Gagliardi v. Trifoods International, Inc.

Plaintiff, Eugene Gagliardi, founded Trifoods International, Inc. In 1993, he was removed as Chairman. Subsequent to plaintiff's ouster, Trifoods suffered financially, as management made a string of bad decisions, including buying a redundant new product facility, acquiring Steak-umms from Heinz and Lloyd's Ribs at egregiously high prices. Plaintiff is suing on theories of negligent mismanagement and corporate waste.

"In the absence of facts showing self-dealing or improper motive, a corporate officer or director is not legally responsible to the corporation for losses that may be suffered as a result of a decision that an officer made or that directors authorized in good faith. There is a hypothetical exception to this general statement that holds that some decisions may be so 'egregious' that liability for losses they cause may follow even in the absence of proof of conflict of interest or improper motivation." In this case, the Court holds that the exception is only limited to equitable relief and since there is no equitable relief requested, the complaint does not state a claim for which relief can be granted. In addition, the claim attempts to plead corporate waste. The corporate waste rule may be applied if what the corporation has received is so inadequate in value that no person of ordinary, sound business judgment would deem it worth what the corporation has paid. The Court holds that there was no corporate waste.

Fiduciary Duties & Shareholder Litigation | The Business Judgment Rule and Duty of Care