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Broz v. Cellular Information Systems Inc.

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Location
  
Delaware, United States

Citation(s)
  
673 A2d 148 (Del Supr 1996)

Similar
  
Shlensky v Wrigley, Guth v Loft Inc, AP Smith Manufacturing Co v Bar, Keech v Sandford, In re Citigroup Inc Shar

Broz v Cellular Information Systems Inc, 637 A2d 148 (Del Supr 1996) is a US corporate law case, concerning the standard in Delaware corporations regarding conflicts of interest. It exemplifies that the Delaware courts spend considerable resources inquiring into whether a director has had an actual conflict of interest, as opposed to the traditional common law approach which demanded that there should be no possibility of a conflict.

Contents

Facts

Broz was sole shareholder and president of RFB Cellular Inc. RFB held telecommunications licences for a number of districts of Michigan. Broz was also a non-exec of CIS, in the same business in the upper mid west. As owner of RFB, a tele-licence broker called Mackinac came up to Broz and offered him a licence in Michigan (both RFB and CIS operated in Michigan). Broz started negotiating without telling CIS’s board. Broz did not think CIS would be interested in the same opportunity, because it was shedding licenses to try and stave off bankruptcy. Broz had discussed the matter informally with the CIS board. After he got the licence, Pri-Cellular acquired CIS, and the company was saved. They sued Broz for breaching his fiduciary duty of loyalty, diverting the opportunity to himself. (Pri-Cellular and RFB were themselves absorbed by Dobson Cellular in 1998 and 2004, which was itself bought out by AT&T in 2007.)

Judgment

The Delaware Supreme Court held that Broz was not under any obligation to offer the Michigan-2 licence to the CIS board, the opportunity being one that had come to him personally. The plaintiff company had lacked both the interest and the financial means to acquire the licence for itself.

References

Broz v. Cellular Information Systems Inc. Wikipedia