What is an example of when the breach of a fiduciary duty violates shareholders rights? A recent legal battle involving Wynn Resorts, a casino empire involved two business partners who built the business 12 years ago. The board of the publicly traded casino giant redeemed the shares of one of these business partners. He was also one of the major shareholders of Wynn Resorts.
That former shareholder was upset and, therefore, filed a federal lawsuit claiming a breach of fiduciary duty and that his rights as a shareholder were violated because his stake in the company was taken from him by unethically.
In his shareholder rights lawsuit he accused his former business partner, along with other executives, lawyers, financial advisers and board members of committing securities fraud when they forcibly redeemed his shares for 30 percent of their market value. This amount also was not to be paid to him for 10 years. As a result of the stock redemption, the other investors in the company had consequently increased their stakes in the company.
Wynn Resorts said the redemption was necessary under its articles of incorporation and Nevada casino laws because they claim that its gaming license was placed in jeopardy based on the alleged illegal activity of the shareholder.
The shareholder vehemently denied any illegal activity and complains that he was not given a chance to exonerate himself. He also questioned why it was appropriate for the board of directors to deem him an unfit shareholder, rather than refer him to a law enforcement agency.
The former shareholder hoped the federal court would reverse the redemption of his shares based on his own stock agreement. At the very least, he was hoping to obtain the fair market value of his shares based upon an independent financial adviser, someone who is not tied at all to the company Wynn Resorts. The lawsuit was settled and the former partner accepted a substantial financial amount.
If you would like to learn more about how breach of a fiduciary duty violates shareholders rights we invite you to review the strong recommendations of our former clients and contact the Watkins Firm or call 858-535-1511 today for a free consultation with one of our experienced San Diego business attorneys.