Friday, March 30, 2007

Argiropoulos v. Kopp, et al. (Maryland U.S.D.C.)(Not approved for publication)

Decided March 26, 2007—opinion by Judge Catherine Blake

Plaintiff John Argiropoulos claimed damages on his own behalf, and on behalf of Club 10, Inc. in an action against defendants whom Argiropoulos claimed breached contracts, made fraudulent representations, breached the duty of loyalty owed to Club 10's shareholders, and were grossly negligent in the management of the club. The Court considered and granted a motion by Defendants to dismiss multiple counts of the complaint. Counts Seven through Thirteen alleged that the defendants engaged in waste, illegitimately took cash from the corporation, violated tax laws, permitted illegal activities on Club 10 premises, discriminated against customers, and generally mismanaged the corporation. The Court found that the claims alleged injuries to the corporation and would be typically appropriately brought under a derivative action. Because a suit to recover damages to a corporation can only be brought by corporation itself through a derivative action, and not by individual shareholders, the Court dismissed those counts.

In counts Fourteen through Twenty, Argiropoulos made a series of claims on behalf of the corporation in the form of a shareholder derivative action. The defendants argued that Argiropoulos did not fairly and adequately represent the interests of the shareholders or members similarly situated as required to maintain such a derivative action. Both the individual claims by Argiropoulos and his derivative claims sought significant money damages and hence, the Court reasoned, Argiropoulos and the derivative class were competing for the same pool of money, creating a conflict. The Court dismissed counts Fourteen through Twenty on the ground that Argiropoulos was not an adequate representative of the derivative class.

The opinion and order are available in PDF.

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