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673 A.2d 148 (1996)

Robert F. BROZ and also RFB Cellular, Inc., Defendants Below, Appellants, v. CELLULAR information SYSTEMS, INC., a Debromheads.tvare Corporation, Plaintiff Below, Appellee.

You are watching: Broz v. cellular information systems inc

No. 208, 1995.Supreme Court the Debromheads.tvare.Submitted: December 19, 1995.Decided: march 22, 1996.Rehearing Denied: April 11, 1996.

Stephen C. Norman and Michael A. Pittenger the Potter, Anderson & Corroon, Wilmington; Michael J. Silverberg (argued), and also Theodore C. Max that Phillips, Nizer, Benjamin, Krim & Ballon LLP, brand-new York City, because that Appellants Robert F. Broz and RFB Cellular, Inc.

Kenneth J. Nachbar and Karen L. Pascale of Morris, Nichols, Arsht & Tunnell, Wilmington; Paul Vizcarrondo, Jr. (argued), Meir Feder and Marc Ashley the Wachtell, Lipton, Rosen & Katz, brand-new York City, for Plaintiff Below, Appellee, Cellular information Systems, Inc.

Before VEASEY, C.J., WALSH and also HOLLAND, JJ.

<150> VEASEY, chef Justice:

In this appeal, we consider the applications of the theory of that company opportunity. The Court the Chancery made decision that the defendant, a that company director, breached his fiduciary duty by no formally presenting come the coporation, group an chance which had come to the director individually and independent of the director"s partnership with the corporation. Below the opportunity was no one in i m sorry the copy, group in its existing mode had actually an interest or i beg your pardon it had actually the financial capacity to acquire, but, under the unique circumstances here, that mode was topic to readjust by virtue of the brewing acquisition that the coporation, group by another entity.

We finish that, back a corporate director may be shielded from liability by giving to the coporation, group an opportunity which has come to the director independently and individually, the failure of the director to existing the chance does no necessarily result in the improper usurpation of a that company opportunity. We more conclude that, if the copy, group is a target or potential target that an acquisition by another firm which has actually an interest and ability to game the opportunity, the director of the target firm does not have actually a fiduciary duty to present the possibility to the target company. Accordingly, the judgment of the Court of opportunities is REVERSED.


Robert F. Broz ("Broz") is the President and also sole stockholder of RFB Cellular, Inc. ("RFBC"), a Debromheads.tvare corporation engaged in the company of offering cellular telephone organization in the Midwestern united States. At the moment of the conduct at issue in this appeal, Broz was also a member the the board of directors of plaintiff below-appellee, Cellular details Systems, Inc. ("CIS"). CIS is a publicly organized Debromheads.tvare corporation and also a contender of RFBC.

The conduct prior to the Court entails the purchase by Broz that a to move telephone organization license for the advantage of RFBC.<1> The patent in question, well-known as the Michigan-2 Rural company Area Cellular license ("Michigan-2"), is approve by the Federal interactions Commission ("FCC") and also entitles the holder to provide cellular telephone company to a part of north Michigan. CIS carried an action against Broz and RFBC because that equitable relief, completing that the acquisition of this license by Broz comprised a appropriate of a corporate chance properly belonging come CIS, regardless of whether of whether or not CIS was interested in the Michigan-2 chance at the moment it was readily available to Broz.

<151> The primary basis because that the contention the CIS is that PriCellular, Inc. ("PriCellular"), one more cellular communications firm which was contemporaneously engaged in an salvation of CIS, to be interested in the Michigan-2 opportunity. CIS contends that, in determining even if it is the Michigan-2 chance rightfully belonged come CIS, Broz was required to consider the understanding of PriCellular insofar together those interests would certainly come right into alignment with those of CIS together a result of PriCellular"s acquisition plans.

After trial, the Court of chancery agreed with the contentions the CIS and entered judgment against Broz and also RFBC. See Cellular info Systems, Inc. V. Broz, Del. Ch., 663 A.2d 1180 (1995). The court organized that: (1) irrespective of the reality that the Michigan-2 opportunity involved Broz in a manner wholly independent that his condition as a director of CIS, the Michigan-2 patent was an chance that correctly belonged to CIS; (2) as result of an alignment that the understanding of CIS and PriCellular emerging out of PriCellular"s efforts to gain CIS, Broz breached his fiduciary duty by failing to consider whether the opportunity was one in i beg your pardon PriCellular would be interested; (3) in spite of the reality that CIS was mindful of the opportunity and expressed no interest in follow it, Broz was compelled formally to existing the transaction to the CIS board before seizing the possibility for his own; and (4) absent formal presentation to the board, Broz" salvation of Michigan-2 comprised an impermissible appropriate of a corporate opportunity. The trial court implemented a constructive to trust on the commitment to acquisition Michigan-2 and directed the the right to purchase the patent be moved to CIS. Indigenous this judgment, Broz and RFBC appeal.

