Menezes v. WL Ross & Company

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Petitioner Brian Menezes served as the chief financial officer and interim chief executive officer of Safety Components International, Incorporated (SCI), from 1999 until 2006. SCI was a publicly traded Delaware company with its headquarters and principal place of business located in Greenville, South Carolina. In June 2006, SCI terminated Petitioner. Petitioner sued SCI, alleging, among other things, breach of contract and violation of the South Carolina Payment of Wages Act. A short time after his termination, Petitioner exercised his stock options and became an SCI shareholder. The SCI board of directors entered into merger negotiations with the former International Textile Group (FITG). WL Ross & Company, LLC (Respondents), controlled both SCI and FITG. The SCI Board publicly announced the terms of the merger on August 30, 2006, with the filing of a Form 8-K with the Securities and Exchange Commission (SEC). On September 1, 2006, the SCI Board filed a Joint Proxy Statement/Prospectus (Form S-4) with the SEC. It was clear from the Form S-4, that due to Respondent's ownership role in SCI and FITG, the planned procedures at the 2006 Annual Meeting were a formality. Petitioner argued that Respondents breached their fiduciary duty to SCI's shareholders by approving merger terms which were unfair to SCI shareholders, failing to conduct due diligence regarding the financial condition of FITG, and failing to protect SCI's minority shareholders. On appeal to the Supreme Court, Petitioner argued that the court of appeals erred in its analysis of when a claim for breach of fiduciary duty accrued under Delaware law. The Supreme Court disagreed: "The court of appeals performed a knowledgeable and perceptive analysis of the instant case. However, our review of Delaware law leads us to a different conclusion regarding the efficacy of Petitioner's claim. Thus, we affirm the court of appeals' decision in part, reverse in part, and remand for further proceedings consistent with this opinion." View "Menezes v. WL Ross & Company" on Justia Law