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Business Law And Family Law Can Go Hand In Hand

Posted by Attorney Stephen Hance | Mar 29, 2013 | 0 Comments

Oftentimes business disputes involve disputes related to a family business, and when they do, they can get messy. Take this story out of San Diego where a jury has rejected claims that a billionaire philanthropist backed out on a deal to buy back stock in the family business from his nieces and nephews, costing them hundreds of millions of dollars in losses during the financial crisis.

The verdict marks the first of a two-stage litigation addressing breach of contract and fiduciary duty claims. The trial on the allegations of breach of fiduciary duty is set to begin at the end of March.

This story is really one of the mingling of business and familial relationships. The trial will also test whether the business, American Assets Inc., should be dissolved, which would allow the nieces and nephews to liquidate their shares, said Steven Strauss, counsel for the defendant. “That's a very high bar,” he said. “The court has to find that there's such hostility between the majority and minority shareholders the corporation cannot continue to function.”

The defendant founded American Assets Inc. in 1967. The conglomerate operates American Assets Trust Inc., a publicly held real estate investment trust, and Insurance Co. of the West. In 2005, Rady sold one of his businesses, auto lender Westcorp Inc. in Irvine, Calif., to Wachovia Corp. for nearly $4 billion in stock, boosting him into the ranks of America's billionaires.

In 2009, seven nieces and nephews of Rady's, who now own the shares in American Assets, sued him for breach of fiduciary duty, alleging that he mismanaged their now-reduced assets. They amended their complaint in 2011, adding breach-of-contract claims based on allegations that he reneged on the offer to buy back their shares. They sought $272 million in damages.

According to the amended complaint, Rady sent out a proposal on Sept. 23, 2007, to buy back the shares, but he changed the offer several times as the months progressed, ultimately dropping the discussion in late 2008 as the recession hit and the value of his shares in Wachovia declined. Wachovia was sold a few months later to Wells Fargo & Co.

Attorney Stephen Hance is familiar with these kinds of stories and resolves these kinds of disputes for our clients. If you or your business is facing a breach of contract claim, contact us and we will get you back and focused on your business.

About the Author

Attorney Stephen Hance

Steve represents and advises clients that are dealing with business and real estate disputes. Steve is an investor and business owner, and his approach is unique from other attorneys.

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