Summary 2008 WY 157

Summary of Decision issued December 31, 2008

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: GOB, LLC v. Rainbow Canyon, Inc.

Citation: 2008 WY 157

Docket Number: S-08-0035

Appeal from the District Court of Carbon County, the Honorable Norman E. Young, Judge.

Representing Appellant GOB: Steven F. Freudenthal, Freudenthal & Bonds, PC, Cheyenne, Wyoming.

Representing Appellees Rainbow Canyon, Inc; Palmer; Irvine and Deline: Joel M. Vincent, Vincent & Vincent, Riverton, Wyoming.

Facts/Discussion: GOB filed a derivative action against Rainbow Canyon and three of its shareholders and directors, Gary Palmer, William Irvine and Robert Deline. GOB asked the district court, inter alia, to void an agreement that Rainbow Canyon entered into with Tridem Minerals, LLC, which is solely owned by Deline. GOB challenged that the agreement was a conflict of interest transaction because of Deline’s position within Rainbow Canyon. The district court determined that no conflict of interest transaction occurred, and that GOB did not fairly and adequately represent the interests of the shareholders. It entered judgment in favor of Appellees. GOB appealed.

GOB asserted that Apellees are precluded from raising the issue presented because they did not file a cross-appeal. W.R.A.P. 7.03 plainly contemplates that an appellee, in its brief, may raise additional “issues and arguments.” The Court found no merit in GOB’s contention that Appellees were required to file a cross-appeal in order to raise the issue they now present.
Derivative actions are those by one or more stockholders to enforce a corporate cause of action. Shareholders must meet certain requirements pursuant to Wyo. Stat. Ann. § 17-16-741. Additionally, W.R.C.P. 23.1 requires that the party bringing the derivative action must allege in the complaint that the statutory requirements have been met. The contemporaneous ownership rule is designed to prevent the courts from being used to litigate purchased grievances. The undisputed evidence at trial established that GOB was not a shareholder when the agreement between Rainbow Canyon and Tridem was made.
GOB contended that the purchase from the bankruptcy trustee and confirmation by the bankruptcy court was a transfer by operation of law. GOB presented no authority for the proposition. The deliberate purchase was not a transfer of ownership by operation of law.

Conclusion: The Court held that GOB may not maintain a derivative action challenging the agreement because it did not own Rainbow Canyon stock at the time of the transaction it complains of and did not acquire its share of stock by operation of law.

Affirmed.

J. Burke delivered the decision.

Link: http://tinyurl.com/98rngd .

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