A jury has returned a multimillion-dollar judgment for the plaintiff in a case that is likely to make for strained relationships for one Michigan family. The winner, Richard, was the retired founder of a large automobile dealership. The loser was his daughter, Gail, to whom he had sold a controlling interest in the dealership. The jury agreed that Gail had made decisions that had hurt the dealership to such an extent as to cause the value of its stock to plummet, and eventually to put it into bankruptcy. The financial distress of the dealership had come to a head when it was discovered that the dealership had sold millions of dollars worth of vehicles that it had not paid for, a practice called “selling out of trust” in the automobile sales industry.
The main transgression by the second-generation ownership was the use of funds derived from shares in the dealership to buy two new car dealerships, one of which was located just across the street from the original business. Even though the dealerships sold different brands of vehicles, the competitive disadvantage caused by the new competition was clear. Not only that, but a clause in the agreement between Richard and Gail had restricted Gail from acquiring competing dealerships.
While the bulk of the jury verdict was attributable to breach of the noncompete provision, there were additional amounts awarded for a monthly consulting fee that Gail was supposed to have paid her father after she took over the business, for interest due on a loan under a “shareholder oppression” claim, and, for good measure, for sanctions.