Boyle v. Harries

923 P.2d 504, 22 Kan. App. 2d 686, 1996 Kan. App. LEXIS 89
CourtCourt of Appeals of Kansas
DecidedAugust 2, 1996
Docket72,529
StatusPublished
Cited by13 cases

This text of 923 P.2d 504 (Boyle v. Harries) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Boyle v. Harries, 923 P.2d 504, 22 Kan. App. 2d 686, 1996 Kan. App. LEXIS 89 (kanctapp 1996).

Opinion

Gernon, J.;

This appeal involves a shareholder derivative suit. A jury trial resulted in a $975,000 verdict on behalf of the plaintiff, Henry Boyle. This verdict was reduced to $533,500 by the trial judge. The reduction of the verdict is but one of several issues raised in this complex and fact-sensitive case.

Mega Circuits, Inc., (Mega) makes and sells printed electronic circuit boards used in computers and other electronics. Mega was started in 1984 by Kevin Gassen, Mark Gassen, Patrick Boyle, and Henry Boyle. The Gassens were actively involved in the business. Henry Boyle was involved until 1985, when he left to pursue other interests. Patrick Boyle was never involved in the day-to-day operation of the companies.

*688 Mega was seemingly always under-capitalized. It borrowed $250,000 as start-up money. In addition, in 1987, Mega was penalized for failing to pay employee withholding tax. Needing capital, Mega negotiated an agreement with AMT Development.

AMT Development is a partnership. The partners include William Kent, Barbara Kent, and Judith Harries. William Kent and William Harries also control a company named Applied Micro Technology, Inc., (AMT). AMT was a principal customer of Mega.

In 1987, Mega, in exchange for $75,000 from AMT Development, agreed to transfer 50 percent of its stock to AMT Development and to allow William Kent and William Harries to become officers and directors of the corporation.

After the agreement with AMT Development, AMT Development owned 50 percent of Mega and the Gassens owned 38 percent. The balance of the stock was owned by other minor shareholders, including Henry Boyle. At the time of trial, Boyle owned 10 percent of Mega. After the transfer, Mega’s board of directors consisted of Harries, Kent, and the two Gassens.

The record contains an uncontroverted statement that on the day Harries and Kent bought into Mega, Harries stated, “[W]e’re going to F the small shareholders.”

Almost immediately, Mega was called upon to extend special considerations to AMT, both as to price and as to delivery times.

After AMT Development acquired stock in Mega, AMT accounted for more than 25 percent of Mega’s gross sales. This percentage is presumably even higher, given the pricing considerations and undercharges AMT received from Mega.

AMT was paying lip per square inch for circuit boards purchased from Mega before the buy-in. After the buy-in, the charge increased to approximately 12p per square inch in 1988, and eventually reached 20p per square inch in 1991. While a considerable increase in price, the record reveals that other customers were paying twice as much or more for similar orders. In addition, AMT demanded early delivery on its orders but was unwilling to pay current accelerated delivery charges.

Mega’s financial situation continued to deteriorate. In 1990, Mark Gassen resigned from Mega, in part due to health problems. *689 His position on the board was never filled, thus giving Kent and Harries effective control of the board.

In 1991, Kevin Gassen discussed with Harries the possibility of declaring bankruptcy. Kevin Gassen then sought the advice of an attorney and learned that Mega’s preferential treatment given to AMT was illegal. Gassen then conducted an audit of the company. After reviewing the audit, Kevin Gassen sent Kent and Harries a letter in December 1991, informing them of the nature and extent of the damages suffered by Mega due to the preferential treatment given to AMT. Their response was that in February 1992, the board of Mega voted 2 to 1 to fire Kevin Gassen due to “poor management.”

Henry Boyle becamé aware of the preferential treatment given to AMT after the audit. Boyle testified that at no time did he authorize such treatment.

Henry Boyle and Kevin Gassen filed suit in 1993 against Harries, Kent, AMT, and AMT Development. They alleged breach of fiduciary duty, restraint of trade, and unjust enrichment. Kevin Gas-sen later withdrew from the suit. Only the breach of fiduciary duty claim was allowed to be considered by the jury.

