## Facts

- The Pointe was a planned residential community whose governing documents prohibited outside television antennae and granted The Pointe Services Association (PSA), a not-for-profit owners’ association, the exclusive right to provide television service to members.
- William Kirtley served as a PSA director while PSA considered upgrading its television reception system to cable; PSA had authority and financial capacity to undertake the upgrade.
- With knowledge of PSA’s contemplated upgrade and its exclusive service right, Kirtley personally acquired the equipment needed for the upgrade, implemented cable service himself, and billed unit owners directly for approximately two years.
- Kirtley profited from the charges, though the rates were commercially reasonable and below market.
- Kirtley later arranged a deal involving a third-party cable provider in which PSA’s exclusive right to provide television service was exchanged for a service contract; on the same day, Kirtley sold his personally owned equipment and entered into a noncompetition agreement tied to that sale.
- Unit owners and PSA (through a derivative action) alleged Kirtley diverted to himself a business opportunity belonging to PSA and breached fiduciary duties owed as a director.

## Issues

1. Whether unit owners who are members of a not-for-profit owners’ association may bring a derivative action on the association’s behalf against directors for alleged mismanagement and breach of fiduciary duty.
2. Whether a director usurps a corporate opportunity and breaches fiduciary duties by personally exploiting an association’s exclusive service right and an opportunity the association had authority and capacity to pursue.
3. Whether ancillary contract doctrines (including third-party beneficiary principles) affect which party may enforce service-related agreements connected to the association’s rights.

## Decision

- The Indiana Court of Appeals affirmed the trial court’s judgment for the plaintiffs.
- The court held the unit owners had standing to sue derivatively on behalf of PSA to protect PSA’s interests.
- The court held Kirtley’s conduct constituted usurpation of a corporate (association) opportunity and a breach of fiduciary duty.
- The court left undisturbed the trial court’s findings that PSA had both authority and financial capacity to pursue the television upgrade itself and that Kirtley’s private operation and later transactions wrongfully diverted association rights and benefits.

## Legal Principles

- Members of a corporation or not-for-profit association may sue derivatively on the entity’s behalf to protect the entity’s interests when those interests are harmed by directors or managers.
- Under the corporate opportunity doctrine, an officer or director may not appropriate for personal benefit a business opportunity in which the entity has a legitimate interest or expectancy and the financial ability to pursue; such opportunities must be presented to the entity.
- Directors of not-for-profit owners’ associations owe fiduciary duties comparable to those of corporate directors, including duties of loyalty, good faith, and fair dealing, and may not exploit association rights or opportunities for personal gain without proper authorization.
- A nonparty may enforce a contract only if the contract manifests an intent to benefit that party as an intended (not incidental) beneficiary; service-related rights intended for the association support treating the association as the proper claimant.

## Conclusion

The court upheld derivative enforcement of an owners’ association’s rights and affirmed liability where a director privately captured and monetized a television-service opportunity tied to the association’s exclusive rights and within the association’s capacity, thereby breaching fiduciary duties under the corporate opportunity doctrine.


Kirtley v. McClelland, 562 N.E.2d 27 (Ind. Ct. App. 1990)