A minority stockholder and former employee stated a claim for stockholder oppression under Maryland law but failed to establish breach of fiduciary duty or unjust enrichment, the Maryland Supreme Court found.
In an opinion filed in late August and written by Justice Steven Gould, the high court affirmed in part and reversed in part the judgment of the appeals court. In doing so, the Maryland Supreme Court reaffirmed that the Maryland General Corporation Law (MGCL) is the “sole source” of the duties of a director of a Maryland corporation, according to Hirsh Ament, corporate partner at Venable LLP in Maryland.
“What I think this case does is reaffirm that Maryland has a statute, and particularly a duty statute, that provides a lot of certainty to boards in their decision-making process,” Ament said, noting that certainty is key for corporations.
“Uncertainty is generally a negative, and so the more certainty we can provide directors as to their standard of conduct and clarity on that standard, [the better],” Ament said. “It reinforces that Maryland has a statute that is very beneficial to corporations looking to incorporate in Maryland.”
The case itself centers on a shareholder lawsuit by Edward Mekhaya against his family’s company, Eastland Food Corporation. Mekhaya, the company’s former employee who owned a 28% share of the family business, claimed he was fired from the company and denied distribution of profits through dividends.
Additionally, Mekhaya claimed that his...
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