Question

Cookietree, Inc., is a privately held Utah corporation that produces and retails baked goods. The company was formed in 1981, with Greg Schenck and his father, Boyd Schenck, among the original shareholders. From the beginning Greg was president of Cookietree, and after Boyd's death, Greg became majority shareholder. In 1992, Greg Schenck recruited Sam McLaughlin to work as the operations leader for Cookietree. McLaughlin's previous experience at Pillsbury and Quaker Oats made him a valuable employee, and he was quickly promoted to vice president of operations and then chief operating officer and vice president of operations. McLaughlin also invested his personal finances in the corporation by slowly purchasing increasing amounts of shares in the corporation. Nonetheless, McLaughlin's primary reason for joining Cookietree was employment. That employment allowed him to purchase stock in Cookietree, but he was not required to do so. His ability to buy stock was offered to him as an incentive or reward for his work performance, but the purchase allowances were not tied to his employment; instead they were a separate investment in the company. McLaughlin was paid a competitive salary for his contributions to the company, and his investment in the company was separately rewarded through the payment of dividends. Unfortunately, the relationship between Greg and McLaughlin deteriorated, and eventually Greg terminated McLaughlin's employment. While McLaughlin no longer received a salary, he continued to receive dividends on his shares after his termination. McLaughlin sued Greg claiming that as a majority shareholder, Greg owed a fiduciary duty to McLaughlin, a minority shareholder, and that by terminating McLaughlin's employment, Greg had breached that duty. Did the court agree?



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  • CreatedJuly 16, 2014
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