roberts and Orndoff had charged excessive legal fees to the businesses. Roberts, Orndoff, and Smith filed a counterclaim arguing that Sletteland’s lawsuit constituted a breach of fiduciary duty because it interfered with the parties’ efforts to refinance certain debt on a YELP project at a lower interest rate. In addition, BGI would have received payment as a creditor if the debt were restructured. There was a deadline for securing the financing that was tied to certain tax requirements. YELP’s bond counsel stated it was unlikely that financing could be obtained while Sletteland’s lawsuit remained pending. The financing ultimately fell through. The district court found that Roberts and Orndoff had overcharged for their legal services. On the counterclaim, the district court ruled that Sletteland breached his fiduciary duties to BGI and the other shareholders. Cross-appeals were filed. The Montana Supreme Court reversed on the issue of the legal fees because the rate had been approved in advance, and all the parties were aware of it. The court then addressed the counterclaim.