A Derivative Claim By Any Other Name: Direct Claims to Remedy Wrongdoing in Close Corporations

By Michael A. Collora and  David M. Osborne
Send Email to: mcollora@dwyercollora.com

This article first appeared in Vol. 10, No. 2, Fall 2000 edition of Securities News, a publication of the Securities Litigation Committee of the ABA.

Introduction

Derivative suits have long offered a last line of defense against corporate mismanagement, waste and theft by enabling shareholders to sue on the corporation's behalf when its board of directors fails to take action on its own. The benefits to a company and its shareholders can be substantial. For instance, after the board of directors of Computer Associates International, Inc. awarded over $1 billion worth of common stock to three of the company's top executives, shareholders filed a derivative action that succeeded in reducing that stock award by half.[1]

However, when the corporation is closely held, a derivative suit may not be an effective tool to remedy corporate misdeeds. In a close corporation, the majority or controlling owners often act as the company's management as well. Since a derivative claim is brought for the benefit of the corporation, not the plaintiff-shareholder, a successful derivative action on behalf of a close corporation simply turns the money won back to the control of the very same individuals whose conduct gave rise to the claim in the first place. There is no guarantee that the recovery will benefit the corporation and will not be misused again by the majority shareholder. Compounding this problem is the fact that there is usually no available market for stock in a closely held corporation, and thus a minority shareholder may lack an incentive to bring a derivative suit if he or she cannot "cash in" on a successful claim at the end of the litigation.

Courts have responded to this dilemma in two ways. First, in what one court called an "emerging trend",[2] some minority shareholders in close corporations have been permitted to bring what essentially are derivative claims as direct claims for their own benefit. Second, some courts have used their equitable powers to fashion remedies which return a judgment directly to a minority shareholder even when the claims on which the shareholder prevailed are derivative in nature.

Derivative v. Direct Claims: An Overview

Conceptually, a derivative action is two suits in one. "[F]irst, it is the equivalent of a suit by stockholders to compel the corporation to sue; and second, it is a suit by the corporation, asserted by the stockholders in its behalf, against those liable to it."[3] Derivative claims sometimes arise out of the misconduct of an outside party,[4] but more frequently they involve wrongdoing by corporate management, such as misusing of corporate funds for the personal benefit of corporate insiders,[5] paying excessive management compensation and "golden parachutes" to corporate executives,[6] awarding stock options at a below-market exercise price,[7] or paying more than fair market value for a corporate acquisition.[8]

The essential characteristic of a derivative wrong is that it "injures the shareholders indirectly and dependently through direct injury to the corporation."[9] Direct harm to the corporation may take many forms: reduced profits or revenue, lost business opportunities, unnecessary or wasteful expenditures, destruction of corporate property, or exposure of the company to criminal or civil liability. For instance, in a recent Massachusetts case, Klein v. Machala,[10] the court denied a motion to dismiss a derivative action based on allegations of insider trading by corporate insiders, holding that such conduct was an actionable breach of fiduciary obligations to the corporation even though the company was not financially harmed by the alleged trading.

In contrast, any harm to the corporation's shareholders is attributable to the diminished value of their stock as a result of injury to the corporation. When suit is brought on a derivative claim, the recovery goes directly to the corporation, and the shareholder who commenced the action benefits only to the degree a recovery lifts the value of his stock.

A direct claim differs in that the shareholder experiences harm not attributable to any injury to the corporation. To bring such a claim, the shareholder must establish a "special injury" separate and distinct from the injury suffered by other shareholders.[11] Such an injury can arise in two situations. First, it can arise "where the allegedly wrongful conduct violates a duty to the complaining shareholder independent of the fiduciary duties owed that party along with all other shareholders" - for instance, a duty arising out of an employment relationship.[12] Second, it can arise "where the conduct causes an injury to the shareholders distinct from any injury to the corporation itself," such as losses resulting from the wrongful withholding of dividends.[13] The diminution of stock value is not a special injury, but instead is a loss suffered by all shareholders in proportion to their ownership interest, and thus a claim for this type of harm must be brought derivatively.[14]

Derivative and direct harms are not mutually exclusive. The Delaware Supreme Court has noted that "[a] shareholder who suffers an injury peculiar to itself should be able to maintain an individual action, even though the corporation also suffers an injury from the same wrong."[15] For this reason, plaintiff- shareholders frequently allege both derivative and direct claims in their suits.