Broz contends the the Court of opportunities erred in holding the he breached his fiduciary duties come CIS and its stockholders. Specifics Broz asserts the he to be under no duty formally to present the corporate opportunity to the CIS board of Directors. Broz further contends that PriCellular had not consummated its salvation of CIS at the time of his decision to purchase Michigan-2, and also that, accordingly, that was no obligated to take into consideration the interests of PriCellular. We agree with Broz and hold that: (1) the determination of even if it is a that company fiduciary has actually usurped a corporate chance is fact-intensive and also turns on, inter alia, the capacity of the coporation, group to exploit the opportunity and the company"s will to execute so; (2) if presentation the a purported corporate chance to the plank of directors and also the board"s refusal thereof might serve together a shield come liability, over there is no per se dominance requiring presentation to the board before acceptance of the opportunity; and also (3) on this facts, Broz was not required to consider the understanding of PriCellular in getting to his decision whether or not to purchase Michigan-2.


Broz has been the President and also sole stockholder of RFBC due to the fact that 1992. RFBC owns and also operates one FCC license area, known as the Michigan-4 Rural company Area Cellular license ("Michigan-4"). The license entitles RFBC to carry out cellular telephone service to a portion of landscape Michigan. Return Broz" initiatives have been dedicated primarily come the organization operations the RFBC, he additionally served as an external director the CIS at the time of the occasions at problem in this case. CIS was at every times fully aware of Broz" connection with RFBC and the duties incumbent upon the by virtue of the relationship.

In April that 1994, Mackinac moving Corp. ("Mackinac") sought come divest chin of Michigan-2, the patent area immediately adjacent to Michigan-4. Come this end, Mackinac contacted Daniels & Associates ("Daniels") and arranged because that the brokerage firm to look for potential purchasers for Michigan-2. In translate into a perform of prospects, Daniels contained RFBC as a likely candidate. In might of 1994, David Rhodes, a representative that Daniels, contacted Broz and also broached the topic of RFBC"s possible acquisition that Michigan-2. Broz later on signed a confidentiality commitment at the request of Mackinac, and received the offering materials pertaining come Michigan-2.

Michigan-2 was not, however, offered to CIS. Apparently, Daniels go not consider CIS to it is in a viable purchaser for Michigan-2 in irradiate of CIS" current financial difficulties. <152> The document shows that, at the moment Michigan-2 was readily available to Broz, CIS had actually recently arised from prolonged and controversial Chapter 11 proceedings. Pursuant come the chapter 11 setup of Reorganization, CIS gone into into a loan agreement that dramatically impaired the company"s capability to undertake new acquisitions or to incur brand-new debt. In fact, CIS would have actually been unable to acquisition Michigan-2 there is no the approval of its creditors.

The CIS reorganization resulted from the failure of CIS" fairly ambitious plans because that expansion. From 1989 onward, CIS had embarked ~ above a series of cellular patent acquisitions. In 1992, however, CIS" jae won failed, necessitating the liquidation that the company"s holdings and also reduction of the company"s complete indebtedness. Throughout the duration from early 1992 until the moment of CIS" emergence from bankruptcy in 1994, CIS divested chin of part fifteen separate cellular patent systems.<2> CIS contracted to offer four added license locations on may 27, 1994,<3> leave CIS through only 5 remaining license areas, all of which were external of the Midwest.

On June 13, 1994, complying with a conference of the CIS board, Broz spoke with CIS" Chief executive Officer, Richard Treibick ("Treibick"), concerning his interest in acquiring Michigan-2. Treibick interacted to Broz the CIS was not interested in Michigan-2.<4> Treibick further proclaimed that he had been made aware of the Michigan-2 opportunity prior come the conversation through Broz, and also that any kind of offer to obtain Michigan-2 was rejected. ~ the beginning of the PriCellular soft offer, in respectable of 1994, Broz contacted another CIS director, Peter Schiff ("Schiff"), to discuss the possible acquisition the Michigan-2 by RFBC. Schiff, choose Treibick, suggested that CIS had actually neither the wherewithal no one the inclination to purchase Michigan-2. In late September the 1994, Broz likewise contacted Stanley Bloch ("Bloch"), a director and also counsel because that CIS, to request the Bloch stand for RFBC in its dealings with Mackinac. Bloch i agreeed to stand for RFBC, and, choose Schiff and Treibick, to express his id that CIS was no at all interested in the transaction. Ultimately, every the CIS directors testified in ~ trial that, had Broz inquired at that time, they every would have actually expressed the opinion the CIS was no interested in Michigan-2.<5>

