AMERCO v. Shoen

• Decision Date: 04 April 1995
• Docket Number: No. 1,U-H,CA-CV,1
• Citation: 907 P.2d 536,184 Ariz. 150
• Parties: AMERCO, a Nevada corporation;aul International, Inc., an Arizona corporation; and Amerco Business Consultants, Inc., an Arizona corporation, Plaintiffs-Appellants, v. Samuel W. SHOEN, M.D.; Mary Anna Shoen-Eaton and Timothy Eaton, wife and husband, Defendants-Appellees. 92-0178.
• Court: Arizona Court of Appeals

Page 536

907 P.2d 536

184 Ariz. 150

AMERCO, a Nevada corporation; U-Haul International, Inc., an Arizona corporation; and Amerco Business Consultants, Inc., an Arizona corporation, Plaintiffs-Appellants, v. Samuel W. SHOEN, M.D.; Mary Anna Shoen-Eaton and Timothy Eaton, wife and husband, Defendants-Appellees.

No. 1 CA-CV 92-0178.

Court of Appeals of Arizona Division 1, Department E.

April 4, 1995.

As Corrected Aug. 29, 1995.

Review Denied Dec. 19, 1995. ^*

[184 Ariz. 151] Cohen and Cotton, P.C. by Ronald Jay Cohen and Laura A. Hartigan, Richard M. Amoroso, Phoenix, for plaintiffs-appellants.

Gil Shaw, P.C. by Walter G. Shaw, Phoenix, for defendants-appellees.

OPINION

FIDEL, Judge.

This suit by a corporation against participants in a failed takeover attempt is one of many battles in the ongoing Shoen family war for control of the U-Haul corporate empire. After a five week trial, the jury returned verdicts for defendants, rejecting claims that defendants had violated their fiduciary duty to the corporation. On appeal, the corporation attacks the trial court's jury instructions, evidentiary rulings, and refusal to permit the jury to consider nominal damages. We find no reversible error and affirm.

I. BACKGROUND

A previous opinion describes the family and corporate strife that underlies this suit. See Shoen v. Shoen, 167 Ariz. 58, 804 P.2d 787 (App.1990). It suffices here to summarize facts fully developed there, supplemented as necessary to frame the issues of this case.

Plaintiff AMERCO, a Nevada corporation, ¹ was established in 1969 as the holding company for the many companies that constitute the U-Haul Rental System ("U-Haul"), including plaintiffs U-Haul International, Inc., and Amerco Business Consultants, Inc. U-Haul was founded in 1945 by L.S. Shoen as an equipment rental company and is now one of the largest privately-held corporations in the United States.

When L.S. Shoen gave his twelve children most of AMERCO's stock, a sustained intrafamilial struggle for control ensued. Shoen v. Shoen describes steps taken in July 1988 by a "directors' group," led by Edward J. Shoen ("Joe"), to consolidate control. These steps frustrated efforts by a "dissident stockholders' group," led by Joe's brother, Dr. Samuel W. Shoen ("Sam"), to trigger a breakup, restructuring, or takeover of AMERCO. This lawsuit concerns activities by Sam and other members of the dissident group in 1987 and 1988, when the directors' group held, but had not yet consolidated, control.

In November 1986, AMERCO shareholders forced L.S. Shoen into retirement, elected four of his sons to the AMERCO board, and named Joe as Chairman and Sam as President. Relations between the brothers soured; management became polarized; in February 1987, Sam resigned as president but stayed a board member till his ouster in September of that year.

In January 1988, the board established the AMERCO Board Advisory Committee, ostensibly as a forum to permit outside shareholders--primarily members of the Shoen family--to relay their advice and opinions to the board. The committee was chaired by Sam, and among its other members were his sister, defendant Mary Anna Shoen-Eaton ("Mary Anna"), and their brother Michael and father L.S. Shoen, formerly co-defendants in this suit. ² The advisory committee was permitted some access to confidential corporate information.

On July 17, 1988, Sam, Mary Anna, Michael, their father, and other dissident shareholders met and agreed to attempt to wrest control of the corporation or explore a sale. Pursuant to federal law, the dissidents filed a public declaration of their agreement with the Securities and Exchange Commission on July 25, 1988. This "13-D disclosure statement" indicated the amount of AMERCO common stock that the dissidents collectively controlled; and it expressed their intention jointly to "maximize the value and liquidity of the AMERCO shares held by members of the group and, if feasible at an acceptable value, to investigate a possible sale, merger or other disposition of AMERCO, its assets or their interests in AMERCO."

The dissidents were outmaneuvered, however, by the directors' group, which took measures on July 24, 1988, to secure voting control over a majority of the stock. One such measure was to issue treasury stock to five loyal employees, each of whom was loaned the money to purchase the stock in exchange for a non-recourse note, and each of whom assigned the board a five year, irrevocable voting proxy for his shares.

