## Facts

- Steele Platt and related entities were controlling shareholders of The Boiler Room, Inc., a restaurant company.
- Platt and the selling entities entered a stock purchase agreement selling control of The Boiler Room, Inc. to Robert C. Rifkin, Gerald N. Kernis, and Gary Kortz.
- After closing, the buyers asserted that financial statements and related representations underlying the purchase price were inaccurate.
- The buyers and the corporation sued for breach of contract, breach of good faith, breach of fiduciary duty, and unjust enrichment, alleging that Platt misappropriated corporate funds and treated as corporate assets items owned by Platt or entities he controlled.
- The sellers counterclaimed for rescission.
- After a bench trial, the trial court entered judgment for the buyers on breach of contract and for the corporation on breach of fiduciary duty, and awarded contractual attorney’s fees.
- The parties agreed any fiduciary-duty breach occurred before the buyers acquired control, but disputed whether the purchase price already reflected any resulting corporate injury.

## Issues

1. Whether equitable principles associated with Bangor Punta bar or limit a corporation, now controlled by new shareholders, from recovering damages for a former controller’s pre-sale breach of fiduciary duty when the stock purchase price may have reflected diminished corporate value.
2. What additional findings are required to determine who bore the economic loss from the pre-sale misconduct and to calculate any allowable fiduciary-duty damages and related fee awards.

## Decision

- The court affirmed in part and remanded for further proceedings.
- It left undisturbed the trial court’s finding that Platt breached fiduciary duties to the corporation through misappropriation and disregard of separate corporate identities.
- It held that Bangor Punta raised equitable questions that had to be resolved before affirming the amount and propriety of fiduciary-duty damages awarded to the corporation.
- It remanded for findings on whether and to what extent the stock purchase price incorporated the corporate injury and for any necessary adjustment of damages and attorney’s fees consistent with those findings.

## Legal Principles

- A corporate fiduciary who misappropriates corporate funds or misuses corporate assets may be liable to the corporation for breach of fiduciary duty.
- When corporate control changes hands, equitable limits may restrict corporate recovery for pre-transfer wrongdoing to prevent new owners from obtaining a windfall for losses they did not bear.
- Application of such equitable limits depends on factual determinations, including whether the purchase price discounted the corporation’s value to account for the injury and whether the economic loss fell on the sellers through a reduced price or on the purchasers through overpayment.
- Appellate courts may affirm liability determinations yet remand for additional findings and recalculation where the record does not permit proper allocation of damages and related contractual fee awards.

## Conclusion

The court sustained the finding that the former controlling shareholder breached fiduciary duties but required the trial court to determine whether the buyers had already accounted for the injury in the stock price and, if so, to limit or adjust the corporation’s recovery and associated fee and damages calculations to avoid an inequitable windfall.


Rifkin v. Steele Platt, 824 P.2d 32 (Colo. Ct. App. 1991)