On June 28, 1994, adhering to various overtures native PriCellular concerning an salvation of CIS, six CIS directors<6> gone into into agreements v PriCellular to sell their shares in CIS in ~ a price the $2.00 per share. These agreements to be contingent upon, inter alia, the consummation that a PriCellular tender market for all CIS shares at the very same price. Pursuant to your agreements through PriCellular, the CIS directors likewise entered right into a "standstill" commitment which prevent the directors from engaging in any transaction outside the constant course the CIS" organization or occurs any brand-new liabilities till the nearby of the PriCellular tender offer. On august 2, 1994, PriCellular commenced a tender offer for all superior shares that CIS at $2.00 per share. The PriCellular tender market mirrored the standstill agreements entered into through the CIS directors.

PriCellular"s tender offer was originally scheduled come close top top September 16, 1994. <153> At the time the tender offer was launched, however, the source of the $106,000,000 in financing required to consummate the transaction was still in doubt. PriCellular initially planned to structure the transaction around bank loans. When this financing dropped through, PriCellular resorted come a junk link offering. PriCellular"s financing obstacles generated a an excellent deal the concern among the CIS insiders whether the tender sell was, in fact, viable. Financing challenges ultimately led to PriCellular to hold-up the closing date of the tender offer from September 16, 1994 until October 14, 1994 and then again till November 9, 1994.

On respectable 6, September 6 and September 21, 1994, Broz submitted written supplies to Mackinac because that the purchase of Michigan-2. During this time period, PriCellular likewise began negotiations through Mackinac to arrange an choice for the purchase of Michigan-2. PriCellular"s interest in Michigan-2 was totally disclosed to CIS" cook executive, Treibick, that did not express any type of interest in Michigan-2, and also was in reality incredulous that PriCellular would desire to obtain the license. Nevertheless, CIS was completely aware that PriCellular and Broz to be bidding for Michigan-2 and also did not interpose CIS in this bidding war.

In so late September the 1994, PriCellular reached commitment with Mackinac ~ above an option to purchase Michigan-2. The exercise price of the option covenant was collection at $6.7 million, v the alternative remaining in pressure until December 15, 1994. Pursuant come the agreement, the best to exercise the choice was no transferrable to any type of party various other than a subsidiary that PriCellular. Therefore, it can not have been transferred to CIS. The covenant further noted that Mackinac was cost-free to offer Michigan-2 to any party who was ready to exceed the practice price the the Mackinac-PriCellular option contract by at least $500,000. Top top November 14, 1994, Broz agreed to salary Mackinac $7.2 million because that the Michigan-2 license, thereby conference the terms of the alternative agreement. An asset purchase agreement was thereafter executed by Mackinac and also RFBC.

Nine job later, ~ above November 23, 1994, PriCellular completed its financing and also closed its tender sell for CIS. Before that point, PriCellular own no equity attention in CIS. Subsequent to the consummation of the PriCellular tender offer for CIS, members the the CIS board of directors, including Broz, were discharged and also replaced with a slate of PriCellular nominees. On march 2, 1995, this activity was commenced by CIS in the Court that Chancery.

At psychological in the Court of Chancery, CIS competed that the purchase of Michigan-2 by Broz constituted the impermissible appropriate of a corporate chance properly belonging come CIS. Thus, CIS asserted that Broz breached his fiduciary duty to CIS and its stockholders. CIS admits that, at the time the possibility was available to Broz, the board of CIS would not have actually been interested in Michigan-2, but CIS asserts the Broz usurped the possibility nevertheless. CIS insurance claims that Broz was compelled to watch not simply to CIS, but to the articulated organization plans of PriCellular, to identify whether PriCellular would be interested in gaining Michigan-2. Due to the fact that Broz fail to execute this and acquired Michigan-2 without very first considering the interests of PriCellular in its capacity as a potential acquiror of CIS, CIS contends the Broz should be hosted to account because that breach the fiduciary duty.

In assessing the contentions that the parties in irradiate of the facts of record, the Court of opportunities concluded:

(1) that ... Could have legitimately compelled its director come abstain native the Mackinac transaction out of deference to its own interests in expanding an offer, despite the reality that it involved such manager in a completely independent way, (that is the transaction is one that drops quite close come the main point transactions that the coporation, group was formed to connect in); (2) the by no later than the time by which Price had expanded the public soft offer, the scenarios of the agency had changed so the it was quite plausibly in the corporation"s interest and financially feasible because that it to go after the Mackinac transaction; (3) that in such situations as exist at the latest after October 14, 1994 (date of PriCellular"s option contract ~ above Michigan 2 RSA) it to be the duty <154> the Mr. Broz as a director of CIS to take it the transaction come the CIS plank for its formal action; and also (4) the ~ the reality testimony of directors to the result that they would certainly not have actually been interested in pursuing this transaction had actually it been carried to the board, is not beneficial to defendant, in my opinion, since most that them did not recognize at the time that PriCellular"s interest in the property and also how it related to PriCellular"s setup for CIS.

