## Facts

- Lear Siegler Holdings acquired Rapistan in 1987; William R. Michaels (president/CEO), Michael J. Tilton (VP finance), and Stephen J. O’Neill (VP marketing/sales) were senior Rapistan officers.
- While still officers, the individuals learned of and pursued participation in a management-led leveraged acquisition of Alvey, Inc., a conveyor and palletizer manufacturer, through Alvey Holdings, a vehicle formed by a merchant bank.
- Michaels, Tilton, and O’Neill resigned from Rapistan on September 6, 1988, and signed employment agreements with Alvey Holdings the next day.
- Rapistan and Lear alleged the officers (1) usurped a corporate opportunity belonging to Rapistan, (2) breached fiduciary duties, and (3) misappropriated confidential Rapistan information; they also asserted civil conspiracy and sought rescission of a stock subscription agreement involving Michaels.
- Defendants contended the Alvey opportunity was offered to the individuals in their personal capacities, Rapistan lacked financial capacity and a reasonable expectancy to acquire Alvey, and no corporate assets or confidential information were improperly used.

## Issues

1. Whether the officers usurped a corporate opportunity and breached fiduciary duties by participating in the Alvey acquisition through Alvey Holdings.
2. Whether the trial court erred in finding the acquisition was not essential to Rapistan and that Rapistan lacked an interest or reasonable expectancy, including by not treating “desirability” to Rapistan as controlling.
3. Whether plaintiffs proved misuse of confidential information, civil conspiracy, or grounds for rescission or other equitable relief.

## Decision

- The Michigan Court of Appeals affirmed the judgment of no cause of action for defendants.
- The court held the Alvey acquisition was not a corporate opportunity belonging to Rapistan because it was presented to the officers personally and Rapistan lacked an interest or reasonable expectancy in it and it was not essential to Rapistan.
- The court found no significant use of Rapistan assets and insufficient proof of actionable misuse of confidential information in pursuing the acquisition.
- Because no underlying wrong was established, the civil-conspiracy claim failed, and rescission and related relief were properly denied.
- The court affirmed the trial court’s award of costs to defendants.

## Legal Principles

- Corporate officers owe a duty of loyalty and may not appropriate for personal benefit a business opportunity that belongs to the corporation.
- Under Michigan corporate-opportunity doctrine, an officer may pursue an opportunity personally where the corporation lacks an interest or reasonable expectancy, the opportunity is not essential to the corporation, and the officer does not improperly use corporate assets or information.
- Whether an opportunity belongs to the corporation turns on factors including the corporation’s line of business, reasonable expectancy, essentiality, and the capacity in which the opportunity was presented to the officer.
- A civil-conspiracy claim requires an underlying actionable wrong; absent a proven breach or tort, conspiracy fails.

## Conclusion

The court concluded that participation by Rapistan’s former officers in a management-led acquisition of a related company did not violate fiduciary duties where the opportunity was offered to them individually, Rapistan had no reasonable expectancy or essential need to acquire the target, and plaintiffs did not prove improper use of corporate resources or confidential information.


Rapistan Corp. v. Michaels, 203 Mich. App. 301, 511 N.W.2d 918 (Mich. Ct. App. 1994)