On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, C-150-97E.
Before Justice Wallace, Jr., (temporarily assigned)
and Judges Ciancia and Hoens.
The opinion of the court was delivered by: Hoens, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 4, 2003
Plaintiff Isabel S. Weil appeals from three separate Chancery Division orders entered August 3, 2001. The orders granted summary judgment in favor of Albert Weil (Isabel's late father), Stephen Weil (Isabel's brother), his wife Amy Weil (both individually and in her capacity as trustee of the Stephen J. Weil 1996 Family Trust), and Battleground Realty L.L.C. (the Weil defendants), and Marc E. Berson and Wilson Fidelco Realty, L.P. (the Berson defendants).*fn1 We affirm.
While the procedural history of the litigation and the factual assertions raised by Isabel are both lengthy and complex, we need only summarize them for purposes of this appeal. Isabel commenced this litigation in 1997 alleging that she was a minority shareholder in two corporations, Express Container Corporation (Express) and Sea Coast Packaging Corp. (Sea Coast). She asserted that the foregoing defendants, along with another individual who had served as the controller for Express, two groups of lawyers and their law firms, and several accountants and their accounting firm had engaged in acts of minority shareholder oppression, fraud, equitable fraud, conspiracy to defraud, breach of fiduciary duty, tortious interference with prospective economic advantage, RICO violations and, as to the attorneys, legal malpractice. Her claims arose out of a series of events that she contended were designed to and had the effect of oppressing her rights as a minority shareholder.
The factual background of the claims is as follows. Express was formed in 1922 by Evelyn Weil, the wife of Albert and the mother of Stephen and Isabel. Express was engaged in the corrugated cardboard business. Albert began working for the company in 1939 and became the president in 1964. In the late 1960's Sea Coast was formed to serve as a sales organization for Express in connection with certain government contracts. Thereafter, Sea Coast also purchased trailers and tractors and leased them back to Express.
Stephen began working for Express in the late 1970's, eventually replacing Albert in the 1980's. Through a lengthy series of transfers of voting and non-voting shares of the stock in the companies, and in compliance with the wishes expressed by Evelyn in her will, eventually Stephen owned 75% of the outstanding shares and Isabel owned the remaining 25% of the shares of the Express and Sea Coast stock. As part of that series of transactions, and in particular when he retired from active involvement in the business, Albert arranged to be paid a consultant's fee and to receive other distributions from the earnings of the corporations. Stephen actively ran the businesses and received a salary for his efforts. His wife, who worked in the business in a limited capacity, was also paid a small salary. Throughout the time prior to the commencement of the litigation, Isabel, who played no active role in the business and who did not in any way participate in or contribute to the management of either company, was paid a monthly distribution. While the distribution was supposedly paid in consideration of her ownership interest in the companies, in fact she was paid a monthly distribution even prior to having any ownership interest in the businesses.
Stephen and Isabel were never on particularly good terms and Stephen began trying to buy out Isabel's interest in the companies even before she became a shareholder. He offered her various sums on various terms beginning in 1990, but Isabel refused to accept any of his offers. In 1995, Stephen hired defendant Marc Berson to help move the companies toward greater profitability. Berson believed that the business was in poor financial health and needed an immediate cash infusion to survive, so he suggested that Express enter into a sale and leaseback agreement with Wilson Fidelco, an entity to be created for that purpose with another investor. In connection with that series of proposals, the real property in Newark owned by Express was appraised and a number of potential transactions were structured based on several appraisals. Isabel was dissatisfied because she believed that all of the appraisals undervalued the land and its improvements. While the proposed Wilson Fidelco transaction generated a number of agreements between Stephen and others, including Berson, to the exclusion of Isabel, eventually Stephen decided that the deal was not advantageous to Express and he terminated the discussions entirely. It is undisputed that during this time, Berson did not know that Isabel had any interest in the companies and that when he learned of her shareholder status, he advised Stephen to treat her fairly.
The financial picture for Express continued to be troubled and Stephen sought other opportunities to improve the business. In 1995, he made a new buy-out proposal to Isabel which she found to be unacceptable because it offered her less than the prior offer. Stephen insisted that the value of the company was reduced, but Isabel believed that information was false and eventually she rejected the 1995 offer as well. At about the same time, Berson advised Stephen that all of the distributions to stockholders should stop because of the company's financial distress. Stephen therefore decreased, and later ended entirely, the payments to Isabel, and he reduced the payments then still being made to Albert as well. Stephen also terminated payments on a leased vehicle driven by Isabel at about the same time. During this time frame, Isabel recorded a series of telephone conversations she had with Stephen during which he threatened to issue more stock to dilute her shares if she continued to refuse to accept his buy-out offer.
In 1996, Stephen decided to build a plant in North Carolina in order to have a production facility near one of Express's largest customers. As a part of that decision, he formed Express Container L.L.C. (Express L.L.C.) and Battleground Realty L.L.C. (Battleground). The plan was that Express L.L.C. would operate the business in North Carolina, while Battleground would own the plant and the property on which it was to be built. The funds for this venture came from the Stephen J. Weil 1997 Family Trust and Interest in these new entities was given to the Trust by Express L.L.C. and Battleground. Stephen did not arrange for an interest to be given to Isabel because time was short and he was fearful that she would interfere. Shortly after the formation of these entities, however, Stephen, through counsel, offered Isabel the opportunity to participate in the transaction in accordance with her stock ownership in Express, in exchange for her personal guarantee of certain loans that had been required as a part of the transaction. Isabel did not opt to provide a guarantee and as a result, she was not given any interest in the new entities.
In 1997, after Isabel filed her complaint, Stephen again offered to buy her interest in the companies through a buy-sell agreement. It appears that she did not respond to that offer. In addition, shortly after the complaint was filed, the Chancery Division judge appointed an appraiser to evaluate Isabel's interest in Express and Sea Coast and to separately appraise Express L.L.C. and Battleground, and he ordered that the distributions Isabel had been receiving be reinstated. The appraiser submitted his report in November 1997. Express filed for bankruptcy in March 1998, as a result of which the pending state action was removed to federal court. Sea Coast and Express L.L.C. also filed for bankruptcy and all of the proceedings were consolidated. Isabel objected to the reorganization plan in the Bankruptcy Court. As a part of that plan, the assets of Express and Sea Coast were to be sold to Greater New York Box, which subsequently hired Stephen as a salesman.
In response to Isabel's objection and in confirming the reorganization plan, the bankruptcy judge determined that, as a shareholder, Isabel had certain derivative claims that were assigned in the bankruptcy to Greater New York Box and that she could only pursue those claims against that entity. At the same time, he held that her personal claims would survive the bankruptcy and could be asserted in the state court litigation, which he then remanded to the Chancery Division. He specifically identified the claims that qualified as personal claims and that would survive the bankruptcy. Isabel thereafter filed an amended complaint in the Chancery ...