Broz v. Cellular Information Systems, Inc.

673 A.2d 148 (1996)

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Nature of the Case

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Facts

Broz (D) was the president and sole stockholder of RFBC, a corporation engaged in the business of providing cellular service in the midwest. D was also a director of Cellular Information Systems, Inc, (P), a publicly held Delaware corporation and a competitor of RFBC. D's efforts have been devoted primarily to the business operations of RFBC. In April 1994, Mackinac Cellular Corp. sought to divest itself of Michigan-2 license in the area immediately adjacent to Michigan-4 which was operated by RFBC. A brokerage firm was contacted and it sought a list of potential purchasers. RFBC was put on that list as a potential buyer. The broker did not consider P to be a viable purchaser in light of recent difficult financial problems. At the time that the license was offered to D, P had just emerged from lengthy and contentious insolvency reorganization. During this time, P divested itself of fifteen separate cellular licenses and had even recently put up four more licenses for sale in 1994 leaving it with only five remaining licenses, all outside the midwest. D spoke to the CEO of P, and it was indicated to D that P was not interested in the license. Another director was contacted, and that director indicated that there was no interest on P's part. Even the corporate counsel and director of P was contacted to represent D on the pending purchase, and clearly let it be known that P was not interested in the purchase. Then six directors of P entered into a deal with PriCellular to sell their shares at $2 per share. The closing date for the purchase of P by PriCellular was delayed until November 9, 1994, and all during this time D negotiated to buy Michigan-2. During this period, PriCellular eventually bid on the Michigan-2 with a price of $6.7 million under an option to expire on December 15, 1994, but with the ability of the seller to sell to anyone exceeding that price by $500,000. D agreed to pay $7,2 million for the license, and the license was sold to RFBC. Nine days later, PriCellular completed its purchase of P on November 23, 1994. Prior to that time, PriCellular had no equity interest in P. P sued D for a breach of fiduciary duties. The court found for P and D appealed.