Broz v. Cellular Information Systems, Inc.
673 A.2d 148 (Del.1996)
- Broz was President and sole stockholder of RFB Cellular. He was also a board member of Cellular Information Systems (CIS), a competitor of RFB.
- RFB owned a license (“Michigan-4”) which allowed it to provide cell service to a portion of rural Michigan. Mackinac Cellular Corp. owned its own license (“Michigan-2”) which was immediately adjacent to Michigan-4.
- Mackinac wanted to sell Michigan-2, and Broz, after meeting with numerous CIS directors, went ahead and purchased Michigan-2 for RFB.
By purchasing the license for RFB, did Broz breach his fiduciary duties to CIS? More specifically, did he usurp a corporate opportunity?
A corporate opportunity exists where:
(1) The corporation is financially able to undertake it;
(2) It is in the line of the corporation’s business;
(3) It is of practical advantage to it;
(4) It is one in which the corporation has an interest or a reasonable expectancy; and
(5) By embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of the corporation.
Here, the court held that:
(1) CIS was not financially capable of exploiting the Michigan-2 opportunity – it had just emerged from a length and contentious insolvency reorganization.
(2) CIS had no interest or expectancy in the Michigan-2 opportunity – it was actually in the process of divesting its cellular licenses.
(3) There was no conflict – Broz communicated with a number of the directors prior to moving forward.