Toscano v. Koopman

148 F. Supp. 3d 679, 2015 U.S. Dist. LEXIS 166992, 2015 WL 8280492
CourtDistrict Court, N.D. Illinois
DecidedDecember 7, 2015
DocketCase No: 15 C 2197
StatusPublished
Cited by4 cases

This text of 148 F. Supp. 3d 679 (Toscano v. Koopman) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Toscano v. Koopman, 148 F. Supp. 3d 679, 2015 U.S. Dist. LEXIS 166992, 2015 WL 8280492 (N.D. Ill. 2015).

Opinion

ORDER

FREDERICK J. KAPALA, District Judge

Defendants’ motion to dismiss for failure to state a claim [22] is granted in part. Plaintiffs complaint is dismissed for failure to comply with the verification requirement of Rule 23.1(b). The individual claims alleged in Counts II, IV, and V are dismissed without prejudice. The motion is denied in all other respects. Plaintiff is granted leave to file a verified amended [681]*681complaint consistent with the directives in this order within 30 days.

STATEMENT

In this diversity-of-citizenship direct and derivative action, plaintiff, Samuel Tosca-no, Jr., a minority shareholder in defendants Precision Dose, Inc. (“Precision Dose”) and Cup Pac Packaging, Inc. (“Cup Pac”)' (collectively “the companies”), has sued his fellow shareholders, Robert Koop-man and Frank Darnell, and the companies, as" well as Koopman’s and Darnell’s company, Precision Dose Properties, Inc. Plaintiff alleges oppression of a minority shareholder, breach of fiduciary duty, breach of contract, unjust enrichment, and seeks an equitable accounting. Before the court is defendants’ motion to dismiss pursuant to Federal Rules of Civil Procedure 23.1(b) and 12(b)(6). For the reasons that follow, the motion is granted in part and denied in part.

I. ALLEGATIONS1

The companies are Illinois corporations that sell specialized medical and food service products. They are owned "by Koop-man, a citizen of Illinois;' Darnell, a citizen of Indiana" and Florida; plaintiff, a citizen of New Jersey; Thomas Anderson; and the estate of James E. Kleinheinz. Koop-man, the Chief Executive Officer and President of the companies, and Darnell, majority shareholder and Treasurer, are the controlling shareholders of the companies. Plaintiff, Thomas;Anderson, and the estate of Kleinheinz are the minority shareholders. Each of the shareholders are parties to the Precision Dose Shareholders Agreement and the Cup Pac Shareholders Agreement which are substantively identical (collectively the “shareholders agreements”). The Boards of Directors of the companies are Koopman, Darnell, plaintiff, Anderson, and the son of Kleinheinz, as the representative of his estate.

A. Transfer of Cup Pac’s Option to Purchase Real Estate to Precision Dose Properties and its lease of the Real Estate Back to Cup Pac

Koopman and Darnell are the sole shareholders of Precision Dose Properties, an Illinois corporation. After plaintiff became a shareholder in Precision Dose, and soon after the formation of Cup Pac, defendants caused Cup Pac to enter into an Industrial Building Lease with Sobo, Inc. (the. “Sobo Lease Agreement”), under which Cup Pac leased real estate for its operations and under which it had an option to purchase that real estate. On March 16, 2010, Koopman executed an assignment transferring Cup Pac’s. .option to Precision Dose Properties for no consideration. Koopman and Darnell took no steps to assure that this transaction, which directly benefitted them at the potential expense of Cup Pac, was in fact in the interest of Cup Pac. Cup Pac was not represented by independent counsel in connection with the assignment, and it was not approved by the Board of Directors or the shareholders. Soon thereafter, Precision Dose Properties purchased the real estate under the option in the Sobo Lease Agreement.

On June 1, 2012, Precision Dose Properties entered into another Industrial Building Lease, this time with both Precision Dose and Cup Pac, which included the real estate on which both companies operated, which in turn included the real estate which" Precision Dose Properties purchased under the option. Neither Darnell nor Koopman took any steps to protect the [682]*682interests of the companies in connection with the June 1, 2012 transaction, eveh though it directly benefitted them at thb expense of the companies. The lease agreements were negotiated oh behalf of the companies and on behalf of Precision Dose Properties by Darnell and Koopman. The companies were not represented by independent counsel in connection with the lease agreements. Neither lease agreement nor the rents paid under them were disclosed to the Board of Directors or the stockholders of the companies. In 2014, plaintiff requested and received information from counsel for the companies concerning the March 16,' 2010 assignment and the June 1,2012 lease agreements'. In response to plaintiffs inquiries and subsequent complaints, defendants committed to unwind the transactions. However, defendants failed to make any effort to do so.

B. Failure to Sell or Transfer the Kleinheinz Shares

When Kleinheinz died, he owned 10,000 shares each of Precision Dose and Cup Pac directly and though a trust. After Klein-héinz’s death, his shares temporarily were controlled by his estate or a trust. Klein-heinz and his trust were parties to the Shareholders Agreements which required the shares to be transferred after his death. Specifically, pursuant to section 6 of those agreements, the companies and the other shareholders were required to perform a valuation and to sell or transfer the Kleinheinz shares on or before June 26, 2013. .Pursuant to section 5 of the agreements, the compames were required to notify all other shareholders about the potential transfer of the Kleinheinz shares and to give all other shareholders the option to purchase some or all of the Klein-heinz shares. Despite'repeated requests, the Kleinheinz shares have not been purchased, transferred, or offered to all other shareholders and no effort has been made by defendants to comply with their obligations, or to enforce the obligations on the' holders of the Kleinheinz shares to transfer the shares, under the shareholder agreements. Instead, Koopman and Darnell, as well as other representatives of the companies, have informed the holders of the ‘Kleinheinz shares that they do not have any obligation to transfer the shares because the companies have waived their contractual obligations to value and transfer the Kleinheinz shares. However, by their terms, the shareholders agreements may only be amended pursuant to a written agreement signed by all shareholders and no such amendment has taken place.

C. Dividend Payments to Darnell Disguised as Consulting Payments

In November 2014, plaintiff learned of a consulting agreement between Precision Dose and a company owned and controlled by Darnell, providing Darnell with $3,750 per month for consulting services. The agreement was later modified to increase the consulting fee to $11,666.67 a month. Darnell does not provide consulting services to Precision Dose apart from his role as a director and officer for which he is separately compensated. Precision Dose does not receive any value in exchange for the payments made to Darnell or his affiliate under the consulting agreement. Neither the consulting agreement nor the modification to the agreement were approved by the Precision Dose Board of Directors and the consulting fees are disguised dividend' payments which should have been provided to all shareholders. Defendants not' only failed to disclose to all shareholders the consulting agreement, the modification, and the payments made under- it but also actively tried to conceal their existence from the shareholders. For example, defendants never caused the consulting agreement or the payments made under it to appear on the financial statements of Precision Dose.

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Cite This Page — Counsel Stack

Bluebook (online)
148 F. Supp. 3d 679, 2015 U.S. Dist. LEXIS 166992, 2015 WL 8280492, Counsel Stack Legal Research, https://law.counselstack.com/opinion/toscano-v-koopman-ilnd-2015.