663 A.2d in ~ 1186. Based on these conclusions, the court hosted that:

even though understanding of the ease of access of the Michigan 2 RSA license and also its associated assets pertained to Mr. Broz wholly independently of his duty on the CIS board, that possibility was within the core service interests of CIS in ~ the pertinent times; the at such time CIS would have had accessibility to the financing vital to complete for the assets that were for sale; and that the CIS plank of director were no asked to and thus did not think about whether such action would have been in the finest interests the the corporation. In these situations I conclude the Mr. Broz together a director of CIS violated his duty of loyalty to CIS by seizing this possibility without formally informing the CIS board completely about the opportunity and also facts bordering it and by proceeding to get rights for his advantage without the consent the the corporation. See Yiannatsis v. Stephanis, Del.Supr., 653 A.2d 275 (1995).

663 A.2d in ~ 1181-82.


The determination after attempt of the Court the Chancery the Broz breached his fiduciary duty the loyalty involves both a concern of bromheads.tv and a concern of fact. Science accessories Corp. V. Summagraphics Corp., Del.Supr., 425 A.2d 957, 963 (1980) (whether this firm opportunity has been usurped "depends... On the facts and also the reasonable inferences to be drawn therefrom"); Johnston v. Greene, Del.Supr., 121 A.2d 919, 923 (1956); Guth v. Loft, Inc., Del.Supr., 5 A.2d 503, 513 (1939) (whether a corporate opportunity has actually been usurped is "a factual inquiry to be determined by reasonable inferences from target facts"). Together we have stated previously, a attempt court"s recognize pertaining come a purported breach of the duty of loyalty, "being truth dominated," is, "on appeal, entitled to substantial deference unless plainly erroneous or not the product the a logical and also deductive process." Cede & Co. V. Technicolor, Inc., Del.Supr., 634 A.2d 345, 360 (1993) (quoting Citron v. Fairchild Camera & tool Corp., Del.Supr., 569 A.2d 53, 64 (1989)); see also Levitt v. Bouvier, Del.Supr., 287 A.2d 671, 673 (1972).

In all events, if it have the right to be presented that the court erred in formulating or applying legal precepts, this Court"s evaluation is plenary. Debromheads.tvare alcohol addict Beverage Wholesalers, Inc. V. Ayers, Del.Supr., 504 A.2d 1077, 1081 (1986); see likewise Rohner v. Niemann, Del. Supr., 380 A.2d 549, 552 (1977).

IV. Application OF THE CORPORATE opportunity DOCTRINE

The theory of corporate chance represents yet one varieties of the wide fiduciary duties assumed by a corporate director or officer. A corporate fiduciary agrees to ar the interests of the corporation prior to his or her very own in proper circumstances. In light of the diverse and often competing obligations challenged by directors and officers, however, the corporate possibility doctrine occurred as a way of defining the parameters of fiduciary duty in instances of potential conflict. The standard statement of the doctrine is derived from the venerable situation of Guth v. Loft, Inc. In Guth, this Court held that:

if over there is presented to a corporate officer or director a organization opportunity which the corporation is financially able come undertake, is, native its nature, in the heat of the corporation"s business and also is the practical benefit to it, is one in i m sorry the corporation has an interest or a reasonable expectancy, and, through embracing the opportunity, the self-interest that the officer or director will certainly be brought into dispute with that of the corporation, the regulation will no permit him come seize the opportunity for himself.

Guth, 5 A.2d at 510-11.

The corporate opportunity doctrine, together delineated through Guth and its progeny, hold <155> that a corporate officer or director may not take a company opportunity because that his own if: (1) the copy, group is financially maybe to exploit the opportunity; (2) the opportunity is within the corporation"s heat of business; (3) the corporation has actually an attention or span in the opportunity; and (4) by acquisition the possibility for his own, the that company fiduciary will thereby be put in a place inimicable come his duties to the corporation. The Court in Guth additionally derived a corollary which states that a director or officer may take it a corporate chance if: (1) the opportunity is presented to the director or officer in his individual and not his corporate capacity; (2) the opportunity is not essential to the corporation; (3) the corporation stop no attention or span in the opportunity; and also (4) the director or officer has not wrongfully work the sources of the corporation in follow or exploiting the opportunity. Guth, 5 A.2d at 509.