The Dilemma of Derivative Recovery for Close Corporations

In theory, the derivative suit provides a remedy for any corporate mismanagement, regardless of whether the corporation is publicly traded or privately held. However, a closely held corporation differs from other corporations in one fundamental aspect which may affect the efficacy of a derivative remedy. In a non-close corporation, management is usually sufficiently independent of ownership to ensure that the interests of the shareholders will be protected if money is returned to the corporation as the result of a derivative action. For instance, if a publicly traded company's board of directors authorizes an extravagant "golden parachute" severance payment to a corporate officer, and that payment ultimately is returned to the corporate coffers by a derivative judgment or settlement, the shareholders should experience a commensurate appreciation of the value of their stock. They then have the option of selling that stock and obtaining the indirect benefit of the derivative suit.

In contrast, a closely held corporation frequently does not have the same degree of separation between management and ownership. It is likely that the shareholder majority runs or controls the company as well as owns most of it. Thus, if a minority shareholder sues on behalf of a close corporation to rescind a "golden parachute" payment, any recovery will go back to the control of the majority shareholder whose misconduct prompted the claim in the first place. There is no way to ensure that the recovery will be turned over to the corporation and used for its benefit. In addition, unlike the shareholder in a publicly traded corporation, a minority shareholder in a close corporation may never obtain his or her pro rata share of the recovery because there is no market for the corporation's stock. For these reasons, a derivative judgment on behalf of a close corporation may be a Pyhrric victory. A minority shareholder may lack the motive to pursue an expensive, time-consuming and bitter legal action on behalf of the corporation if he or she knows that the majority shareholder can thwart its ultimate success.

The "Direct Derivative" Claim

In response to this reality, some courts have permitted minority shareholders in close corporations to take what are essentially derivative claims and recast them as direct claims. There are at least two different approaches, each of which are discussed below.

1. The ALI Approach

Section 7 of the Principles of Governance of the American Law Institute ("ALI") provides that a court should have discretion to permit a derivative claim to be brought directly, but only if the defendants and interested third parties will not suffer prejudice as a result:

In the case of a closely held corporation … the court in its discretion may treat an action raising derivative claims as a direct action, exempt it from those restrictions and defenses applicable only to derivative actions, and order an individual recovery, if it finds that to do so will not (i) unfairly expose the corporation or the defendants to a multiplicity of actions, (ii) materially prejudice the creditors of the corporation, or (iii) interfere with a fair distribution of the recovery among all interested persons.[16]

The ALI rule has both advantages and disadvantages for shareholder plaintiffs. The advantage is that it permits a derivative claim to be brought directly unless the defendant or a third party would be prejudiced as a result. The disadvantage is that it leaves a court with unfettered discretion to decide whether a direct claim should be allowed at all, since there is nothing in the rule that would compel a court to allow a derivative claim to be brought directly by a shareholder.

A few courts have adopted the ALI approach. In Brown v. Brown,[17] decided last year by the Appellate Division of the New Jersey Superior Court, a former shareholder in a closely held roofing company brought a third party complaint alleging that the third party defendant diverted corporate opportunities. The Superior Court held that the claim was derivative in nature, and since the third party plaintiff had transferred her stock in the company as part of a divorce settlement, she lacked standing to bring such a claim. On appeal, the Appellate Division observed that "the normal policy reasons for requiring a plaintiff to employ the form of the derivative action may not be present or will be less weighty, even though the action alleges in substance a corporate injury."[18] The court allowed the third party plaintiff's claim to go forward, declining to adopt a universal rule treating every claim against a close corporation as a direct claim but embracing what it called the ALI rule's "flexible approach".[19] Other jurisdictions where courts have adopted the ALI rule in recent years include Georgia,[20] Indiana,[21] Utah,[22] and Kansas.[23]

However, a number of state appellate courts have flatly rejected the ALI rule. For instance, in Wessin v. Archives Corp., [24] a Minnesota case decided last year, four minority shareholders in a close corporation brought direct claims against the two majority shareholders, alleging that the defendants made misrepresentations to them about certain financial matters to induce them not to seek dividend compensation or further financial information and breached their fiduciary duties by committing fraud, mismanagement and waste of corporate assets. The trial court dismissed the claims on the grounds that the plaintiffs had alleged harm only to the corporation, not any direct harm to themselves.

