The Texas Supreme Court Will Review A Breach Of Fiduciary Duty Claim Against Directors For Allegedly Usurping A Corporate Opportunity

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The Texas Supreme Court granted the petition for review in Longview Energy Co. v. The Huff Energy Fund, 482 S.W.3d 184 (Tex. App.—San Antonio 2015, pet granted). In this case, the plaintiff asserted a breach of fiduciary duty claim arising from allegations that directors breached duties by usurping a corporate opportunity to invest in shale property the company was considering. Two liability questions asked whether the directors (1) failed to comply with their fiduciary duty to Longview by taking a corporate opportunity and (2) failed to comply with their fiduciary duty of loyalty by improperly engaging in competition with Longview. The jury answered affirmatively to both questions, as well as affirmatively to other questions. The trial court awarded Longview $95.5 million in monetary disgorgement and imposed a constructive trust on a variety of assets owned by one of the defendants. On appeal, the defendants alleged legal sufficiency challenges to the evidence in support of the liability findings. The court of appeals held that the evidence was legally insufficient to support the jury’s finding on the corporate opportunity question and that the plaintiff did not plead a competition cause of action. It reversed and rendered a take-nothing judgment in favor of the defendants.

The Texas Supreme Court’s staff attorney describes the issues as “(1) whether Longview pleaded its claim that the directors competed with it without Longview’s informed consent and, if not, whether the trial court properly submitted a liability question based on the competition claim; (2) whether the appeals court erred in applying Delaware corporate-opportunity law by recognizing a director’s loyalty may be breached by competing against the company without authorization; and (3) whether sufficient evidence supported Longview had an interest or expectancy in shale property it was considering for investment.”



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