## Facts

- Northeast Harbor Golf Club, Inc. operated a golf course; its principal asset was the course on Mount Desert Island.
- Nancy Harris served as the Club’s president (1971–1990) and assumed substantial operational responsibility as the board relied heavily on her.
- The Club frequently operated at a deficit, and Harris subsidized operations by personally purchasing equipment and leasing or selling it to the Club on favorable terms.
- The board intermittently discussed raising funds through land development but repeatedly declined to pursue such activity despite studies and committee authorization.
- In 1979, a broker approached Harris because she was Club president regarding the Gilpin property (three noncontiguous parcels among the fairways, including a right-of-way used for the Club’s clubhouse and parking lot, and burdened by an easement benefiting the Club).
- Without first presenting the opportunity to the board, Harris agreed to purchase the Gilpin property in her own name for $45,000 and later announced the purchase at an annual meeting, stating the Club would be “protected”; the board took no formal action.
- In 1984, Harris learned the Smallidge property (surrounded on three sides by the course) was for sale; she bought it personally without first formally submitting the opportunity to the board, later disclosing the purchase at the annual meeting; the board again took no formal action.
- In 1988, Harris began developing the properties into a residential subdivision; the board became divided, and the Club sued alleging breach of the duty of loyalty by usurpation of corporate opportunities.

## Issues

1. What standard governs whether a corporate officer has taken a “corporate opportunity” in breach of the duty of loyalty.
2. Whether the trial court erred by applying the traditional “line of business” test (including financial-ability considerations) rather than a disclosure-and-rejection framework.
3. Whether Harris’s acquisition and later development of land intertwined with the golf course constituted a corporate opportunity requiring advance disclosure and formal rejection.

## Decision

- The Maine Supreme Judicial Court vacated the judgment for Harris and remanded.
- The court rejected use of the “line of business” test as the governing standard for corporate opportunity disputes in Maine.
- The court adopted the American Law Institute’s Principles of Corporate Governance approach to corporate opportunities.
- Under the adopted standard, Harris’s transactions involved opportunities that, at minimum, required full advance disclosure and formal rejection by appropriate disinterested decision-makers before she could take them personally.
- Because the trial court applied the wrong legal standard, further proceedings were required to apply the ALI framework.

## Legal Principles

- A corporate opportunity includes an opportunity that is closely related to the corporation’s business or that comes to the fiduciary because of the fiduciary’s corporate position, use of corporate information, use of corporate property, or circumstances indicating corporate interest.
- A fiduciary must provide full disclosure of the opportunity to the corporation before taking it personally.
- The corporation must formally reject the opportunity through appropriate decision-makers; a defective disclosure can be ratified only by an affirmative vote of disinterested directors or shareholders.
- Reliance on “line of business” and “financial inability” as dispositive criteria is disfavored because the inquiries are indeterminate and can advantage insiders who control corporate financial information.
- The duty of loyalty in corporate-opportunity cases is enforced primarily through required procedures (disclosure and informed, disinterested approval or rejection), not after-the-fact judicial balancing.

## Conclusion

The court held that Maine’s corporate opportunity doctrine follows the ALI Principles of Corporate Governance, requiring advance, complete disclosure and formal rejection by disinterested decision-makers before a corporate officer may appropriate an opportunity personally, and it vacated and remanded for application of that standard to Harris’s conduct.


Northeast Harbor Golf Club, Inc. v. Harris, 661 A.2d 1146 (Me. 1995)