After hearing the testimony of several witnesses, the jury found the existence of a breach and returned separate verdicts of $487,500 against Harries and $487,500 against Kent. The trial court combined these two amounts for a total verdict of $975,000 and, then, reduced the total damage figure to $533,500 to reflect its pretrial order. The trial court then allocated that amount between Harries and Kent, so they each were assessed $266,750.

Afterward, Harries and Kent filed a motion to stay execution of the judgment while the post-trial motions were pending. The court granted the motion upon the condition that they post a supersedeas bond in the amount of $275,000. Harries and Kent then filed a motion seeking judgment notwithstanding the verdict, or, in the alternative, a new trial, or, in the alternative, an alteration of the judgment, but the court denied the motion. The court also directed that the supersedeas bond should be altered to name Henry Boyle as the beneficiary. The parties appeal several of the court’s rulings.

*690 Limitation of Damages

Boyle argues that it was error to limit compensatory damages to the amount established in its pretrial order.

K.S.A. 60-216(a) provides that a pretrial order controls the future course of the action “unless modified at the trial to prevent manifest injustice.” This statute bestows broad discretionary power upon the trial courts. State Farm Fire & Cas. Co. v. Liggett, 236 Kan. 120, 124, 689 P.2d 1187 (1984). Consequently, “[t]he admission of exhibits not previously disclosed or the admission of the testimony of witnesses not previously disclosed is discretionary with the trial court. Discretion is abused only when no reasonable [person] would take the view adopted by the trial court.” 236 Kan. at 124.

In Burkhart v. Philsco Products Co., 241 Kan. 562, 738 P.2d 433 (1987), the Supreme Court noted the purpose of a pretrial conference:

“ ‘The pre-trial conference and the order entered thereon are an important part of the procedural process. They are provided to acquaint each party in advance of trial with the factual contentions of the opposite parties as to matters in dispute. The opportunity for maneuver and surprise during the trial is reduced. As a result of the pre-trial conference all parties are better able to prepare their testimony on the issues to be tried.’ ” 241 Kan. at 565 (quoting Tillotson v. Abbott, 205 Kan. 706, 709, 472 P.2d 240 [1970]).

The pretrial order indicates Boyle was asking for $3,600,085 in total damages. Of that amount, $533,500 was claimed to be damages for undercharges to AMT by Mega.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Great American Ins. Co. v. Wahl
Court of Appeals of Kansas, 2017
Mohr v. Tatro (In Re Tatro)
387 B.R. 833 (D. Kansas, 2008)
Norton Farms, Inc. v. Anadarko Petroleum Corp.
91 P.3d 1239 (Court of Appeals of Kansas, 2004)
Med James, Inc. v. Barnes
61 P.3d 86 (Court of Appeals of Kansas, 2003)
Moore v. Dudley
64 P.3d 429 (Court of Appeals of Kansas, 2002)
Dealer's Leasing, Inc. v. Allen
994 P.2d 651 (Court of Appeals of Kansas, 1999)
Rajala v. Donnelly Meiners Jordan Kline, P.C.
193 F.3d 925 (Eighth Circuit, 1999)
Gottstein v. National Ass'n for the Self Employed
53 F. Supp. 2d 1212 (D. Kansas, 1999)
Bold v. Spitcaufsky
942 P.2d 652 (Court of Appeals of Kansas, 1997)
Koch v. Koch Industries, Inc.
969 F. Supp. 1460 (D. Kansas, 1997)
Franklin Savings Corp. v. United States
970 F. Supp. 855 (D. Kansas, 1997)

Cite This Page — Counsel Stack

Bluebook (online)
923 P.2d 504, 22 Kan. App. 2d 686, 1996 Kan. App. LEXIS 89, Counsel Stack Legal Research, https://law.counselstack.com/opinion/boyle-v-harries-kanctapp-1996.