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02/10/95 TURNHAM W. COOPER v. USCO POWER EQUIPMENT

February 10, 1995

TURNHAM W. COOPER, ET AL.
v.
USCO POWER EQUIPMENT CORPORATION, ET AL. MAUDE S. COLLEY V. USCO POWER EQUIPMENT CORPORATION, ET AL.



Appeals from Jefferson Circuit Court. (CV-92-9659, CV-93-626). Claude Hughes, Trial Judge.

Rehearing Denied February 10, 1995. Released for Publication May 27, 1995.

Kennedy, Shores, Houston, and Ingram, JJ., concur. Cook, J., concurs in the result.

The opinion of the court was delivered by: Kennedy

KENNEDY, JUSTICE.

The plaintiffs appeal from a summary judgment in favor of the defendant USCO Power Equipment Corporation.

On December 15, 1992, Merle Cooper and Turnham Cooper filed a shareholder's derivative action against USCO, alleging breach of fiduciary duty, based on what they alleged to be USCO's excessive compensation of the company's chief executive officer, Benton T. Lankford. The plaintiffs also alleged that USCO was spending too much money was on employee benefits. On January 25, 1993, Maude S. Colley sued USCO, based on the same allegations. The actions were consolidated, and John Assell was also added as a plaintiff.

USCO filed a motion to dismiss or, in the alternative, for a summary judgment. The trial court treated the motion as one for a summary judgment, because in ruling on the motion it considered matters outside the pleadings. See Rule 12(c), A.R.Civ.P. The trial court entered a summary judgment in favor of USCO.

Rule 23.1, A.R.Civ.P. provides:

"In a derivative action brought by one or more shareholders or members to enforce a right of a corporation or of an unincorporated association, the corporation or association having failed to enforce a right which may properly be asserted by it, the complaint shall be verified and shall allege that the plaintiff was a shareholder or member at the time of the transaction of which he complains or that his share or membership thereafter devolved on him by operation of law. The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for his failure to obtain the action or for not making the effort. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association. The action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to shareholders or members in such manner as the court directs."

(Emphasis added.)

The plaintiffs, in opposing the motion for summary judgment, failed to present substantial evidence that they met the requirements to maintain a shareholder's derivative action pursuant to Rule 23.1.

A summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), A.R.Civ.P.

The moving party must show that there is no material fact in dispute, and, in determining whether such a fact is disputed, the court must review the evidence most favorably to the nonmoving party. Harvell v. Johnson, 598 So. 2d 881 (Ala. 1992). In order to defeat a properly supported motion for summary judgment, the nonmoving party must present substantial evidence creating a genuine issue of material fact. Harvell.

Rule 23.1 requires that the plaintiff in a derivative action allege with particularity any efforts the plaintiff has made to obtain the action he or she desires from the directors and the reasons for failing to obtain such action or the reasons for not making such an effort. Elgin v. Alfa Corp., 598 So. 2d 807 (Ala. 1992). This ...


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