Chapter 27: 6. Klinicki and Lundgren incorporated to form an air taxi service kn

Question

Chapter 27:

6.   Klinicki and Lundgren incorporated to form an air taxi service known as Berlinair, Inc. Each of them owned one-third interest in the corporation. The final third was owned by Lelco, Inc., a company owned by Lundgren. In his capacity as president of Berlinair, Lundgren learned that the Berlinair Flug Ring (BFR), a business association of Berlin’s travel agents, was looking for an air charter service. Lundgren incorporated a new corporate entity called Air Berlin Charter (ABC). ABC then negotiated an air charter contract with BFR. Klinicki brought suit, demanding that Lundgren reimburse Berlinair for any profits made by ABC on the BFR contract. Was this a direct or derivative suit? Explain. Should the business judgment rule or the fairness rule be used by the court to measure Lundgren’s performance? Explain. Who should have won the suit? Defend your choice. [See: Klinicki v. Lundgren, 695 P.2d 906 (OR).]

Explanation / Answer

Kliniki Vs Lundgren are already having contracts for running the air taxi services and as explained in the above case it is provided as corporate opportunity defended by Lundgren. But according to law no individual in such contract should take up these kind of opportuities before presenting it to other associated entity. So Lundgren should have presented this opportunity to BFR first and upon rejection from BFR he could have taken up this opportunity which would be appropriate.

Thus I would say BFR must have won the lawsuit based on the career opportunity definition and his actions as explained in the above case.

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