Telxon Corp. v. Meyerson

Telxon Corp. (plaintiff) developed portable handheld computers for use in various industries. Robert Meyerson (defendant) was the chief executive officer (CEO) until 1985, when he was succeeded by Raymond Meyo. Meyerson and Meyo, as well as four others, comprised Telxon’s six-member board of directors during the relevant timeframe. The compensation for serving as a director was based on time spent and approximately $90,000 a year. One board member, Robert Goodman, belonged to a law firm that had provided personal legal services to Meyerson in the past. In 1989, Telxon decided to retain Meyerson as a consultant to assist Meyo in operating Telxon. Meyerson owned his own company at the time but agreed to be a part-time product-development consultant to Telxon. Under the consulting agreement, Meyerson’s work for Telxon belonged to Telxon. In 1991, Meyerson had the idea to develop pen-based computers (PBCs or PBC technology). Meyerson may have offered the opportunity to develop PBC technology to Meyo, which Meyo considered and rejected. It was not clear whether the opportunity was presented to the entire board. Meyerson then pursued PBCs on his own, and the technology became the sole asset of Meyerson’s company, Teletransaction. At some point, Telxon’s board decided to purchase an interest in Teletransaction. In October 1992, Meyo abruptly resigned, and the board wanted to entice Meyerson to return to Telxon full time as CEO. To that end, the board voted to purchase Teletransaction in its entirety for $17.3 million. Meyerson abstained from the vote. In a shareholder derivative suit, Telxon sought to recover damages from Meyerson and several directors (collectively, the directors) (defendants). Telxon claimed that Meyerson had usurped a corporate opportunity, the directors had breached their fiduciary duties by voting to purchase Teletransaction, and the directors had received excessive compensation. Telxon argued that PBC technology already belonged to the company by virtue of Meyerson’s consulting agreement, the opportunity was not offered to the entire board, and some of the voting board members were not independent from Meyerson. The trial court ruled in the directors’ favor on summary judgment. Telxon appealed.