Corporate Opportunity Doctrine - Avery & Aesop Scene3_3mins30secs





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Published on Dec 6, 2010

See Avery and Aesop Scenes 1 and 2. There are four scenes altogether.
In Ostrowski v. Avery, 703 A.2d 117 (Connecticut Supreme Court 1997), the Connecticut Supreme Court first determined that (1) the owners and operators of the "small cutting wheel operation" owed fiduciary duties to the large cutting wheel business, Avery Abrasives, and its shareholders, and (2) the chance to develop small cutting wheels constituted a "corporate opportunity" for Avery Abrasives.
The court then turned to the central question in its opinion: "What role does disclosure to the other directors and shareholders play in determining whether a corporate opportunity was in fact usurped?"
The court noted that the law of corporate opportunity contemplates the disclosure will be made to disinterested directors, who then are given an opportunity to accept or reject the opportunity. Adequate disclosure of a corporate opportunity will provide defendants with a safe harbor from liability for breach of fiduciary duty. But Avery and his "partner" had apparently failed to give adequate notice. Their disclosure was to Avery's father, who could not be considered disinterested. Moreover, the board as a whole (including its disinterested directors) was not informed of the opportunity until after Avery and his partner had established the small cutting wheel businness.
However, the court held that, under Connecticut law, failure to disclose would not give rise to automatic liability. In the absence of adequate disclosure, a corporate fiduciary could avoid liability if he or she could prove by clear and convincing evidence that exploitation of a corporate opportunity did not damage the corporation. The court declined to apply this rule to the facts of this case, instead leaving the issue to be addressed by the trial court on remand.

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