## Facts

- College Park Woods, Inc. (College Park) owned a large parcel of land in Prince George’s County, Maryland, which it had purchased in 1961.
- College Park developed a shopping center on the parcel (Clinton Plaza), but the center proved unprofitable.
- Charles Shapiro was College Park’s CEO and a director; other directors included members of his family, including his sister, Joan Smith, and his son, Michael Shapiro.
- College Park’s board decided that the land should be redeveloped into a much larger shopping center, but concluded that College Park needed a business partner to complete the redevelopment.
- After difficulties identifying an outside partner, the board approved a redevelopment arrangement using a joint venture in which Charles Shapiro held a substantial personal interest.
- Under the arrangement, College Park conveyed title to the property to the joint venture in exchange for a 50% ownership interest in the joint venture.
- College Park retained no management rights in the redevelopment, and the structure placed the development risk largely on the joint venture if the project failed.
- Before final approval, the board called a special shareholders’ meeting and provided notice describing the proposed transaction and what would be voted on.
- Minority shareholders Marvin and Betty Greenfield received notice but did not attend the special meeting.
- Shareholders who attended approved the transaction unanimously, and the board later ratified the transaction.
- After the vote, the Greenfields requested corporate books and records relating to the transaction; the company provided some documents but refused others.
- The Greenfields filed a shareholder derivative action against College Park and its directors/officers, seeking an accounting, damages, appointment of a receiver, and other relief, alleging that Shapiro and other insiders had taken a corporate opportunity for themselves.
- The trial court agreed that the redevelopment was a corporate opportunity, found the transaction not fair and reasonable to the corporation, found no disinterested directors, and appointed a receiver.

## Issues

1. Whether the redevelopment of College Park’s property was a corporate opportunity belonging to the corporation, making Shapiro’s personal participation in the joint venture a breach of the duty of loyalty.
2. Whether the Greenfields were barred from challenging the transaction because they received notice of the special shareholders’ meeting but did not attend or vote.
3. Whether a court may appoint a receiver to take control of a solvent corporation without making the statutory findings required for that remedy.

## Decision

- The appellate court largely affirmed the trial court’s liability determinations that treated the redevelopment as a corporate opportunity and found that the insider-conflicted transaction was not shown to be fair and reasonable to the corporation.
- The court rejected the argument that the Greenfields’ nonattendance at the noticed shareholders’ meeting, by itself, estopped them from bringing a derivative challenge.
- The court vacated or limited the receivership remedy and remanded because the trial court did not make the findings required by the governing statute before imposing a receiver for a solvent corporation.

## Legal Principles

- A director or officer owes a duty of loyalty and may not appropriate, for personal gain, a business opportunity that in fairness belongs to the corporation.
- In determining whether something is a “corporate opportunity,” courts consider the relationship between the opportunity and the corporation’s existing or contemplated business, including whether the opportunity concerns a central corporate asset and whether the corporation had an interest or expectancy in pursuing it.
- A corporation’s need for outside capital or a development partner does not automatically permit an insider to participate on the other side of the deal; the conflict must be handled through lawful approval mechanisms and the transaction must be fair to the corporation.
- Shareholder approval does not necessarily bar later challenge to an insider-conflicted transaction unless the approval is effective ratification (including adequate disclosure and approval by disinterested decision-makers); receiving notice but not attending a meeting does not alone create estoppel.
- Appointment of a receiver to take control of a corporation is an extraordinary remedy and requires compliance with statutory standards, including specific findings that justify receivership for a solvent corporation.

## Conclusion

Shapiro v. Greenfield held that redeveloping College Park’s own shopping-center property could constitute a corporate opportunity that insiders could not take for themselves through a joint venture in which the CEO held a large personal interest, and that minority shareholders were not barred from suing derivatively merely because they did not attend a noticed meeting approving the transaction. The court also required strict statutory compliance before a receiver could be imposed on a solvent corporation, vacating and remanding the receivership portion of the trial court’s order.


Shapiro v. Greenfield, 764 A.2d 270 (2000)