CARSON CITY, Nev. (Legal Newsline) - The Nevada Supreme Court last week remanded a case involving AMERCO, the parent company of U-Haul, the country's largest do-it-yourself moving and storage operator.
The Court, in a ruling filed May 12, affirmed in part and reversed in part an order dismissing a shareholder derivative action from the Second Judicial District Court, Washoe County.
AMERCO is a Reno-based corporation controlled by the feuding Shoen family. It also is the parent company of AMERCO Real Estate Company, RepWest and Oxford Life Insurance Company.
According to court documents, AMERCO has engaged in numerous business transactions with SAC Holding Corp. entities, which are real estate holding companies controlled by AMERCO shareholder and executive officer Mark Shoen.
Based on several of those transactions, appellants Glenbrook Capital Limited Partnership, Alan Kahn, Ron Belect and Paul F. Shoen filed the underlying shareholder derivative suit in 2002 against AMERCO's former and current directors, Mark Shoen and the SAC entities, primarily for breach of fiduciary duty and aiding and abetting the breach of that fiduciary duty.
However, the appellants failed to make a demand for corrective action on the AMERCO board of directors and the district court granted the respondents' motion to dismiss for failure to adequately allege demand futility.
Appellants appealed that decision, and the state's high court reversed and remanded for reconsideration after clarifying the demand futility standards.
On remand, the district court once again granted the respondents' motions to dismiss, this time on two grounds distinct from demand futility: a settlement agreement entered into in 1995 by AMERCO and shareholders who are not involved in this case, referred to as the Goldwasser settlement, barred the appellants' derivative claims; and the appellants could not pursue derivative claims against the SAC entities on behalf of AMERCO based on transactions in which AMERCO itself participated.
At issue in the current appeal, first, is whether a claim-release clause contained in the Goldwasser settlement agreement reached by different shareholders several years earlier bars the derivative claims now asserted by the appellant shareholders.
The Supreme Court, in its majority opinion written by Justice James W. Hardesty, concluded it does not.
"When a settlement agreement does not contain language exhibiting a clear intent to release future claims, the release clause is limited to the claims that existed at the time the settlement agreement was reached," it wrote.
Second is whether the appellant shareholders can bring their derivative claims against the corporation's alleged co-conspirators.
The Court concluded that the adverse interest exception and sole-actor rule do not apply in this case.
The adverse interest exception to imputation provides that when the officers have totally abandoned the corporation's interests, their actions are not imputed to the corporation. The sole-actor rule operates as an exception to the adverse interest exception in limited circumstances, the Court explained.
"Therefore, without more, the AMERCO officers' alleged actions are imputed to the corporation," it wrote.
As to whether the respondents can assert the in pari delicto defense -- which precludes a party who has engaged in wrongdoing from recovering when they are at least partially at fault -- that must be remanded to the district court, the Court said.
When a party suffers injury from wrongdoing in which he engaged, the doctrine of in pari delicto often prevents him from recovering for his injury. The rationale underlying the doctrine "is that there is no societal interest in providing an accounting between wrongdoers," the Court explained.
The Court also concluded that the appellants adequately pleaded demand futility, but the district court must now conduct a proper evidentiary hearing regarding whether the evidence supports the appellants' allegations. It said the appellants sufficiently pleaded some, but not all, of their claims.
Also, whether the statute of limitations has run is a question for the district court, it said.
As to the appellants' request that the Court reassign the case to a different judge upon remand, the justices concluded that reassignment was not warranted. The appellants, they said, failed to cite any basis for disqualification under the state Code of Judicial Conduct.
From Legal Newsline: Reach Jessica Karmasek by e-mail at firstname.lastname@example.org.