Thus, the border of this doctrine space well established. The is essential to note, however, the the exam enunciated in Guth and also subsequent cases carry out guidelines come be thought about by a reviewing court in balancing the equities of an separation, personal, instance case. No one aspect is dispositive and all components must it is in taken right into account insofar together they space applicable. Situations involving a insurance claim of appropriate of a that company opportunity range over a multitude that factual settings. Hard and also fast rules room not easily crafted to deal with such selection of complex situations. As this Court provided in Johnston v. Greene, Del. Supr., 121 A.2d 919 (1956), the decision of "hether or not a director has actually appropriated for self something the in fairness should belong come the coporation, group is `a factual concern to be determined by reasonable inference from objective facts."" Id. at 923 (quoting Guth, 5 A.2d in ~ 513). In the prompt case, we uncover that the facts perform not assistance the conclusion that Broz misappropriated a corporate opportunity.

We note at the outset the Broz became aware of the Michigan-2 possibility in his individual and not his corporate capacity. Together the Court of opportunities found, "Broz did no misuse proprietary info that concerned him in a corporate volume nor did the otherwise use any kind of power he could have over the administration of the coporation, group to advance his very own interests." 663 A.2d at 1185. This fact is not the topic of significant dispute. In fact, that is clean from the record that Mackinac walk not take into consideration CIS a viable candidate for the salvation of Michigan-2. Accordingly, Mackinac go not sell the property to CIS. In this factual posture, numerous of the fundamental concerns undergirding the legislation of corporate possibility are not current (e.g., misappropriation of the corporation"s proprietary information). The burden applied upon Broz to present adherence come his fiduciary duties to CIS is thus lessened to part extent. See Science accessories Corp., 425 A.2d at 964 (holding that because opportunity to purchase new technology to be "an `outside" possibility not obtainable to SAC, defendants" fail to disclose the ide to SAC and also their acquisition it for themselves for objectives of contending with SAC cannot be found to it is in in breach of any firm fiduciary duty"). Nevertheless, this fact is not dispositive. The determination of even if it is a particular fiduciary has actually usurped a corporate possibility necessitates a cautious examination of the circumstances, offering due credence to the factors enunciated in Guth and also subsequent cases.

We turn now to an evaluation of the factors relied on through the attempt court. First, we find that CIS was no financially qualified of exploiting the Michigan-2 opportunity. Back the Court of opportunities concluded otherwise, we host that this finding to be not supported by the evidence. Levitt, 287 A.2d at 673. The document shows the CIS was in a precarious financial position at the moment Mackinac presented the Michigan-2 chance to Broz. Having actually recently arised from lengthy and contentious bankruptcy proceedings, CIS was no in a position to commit resources to the acquisition of new assets. Further, the loan commitment entered into by CIS and its creditor severely restricted the discretion the CIS regarding the acquisition of brand-new assets and substantially limited the capability of CIS to incur new debt.

The Court of chancery based its contradictory finding ~ above the reality that PriCellular had purchased an alternative to obtain CIS" financial institution debt. <156> Thus, the court reasoned, PriCellular remained in a place to practice that option and also then waive any type of unfavorable constraints that would stand in the method of a CIS acquisition of Michigan-2. The trial court, however, disregarded the truth that PriCellular"s very own financial situation was not specifically stable. PriCellular was unable to finance the acquisition of CIS v conventional bank loans and was compelled to use the more risky mechanism of a junk bond offering to raise the required capital. Thus, the court"s statement the "PriCellular had actually other resources of jae won to allow the funding of the purchase" is plainly not free from dispute. Moreover, as debated infra, the reality that PriCellular had accessible sources of gaue won is immaterial come the analysis. At the time that Broz was compelled to decision whether to accept the Michigan-2 opportunity, PriCellular had actually not yet obtained CIS, and any plans to execute so were wholly speculative. Thus, contrary to the Court of Chancery"s finding, Broz was not obligated to take into consideration the contingency that a PriCellular salvation of CIS and the related contingency the PriCellular thereafter waiving limitations on the CIS bank debt. Broz was compelled to think about the facts just as they exist at the moment he figured out to expropriate the Mackinac offer and also embark ~ above his efforts to carry the transaction to fruition. Guth, 5 A.2d in ~ 513.

Second, while it might be stated with some certainty the the Michigan-2 opportunity was in ~ CIS" heat of business, that is no equally clear that CIS had a cognizable attention or expectancy in the license.<7> Under the 3rd factor laid down by this Court in Guth, for an chance to be understood to belong to the fiduciary"s corporation, the corporation must have actually an attention or expectancy in that opportunity. As this Court proclaimed in Johnston, 121 A.2d at 924, "or the coporation, group to have an actual or expectant attention in any details property, there must be some tie between that property and also the nature the the that company business." in spite of the fact that the nature that the Michigan-2 possibility was in history close come the core operations the CIS, alters were in process. At the moment the possibility was presented, CIS was actively engaged in the process of divesting that is cellular patent holdings. CIS" articulated business plan did no involve any new acquisitions. Further, as shown by the testimony the the entire CIS board, the Michigan-2 license would certainly not have been of attention to CIS even missing CIS" jae won difficulties and CIS" then current desire to liquidate that is cellular patent holdings.<8> Thus, CIS had actually no <157> attention or expectations in the Michigan-2 opportunity. Cf. Guth, 5 A.2d in ~ 514 (holding that Loft had an interest or expectancy in the Pepsi possibility by virtue of its need for cola syrup for usage in its retail stores).