When the dissidents' group filed a lawsuit challenging the validity of the directors' acts of July 24, 1988, AMERCO responded with this separate lawsuit claiming that the dissidents had betrayed their fiduciary duty to the corporation. ³ Of plaintiffs' many claims of damage, some were the subject of an unappealed directed verdict by the trial court, others have been abandoned, and only three remain pertinent to this appeal.

A. The Firestone Overture

The trial court permitted the plaintiffs to submit a claim to the jury that Sam damaged the corporation by failing to disclose a potentially profitable business proposition from Firestone. The evidence concerning this claim is primarily relevant to plaintiffs' appellate allegation that the trial court inadequately instructed the jury concerning a corporate fiduciary's obligations of disclosure.

On March 11, 1987, John Nevin, Chairman of the Board of Firestone, sent a letter to L.S. Shoen expressing an interest in business dealings with U-Haul:

I continue to believe that some combination of U-Haul and Firestone resources might prove very advantageous to both of our companies....

It is also possible that the combination of resources could take the form of a joint venture or an acquisition by Firestone of some or all of Amerco's assets.

The parties dispute the extent to which the Firestone overture was made known to the AMERCO board. L.S. Shoen testified that he sent the letter to all of his children, four of whom were members of the board; plaintiffs contend he sent the letter to Sam alone. And though it is undisputed that Sam--no longer president but still a member of the board--mentioned Firestone's interest in AMERCO at a board meeting on April 6, 1987, the parties dispute the extent and sufficiency of his disclosure. Sam testified:

I informed the board that I had received from my father this letter from Firestone that they were very interested in acquiring the company, and I wanted to know if the board wanted to pursue it.

The board of directors at that time other than myself were my brother Joe, my brother Paul, and my brother Jim. And they indicated to me quite clearly they had no interest whatsoever in pursuing it.

I then said I would like to pursue this because I think a number of shareholders may very well be interested in this, is it okay if I meet with this man, Mr. Nevin. And they said fine.

AMERCO does not dispute this testimony, but asserts that Sam only mentioned Firestone's interest in an acquisition and withheld disclosure of Firestone's separate interest in a joint venture. When asked whether Sam ever mentioned Firestone's interest in a joint venture, Joe responded, "absolutely not."

On April 20, 1987, after conversations with Sam, Nevin wrote him that Firestone was no longer interested in pursuing the possibility of acquiring or joint-venturing with AMERCO. Sam testified that in their conversations, Nevin had expressed no interest in any relationship with AMERCO that did not include Firestone's friendly acquisition of at least 51% of AMERCO's stock. AMERCO maintained at trial, however, that because Nevin's March 11 and April 20 letters each referred to acquisition or joint venture, the joint venture overture constituted a separate corporate opportunity that Sam was obliged to disclose to the board. AMERCO also introduced evidence from which a jury might have concluded that a joint venture with Firestone--a sharing of outlets for Firestone sales and services and U-Haul equipment--could, if accomplished, have been highly profitable for AMERCO.

B. The Preferred Stock Offering

The trial court also permitted plaintiffs to submit to the jury their claim that Sam and Mary Anna breached their fiduciary duty, while members of the AMERCO advisory committee in June 1988, by entering and publicizing the dissident shareholders' agreement to explore a sale or takeover of the corporation. Defendants were aware, as advisory committee members, that AMERCO was preparing a public preferred stock offering at about this time in an effort to raise capital for the corporation. And AMERCO introduced evidence that publication of the dissidents' activities and intentions forced abandonment of the stock offering by making it unlikely that the offering could succeed. The evidence concerning this claim is primarily relevant to plaintiffs' argument on appeal that the trial court inadequately instructed the jury concerning corporate fiduciaries' duty to place the corporation's interest before their own.

C. The Laidlaw Allegation

For lack of evidence concerning damages, the trial court directed a verdict against plaintiffs on their claim that Sam, while still a member of the board, breached his fiduciary duty to AMERCO by withholding information that Laidlaw Transportation Company, a Canadian corporation, might be interested in acquiring AMERCO. Plaintiffs' Laidlaw allegation is pertinent on appeal to their claim that the trial court wrongly ruled nominal damages unavailable for breach of fiduciary duty.

The relevant evidence is that Sam was advised in June of 1987 by investment bankers from Shearson Lehman that their client Laidlaw wished to acquire a U.S. corporation and that Shearson Lehman had identified AMERCO as a potential candidate. Sam testified that he did not bring this possibility to the attention of the AMERCO board. Instead, he informed Shearson Lehman that the board had recently rejected an acquisition overture from...