Terminated Shareholder Obtains $2.3 Million Settlement for Oppression and Breach of Contract
In a lawsuit filed in Wayne County Circuit Court, plaintiff asserted that defendants committed, among other things, shareholder oppression, breach of fiduciary duty, and breach of oral employment agreement, and that plaintiff was entitled to damages. Defendants filed a counter-complaint against plaintiff also seeking damages.
Plaintiff was a 20% owner and vice president of Mucci Food Products, Ltd., a company that manufactures and sells pasta products, and a 20% owner of Molise Ltd., L.C., a company that invests in real estate. Plaintiff, together with the controlling shareholders and co-owners, two brothers, opened Mucci Food 20 years ago, and grew the company into a very successful business. Fifteen years ago, plaintiff and the other co-owners formed Molise to invest in real estate for their future benefit.
Plaintiff alleged mismanagement and oppression by the defendant controlling shareholders, resulting in, among other things, lost profits and damages to plaintiff. Plaintiff also alleged that he had an oral agreement with the other co-owners, pursuant to which all three would have lifetime employment at Mucci Food. After many years of the three owners working at Mucci Food, plaintiff asserted that the defendant controlling shareholder ousted plaintiff and terminated his wages and benefits. Defendants, meanwhile, contended that there was no oral agreement for lifetime employment, and denied that their actions constituted shareholder oppression. Defendants further contended that they had the right to terminate plaintiff’s employment.
The parties engaged in substantial written and oral discovery, with plaintiff’s counsel taking thorough depositions of the defendants and third-party witnesses. Among other things, plaintiff’s counsel effectively obtained admissions from defendants that plaintiff was entitled to a buy-out, and obtained statements from third-party witnesses supporting the promise of lifetime employment. The parties also retained competing experts regarding the valuation of the companies.
The matter settled for $2.3 million, with plaintiff receiving a buy-out of approximately $1.3 million, plus an additional $1 million in damages.
Type of action: Shareholder oppression, breach of fiduciary duty, breach of contract
Type of injuries: Loss of stock value, wages, and profits
Name of case: Sweeney v. Mucci Food Products, Ltd., et al.
Court/Case no./Date: Wayne County Circuit Court; 11-001282-CK; June 28, 2011
Settlement amount: $2.3 million
Most helpful experts: Barry Grant CPA, expert on financial forensics; Phillip Gaglio CFA, expert on business valuation; and Guy Hostetler MA, expert on loss of employment
Attorneys for plaintiff/counter-defendant: Gerard V. Mantese , Brian M. Saxe
Attorneys for defendants/counter-plaintiff: Withheld