## Facts

- Victor J. DiMaggio III and Elias Rosario were shareholders of Galleria Realty Corporation (Galleria), an Indiana closely held corporation engaged in real-estate development.
- Rosario later formed Liberty Lake Estates, LLC (LLE), an Indiana LLC, with Mark Nevel and William Haak as the other members.
- LLE was formed to pursue a real-estate development project that DiMaggio claimed was a corporate opportunity belonging to Galleria.
- DiMaggio sued Rosario, LLE, Nevel, and Haak, alleging Rosario breached fiduciary duties owed in the closely held corporation context by diverting Galleria’s opportunity to LLE.
- As to LLE, Nevel, and Haak (nonfiduciaries to Galleria), the complaint alleged they “actively participated” with Rosario in the diversion.
- The complaint did not allege that Nevel, Haak, or LLE knew Rosario owed fiduciary duties regarding the opportunity or that they knowingly assisted a breach.
- LLE, Nevel, and Haak moved to dismiss under Indiana Trial Rule 12(B)(6) for failure to state a claim, arguing Indiana did not recognize a corporate-opportunity cause of action against third-party nonfiduciaries.
- The trial court granted the motion and dismissed the claims against LLE, Nevel, and Haak. DiMaggio appealed that dismissal.

## Issues

1. Whether Indiana law recognizes a cause of action against third-party nonfiduciaries for usurpation of a closely held corporation’s corporate opportunity.
2. Whether allegations that nonfiduciary third parties “actively participated” in a fiduciary’s usurpation, without alleging knowing assistance, state a claim for relief against those third parties.

## Decision

- The Court of Appeals of Indiana affirmed the Rule 12(B)(6) dismissal of DiMaggio’s claims against LLE, Nevel, and Haak.
- The court held Indiana had not recognized a stand-alone cause of action imposing liability on third-party nonfiduciaries for usurping a corporate opportunity belonging to a closely held corporation.
- The court rejected DiMaggio’s argument that an earlier Indiana decision had “implicitly” recognized such liability where the prior appeal did not present, and the court did not decide, the dismissal issue.
- The court considered DiMaggio’s reliance on authority from other jurisdictions imposing joint-and-several liability on nonfiduciaries who knowingly assist a fiduciary’s usurpation, but concluded that, at a minimum, such a theory would require pleading knowledge.
- Because DiMaggio’s complaint did not allege that LLE, Nevel, or Haak knowingly assisted Rosario’s alleged breach, the complaint failed to state a claim against them.

## Legal Principles

- A corporate-opportunity claim is a fiduciary-duty doctrine; liability ordinarily runs to fiduciaries who owe duties to the corporation or, in closely held corporations, to fellow shareholders in the relationship giving rise to the duty.
- Indiana appellate decisions do not create precedent on an issue that was not appealed and not decided; a prior case’s silence on a trial court ruling is not recognition of a new cause of action.
- When a plaintiff seeks to hold a nonfiduciary liable for assisting another’s breach of fiduciary duty, the pleading must allege knowing participation (or equivalent awareness) by the nonfiduciary in the breach.
- On a Rule 12(B)(6) motion, a complaint must plead facts supporting a legally recognized theory of liability as to each defendant; alleging participation without the required mental-state element is insufficient.

## Conclusion

The Indiana Court of Appeals affirmed dismissal of the claims against Liberty Lake Estates, LLC and its nonfiduciary members because Indiana had not recognized direct corporate-opportunity liability against third-party nonfiduciaries, and the complaint did not allege that those defendants knowingly assisted Rosario’s alleged fiduciary breach.


DiMaggio v. Rosario, 950 N.E.2d 1272 (2011)