Finally, the corporate chance doctrine is implicated just in situations where the fiduciary"s seizure of an opportunity results in a conflict in between the fiduciary"s duties come the corporation and also the self-interest that the director together actualized by the exploitation the the opportunity. In the instant case, Broz" interest in acquiring and profiting indigenous Michigan-2 created no duties that were inimicable come his duties to CIS. Broz, at all times appropriate to the immediate appeal, to be the single party in interest in RFBC, a competitor of CIS. CIS was totally aware of Broz" perhaps conflicting duties. Broz, however, comported self in a manner the was wholly in accord through his duties to CIS. Broz took care not to usurp any type of opportunity i m sorry CIS was willing and also able to pursue. Broz sought just to contend with an external entity, PriCellular, because that acquisition of an chance which both sought to possess. Broz was no obligated to refrain from competition v PriCellular. Therefore, the totality that the circumstances indicates that Broz did not usurp an chance that appropriately belonged to CIS.

A. Presentation come the Board:

In concluding the Broz had usurped a this firm opportunity, the Court of opportunities placed an excellent emphasis on the reality that Broz had not formally presented the issue to the CIS board. The court held that "in such circumstances as existed at the recent after October 14, 1994 (date of PriCellular"s choice contract ~ above Michigan 2 RSA) it was the duty of Mr. Broz as a manager of CIS to take it the transaction come the CIS plank for its formal action...." 663 A.2d in ~ 1185. In therefore holding, the psychological court erroneously grafted a new requirement onto the legislation of corporate opportunity, viz., the necessity of officially presentation under circumstances where the corporation go not have actually an interest, expectations or jae won ability.

The to teach of Guth and also its progeny is that the manager or officer need to analyze the case ex ante to recognize whether the possibility is one rightfully belonging come the corporation. If the director or officer believes, based on one the the components articulated above, the the coporation, group is no entitled to the opportunity, then he may take it for himself. Of course, presenting the opportunity to the plank creates a type of "safe harbor" because that the director, which gets rid of the specter the a post hoc judicial decision that the director or officer has improperly usurped a that company opportunity. Thus, presentation prevents the possibility that one error in the fiduciary"s evaluate of the situation will develop future liability for breach of fiduciary duty. That is no the bromheads.tv of Debromheads.tvare that presentation come the board is a crucial prerequisite to a finding that a this firm opportunity has not been usurped.

The numerous instances decided due to the fact that Guth space in full accord through this check out of the doctrine. Because that instance, in Field v. Allyn, Del. Ch., 457 A.2d 1089 (1983), the Court that Chancery organized that a director or officer is free to take a organization opportunity because that himself once the corporation has actually rejected the or if it deserve to be displayed that the corporation is no in a place to take it the opportunity. The Field court held this to it is in true also if the fiduciary became conscious of the possibility by virtue of the fiduciary"s position in the corporation. Id. at 1099. Notably, this Court affirmed the Field holding on the communication of the fine reasoned opinion of the court below. Field v. Allyn, Del.Supr., 467 A.2d 1274 (1983). Field is no unique, however. The watch that presentation to the board is not required where the chance is one that the coporation, group is incapable of working out is likewise expressed in other cases. See, e.g., Wolfensohn <158> v. Madison Fund, Inc., Del.Supr., 253 A.2d 72, 76 (1969).

Other cases, such together Kaplan v. Fenton, Del.Supr., 278 A.2d 834 (1971), have uncovered no violation the the corporate possibility doctrine where the director determined that the coporation, group was no interested in the opportunity, but never do formal presentation to the board. The manager in Kaplan request the CEO and also another board member if the corporation would be interested in the opportunity and also whether the should existing the possibility to the board. These concerns were answered in the negative and the manager then obtained the possibility for himself. The Kaplan Court discovered no breach the the doctrine, in spite of the lack of official presentation.<9>

The Court of opportunities cited Yiannatsis v. Stephanis, Del.Supr., 653 A.2d 275 (1995), in support of the proposition that formal presentation to the plank of directors is a vital prerequisite come a corporate fiduciary taking an possibility for his own. See 663 A.2d in ~ 1182. In Yiannatsis, the possibility in inquiry was a block of share in a carefully held corporation, the holder of which was subject to a appropriate of an initial refusal held by the corporation. 2 of the three directors the the corporation brought about the company to refuse the opportunity and, as a result, the corporation never invoked its ideal of first refusal. This Court hosted that the this firm fiduciaries had acted surreptitiously to keep the possibility from being exercised by the corporation, once they had actually no reasonable ground to believe that the corporation would certainly not be interested therein. This elevator of poor faith is not current in the case at bar. Here, Broz had an extensive reason to think that CIS was no interested in or able to take benefit of the Michigan-2 opportunity. Accordingly, Yiannatsis is not pertinent to the analysis here.

