The Illinois Supreme Court has reversed a lower court’s ruling in a case involving an alleged breach of fiduciary duty.
In this case, the trial court first ruled that, although defendants had breached their fiduciary duties to the plaintiff, Indeck Energy Services, Indeck had failed to establish any usurpation of a corporate opportunity. The court found that both the turbine and the funding opportunities were still available to Indeck at the time of trial.
After a bench trial in favor of the defendant, the appellate court then reversed the trial court’s ruling, holding that it was “immaterial” whether a corporate opportunity still existed for Indeck. 2019 IL App (2d) 190043. According to the appellate court, once Indeck established that defendants DePodesta and Dahlstrom had breached their fiduciary duty by choosing not to disclose or tender the funding opportunity to Indeck, that “answered in the affirmative the corporate-usurpation question.”
In other words, the appellate court concluded that plaintiff could establish a claim for usurpation of a corporate opportunity merely by showing that defendants had breached their fiduciary duties.
The Illinois Supreme Court disagreed. To prevail on a claim for breach of fiduciary duty, it must be alleged and ultimately proved, (1) that a fiduciary duty exists, (2) that the fiduciary duty was breached, and (3) that such breach proximately caused the injury of which the party complains.
In a claim for usurpation of a corporate opportunity, the injury of which the plaintiff complains, is the taking or seizing of a corporate opportunity by its fiduciary.
Usurpation of a corporate opportunity is a distinct cause of action for breach of fiduciary duty that involves a particular type of injury: the taking or seizing of a corporate opportunity and the commensurate loss of that opportunity by the corporation. A corporate opportunity, in turn, is a proposed business activity that is reasonably incident to the corporation’s present or prospective business and is one in which the corporation has the capacity to engage.
The basic question in all corporate opportunity cases is whether the fiduciary has appropriated something for himself that, in all fairness, should belong to the corporation. In this case, the plaintiff, Indeck Energy, failed to establish that the defendants wrongfully appropriated either the turbine opportunity or the funding opportunity.
The Supreme Court concluded therefore that the plaintiff failed to establish the injury necessary to prevail in a corporate usurpation claim.
In this case, two of the former executives of the plaintiff, Indeck Energy Services, Christopher M. DePodesta and Karl G. Dahlstrom, surreptitiously competed against Indeck, using its office equipment and confidential information while being paid by the company to spot potential deals. Part of the final judgment after a bench trial ordered the two defendants to disgorge all the compensation they received from the date of the disloyalty started until the date they resigned. That aspect of the ruling was ultimately overturned by the supreme court’s reversal of the appellate court’s reversal of the trial court’s finding. In short, the Illinois Supreme Court in this 4-3 split decision, with the strong dissent, agreed with the trial court that Indeck had not proved its claimed damages.
Indeck Energy Services v. DePodesta, 2021 IL 125733.
Kreisman Law Offices has been handling commercial litigation, Illinois appeals, state and federal, breach of fiduciary duty lawsuits, breach of confidentiality lawsuits, and Illinois jury trials for individuals, families and businesses for more than 45 years in and around Chicago, Cook County and its surrounding areas, including Cicero, LaGrange Highlands, North Riverside, Des Plaines, Lake Zurich, Vernon Hills, Libertyville, North Chicago, Northbrook, Evanston, Tinley Park, Homewood, Highland Park, Lake Forest, Olympia Fields, St. Charles, Hinsdale, Waukegan, Wauconda, Barrington, Schiller Park, Chicago (Little Village, Hyde Park, Wrigleyville, South Shore, Calumet Heights, Gage Park, Englewood, Greater Grand Crossing, Auburn Gresham, Burnham Park, Humboldt Park, Avondale, Irving Park, Albany Park, Uptown, Lakeview, Bucktown, Roscoe Village, Beverly), Lincolnwood, Lincolnshire, Morton Grove, Mount Prospect, Arlington Heights, Hoffman Estates, Glencoe, Geneva, and Prospect Heights, Ill.
Robert D. Kreisman has been an active member of the Illinois and Missouri bars since 1976.
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