Harris v. Carter,

582 A.2d 222 (1990)

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Nature of the Case

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Facts

P is a minority shareholder of Atlas. He brought this action after the change in control from the Carter group to the Mascolo group had occurred. In an amended complaint, P alleged that the Carter group, qua shareholders, owed a duty of care to Atlas to take the steps that a reasonable person would take in the circumstances to investigate the bona fides of the person to whom they sold control. P alleged that the duty was breached here and that if it had been met the corporation would have been spared the losses that are alleged to have resulted from the transactions effected by the board under the domination of Mascolo. P did not allege that the Carter group conspired with Mascolo. The Carter group sold for shares of common stock of a corporation that P claims was a worthless shell and which was later employed in the transactions that are said to constitute a looting of Atlas. The Carter group, which collectively owned 52% of the stock of Atlas, and Mascolo entered into a Stock Exchange Agreement. Ds sold their stock interest in the corporation and resigned as directors. The resignations were done seriatim in a way that permitted the designation of the buyers as successor directors. The buyers then proceeded to loot the corporation. P alleges a series of complex corporate transactions effectuated once Mascolo took control of Atlas, and claims that those transactions wrongfully injured Atlas. P alleges that the Carter defendants had reason to suspect the integrity of the Mascolo group, but failed to conduct even a cursory investigation into any of several suspicious aspects of the transaction. Ds moved to dismiss the complaint for failure to state a claim for which relief can be granted.