Thus, we organize that Broz to be not forced to do formal presentation of the Michigan-2 possibility to the CIS board prior to taking the possibility for his own. In therefore holding, we necessarily conclude that the Court of chancery erred in grafting the added requirement of officially presentation ~ above Debromheads.tvare"s corporate possibility jurisprudence.<10>

B. Alignment of Interests between CIS and also PriCellular:

In concluding that Broz usurped an possibility properly belonging come CIS, the Court the Chancery organized that "or practical service reasons CIS" interests with respect come the Mackinac transaction came to merge with those that PriCellular, even prior to the closing of that is tender market for CIS stock." based on this fact, the trial court concluded the Broz was required to take into consideration PriCellular"s prospective, post-acquisition plans because that CIS in determining even if it is to forego the chance or seize it because that himself. Had Broz done this, the Court that Chancery identified that the would have concluded that CIS to be entitled come the chance by virtue that the alignment the its interests v those that PriCellular.

We disagree. Broz was under no duty to think about the understand of PriCellular once he chose to acquisition Michigan-2. As stated in Guth, a director"s best to "appropriate ... Opportunity depends ~ above the circumstances existing at the moment it presented chin to him without regard to subsequent events." Guth, 5 A.2d at 513. At the moment Broz to buy Michigan-2, PriCellular had not yet obtained CIS. Any type of plans to do so would still have been wholly speculative. Accordingly, Broz to be not compelled to consider the contingent and uncertain to plan of PriCellular in reaching his determination of just how to proceed.

<159> even if it is or no the CIS board would, at some time, have actually chosen to gain Michigan-2 in bespeak to make CIS a an ext attractive salvation target because that PriCellular or to enhance the synergy of any an unified enterprise, is speculative. The trial court discovered this to it is in a plausible scenario and therefore uncovered that, pursuant to the factors laid down in Guth, CIS had a valid interest or span in the license. This dangerous finding cuts versus the statements make by CIS" cook Executive and the whole CIS plank of directors and ignores the reality that CIS still short the wherewithal to gain Michigan-2, even if one takes into account the feasible availability that PriCellular"s financing. Thus, the reality of PriCellular"s plans to get CIS is immaterial and does not adjust the analysis.

In reaching our conclusion on this point, we keep in mind that certainty and predictability room values to be advocated in our corporation bromheads.tv. See Williams v. Geier, Del.Supr., 671 A.2d 1368, 1385 n. 36 (1996). Broz, together an active participant in the moving telephone industry, to be entitled to proceed in his own financial interest in the lack of any kind of countervailing duty. The appropriate of a director or officer to communicate in organization affairs outside of his or her fiduciary capacity would be illusory if these individuals were compelled to consider every potential, future incident in determining even if it is a particular business strategy would certainly implicate fiduciary duty concerns. In order for a manager to interact meaningfully in organization unrelated come his or her corporate role, the director have to be allowed to make decisions based upon the situation as it exists at the moment a offered opportunity is presented. Lacking such a rule, the that company fiduciary would be constrained to stop from exploiting any kind of opportunity for are afraid of liability based on the incident of subsequent events. This state that affairs would unduly limit officers and also directors and also would it is in antithetical come certainty in copy, group bromheads.tv.


The corporate chance doctrine represents a judicially crafted initiative to harmonize the completing demands placed on that company fiduciaries in a modern business environment. The doctrine looks for to mitigate the possibility of conflict in between a director"s duties to the corporation and interests unrelated to the role. In the immediate case, Broz adhered come his obligations to CIS. We hold that the Court of opportunities erred together a issue of bromheads.tv in concluding that Broz had actually a duty formally to current the Michigan-2 chance to the CIS board. We likewise hold that the psychological court erred in its applications of the corporate opportunity doctrine under the unusual facts of this case, where CIS had actually no interest or financial ability to gain the opportunity, yet the unavoidable acquisition of CIS through PriCellular would or might have caused a change in those circumstances.

Therefore, we host that Broz did no breach his fiduciary duties come CIS. Accordingly, us REVERSE the judgment of the Court of chancery holding the Broz diverted a corporate possibility properly belonging come CIS and also imposing a constructive trust.

