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The Tisch siblings won a shareholder derivative action against their brother Gary for civil theft and breach of fiduciary duty. A jury found Gary committed civil theft by misusing Liquor Barn profits for personal use and awarded treble damages, which the appellate court affirmed despite Gary's arguments challenging the corporate veil piercing.
Corporations—Shareholder Derivative Action—Closely Held Corporation—Civil Theft—Piercing the Corporate Veil—Alter Ego—Dividends and Distributions—Statute of Limitations. Father assigned his stock in the Liquor Barn, Ltd. (Liquor Barn) to his son Gary, who was the company's sole director and majority shareholder. The two other Tisch siblings (the Tisch siblings) held nonvoting shares in Liquor Barn. The Tisch siblings filed a complaint against Gary alleging various causes of action related to his fiduciary duties. A jury found that Gary had committed civil theft against the Tisch siblings individually and against Liquor Barn by using the Liquor Barn profits for his private use. It awarded the Tisch siblings treble damages on the civil theft claim. The trial court entered judgment against Gary and Liquor Barn and awarded the Tisch siblings costs and attorney fees. Gary moved to amend the judgment, arguing that the trial court erred in piercing the corporate veil and that this error would prejudice Liquor Barn's creditors. He then filed a combined motion for new trial and relief from judgment, arguing that the trial court erred in disqualifying his expert witness and in piercing the corporate veil. The trial court denied the postjudgment motions and awarded the Tisch siblings attorney fees that exceeded the lodestar. On appeal, Gary contended that the trial court erroneously found that he, as an individual, and the Liquor Barn were "alter egos." Here, the record shows that Gary comingled his personal and other business funds with the Liquor Barn's funds, kept inadequate corporate records, routinely disregarded the legal formalities of declaring shareholder distributions and filing taxes related to payments he made to himself, and used corporate funds for noncorporate purposes and Gary's position as controlling and sole voting shareholder facilitated his misuse of Liquor Barn's funds. The record also shows that Gary used the corporate fiction to defeat the Tisch sibling
This case involved a family business dispute at Liquor Barn, Ltd., where three siblings were shareholders. After their father gave his stock to one son, Gary, he became the majority owner and sole director of the company. Gary's two siblings held smaller, non-voting shares but had no control over business decisions.
The other siblings sued Gary, claiming he was stealing company money by using Liquor Barn's profits for his personal expenses instead of properly distributing them to all shareholders. They argued this was theft and that Gary was violating his duty to act in the best interests of all shareholders, not just himself.
The Court's Decision:
The court sided with the siblings. A jury found that Gary had indeed committed civil theft by misusing company profits for personal use. The court ordered Gary to pay triple damages as punishment for the theft, and an appeals court upheld this decision.
Why This Matters for Workers:
This ruling shows that even family members who control a business cannot steal from it or unfairly benefit themselves at the expense of other shareholders. Workers should know that business owners have legal duties to operate honestly, and there are legal remedies when those in control abuse their power for personal gain.
This summary was generated to explain the ruling in plain English and is not legal advice.
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