<1> The Court recognizes the the actual purchase of the Michigan-2 license was consummated by RFBC as a that company entity, fairly than by Broz acting as an individual for his very own benefit. Broz is, however, the single party in attention in RFBC and all actions bring away by RFBC, including the acquisition of Michigan-2, are completed at the behest that Broz. Therefore, insofar together the acquisition of Michigan-2 is concerned, the Court will certainly not distinguish between the plot of Broz and also those the RFBC in analyzing Broz" alleged breach of fiduciary duty.

<2> Of this fifteen licenses, three were sold to subsidiaries that PriCellular. Specifically, the licenses organized by CIS for areas in Wisconsin and also Minnesota were got by the PriCellular subsidiaries. These transactions closed instantly upon CIS" introduction from bankruptcy.

<3> These license areas, all located in Wisconsin, to be to be sold to PriCellular. After perfect its acquisition of CIS, however, PriCellular determined that property of the licenses need to remain with CIS.

<4> In fact, during a deposition provided in march of 1995, Treibick testified that he didn"t "know that frankly was hawking ... At the time ... e said forget it. The was not something us would have actually bought if they readily available it to us for nothing."

<5> us assume arguendo that informal contacts and also individual opinions of plank members room not a substitute because that a formal process of presenting an opportunity to a board of directors. Nevertheless, in our see such a formal process was not important under the scenarios of this case in order for Broz to prevent liability. These contacts through individual plank members do, however, tend to show that Broz was not acting surreptitiously or in bad faith.

<6> all the members that the CIS plank of directors except Broz and Bloch agreed to tender their shares come PriCellular.

<7> The language in the Guth opinion relating to "line the business" is less than clear:

Where a coporation, group is involved in a certain business, and also an opportunity is presented to it embracing an task as to which it has an essential knowledge, practical experience and also ability come pursue, which, logically and also naturally, is adaptable to its service having regard because that its jae won position, and is consonant v its reasonable needs and also aspirations because that expansion, it may properly be stated that the possibility is within the corporation"s line of business.

Guth, 5 A.2d in ~ 514 (emphasis supplied). This formulation that the definition of the ax "line the business" suggests that the company strategy and also financial health of the corporation are likewise relevant to a determination of even if it is the opportunity is in ~ the corporation"s heat of business. Since we discover that this considerations are decisive under the other determinants enunciated by the Court in Guth, we do not with the inquiry of whether they are below relevant to a decision of the corporation"s line of business.

<8> in ~ trial, every of the members that the CIS plank testified to his belief that CIS would not have been interested in the Michigan-2 opportunity at the time it was presented come Broz. The Court that Chancery made decision to disregard this testimony, holding the "the after the fact testimony of directors to the result that they would not have actually been interested in pursuing this transaction had actually it been carried to the board, is not useful to defendant, in mine opinion, since most the them did not know at the time the PriCellular"s attention in the property and also how it concerned PriCellular"s arrangement for CIS." 663 A.2d in ~ 1186. Us disagree through the court"s assessment. First, as discussed, infra, Broz was forced to consider the case only as it existed as soon as the chance was presented. Thus, the reality the CIS directors were unaware the the future plans of PriCellular go not influence adversely ~ above the weight to it is in ascribed to this certain evidence. Second, testimony that the CIS plank is extremely advantageous to develop the propriety the Broz" actions. As discussed, infra, Broz was not compelled to current this possibility to the board. That was complimentary to advice the situation and also determine whether the possibility was one effectively belonging to CIS. Missing such official presentation, however, this Court should make one after-the-fact assessment of an essentially stale factual scenario. In such a setting, the testimony that the directors who regulated the business and affairs the the copy, group at the time the possibility was allegedly usurped is relevant. Such testimony gives a direct indication that the company posture and expectations that the corporation during the relevant duration of time. The Court of Chancery additionally held the "this sort of after the truth testimony is a really thin substitute for an informed board decision made at a meeting in `real time" (i.e., while the possibility to plot with effect continues)." Id. While that is true that contemporaneous decisionmaking or unanimous composed consent is forced for board action (8 Del.C. § 141(f)), in ours view, this testimony the the CIS board was probative and should not have been wholly discounted. See n. 5, supra.

<9> as the next note, Kaplan is distinguishable in the the Kaplan board previously rejected a similar offer come the one exploited by the defendant director. The board of CIS, however, had demonstrated a similar lack of interest by divesting chin of holdings similar to the license at issue.

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<10> Recognizing the understanding the Court of opportunities sought come promote, however, we note that formal presentation come the board is regularly the preferred — or "safe" — approach, and also we keep in mind that this litigation could have to be unnecessary had this precaution been observed.