The Court of Appeals adopted the ALI rule and reversed the trial court's ruling.[25] The court noted that the plaintiffs' claims "illustrates the problem of providing an adequate remedy for a shareholder's economic injury: when the alleged wrongdoer is also the majority shareholder, the wrongdoer receives the benefit of any recovery in a derivative action - thereby magnifying the injury to the minority shareholder who initiated the action."[26] It cited what it called the "emerging trend" that closely held corporations should not be subject to the same derivative pleading requirements as a publicly held corporation.[27]

The Minnesota Supreme Court reversed the Court of Appeals, objecting to the erosion of corporate formalities. While acknowledging the plaintiffs' concern that a derivative action on behalf of a close corporation would be futile, the court concluded that "a closely held corporation is still a corporation with all of the rights and limitations proscribed by the legislature." [28] It added:

Whether to incorporate entails a choice of many formalities. Commercial rules should be predictable; this objective is best served by treating corporations for what they are, allowing investors and other participants to vary the rules by contract if they think deviations are warranted.[29]

In rebuking the Wessin plaintiffs for wanting to have their cake and eat it too, the Minnesota Supreme Court echoed strains from the Supreme Court of South Dakota's holding in Landstrom v. Shaver, [30] where the ALI approach met a similar fate. The Landstrom court noted that the plaintiff "seeks the best of both business entities: limited liability provided by a corporate structure and direct compensation for corporate losses. 'That cushy position is not one the law affords. Investors who created the corporate form cannot rend the veil they wove.'"[31] The court also criticized the ALI rule for failing to take into account whether a derivative suit is sufficient to compensate a shareholder.[32]

2. The Fidicuary Duty Approach

A second approach arises out the principle adopted by a number of courts that majority shareholders in a close corporation owe the minority not merely a duty of fairness, but a fiduciary duty of the utmost loyalty and trust. In Donahue v. Rodd Electrotype of New England, Inc.,[33] one of the seminal cases addressing this principle, the Massachusetts Supreme Judicial Court analogized close corporations to partnerships:

[T]he close corporation bears striking resemblance to a partnership. Commentators and courts have noted that the close corporation is often little more than an "incorporated" or "chartered" partnership. The stockholders "clothe" their partnership "with the benefits peculiar to a corporation, limited liability, perpetuity and the like." In essence, though, the enterprise remains one in which ownership is limited to the original parties or transferees of their stock to whom the other stockholders have agreed, in which ownership and management are in the same hands, and in which the owners are quite dependent on one another for the success of the enterprise. Many close corporations are "really partnerships, between two or three people who contribute their capital, skills, experience and labor."[34]

Relying on this analogy, some minority shareholders have succeeded in casting what were essentially derivative claims as direct claims for relief by alleging that the majority shareholder's wrongdoing breached a fiduciary duty to the minority even though the harm was suffered primarily by the corporation.

For instance, in Orsi v. Sunshine Art Studios, Inc.,[35] the court refused to grant summary judgment in favor of the defendants on a direct claim by the minority shareholder of a close corporation who alleged that the defendants breached a fiduciary duty to her by diverting corporate assets to a related corporation owned by the defendants, usurping a corporate opportunity, paying excessive rent and receiving excessive compensation. The Orsi court held that it was obliged to "fashion an equitable result, not to blindly apply rigid rules that limit the court's ability to adequately redress the 'manifest unfairness' of an oppressed minority shareholder in a freeze-out."[36] It noted that, if the plaintiff's claims were proven, "it may be futile to require the minority shareholder to sue on behalf of the corporation when the only other shareholders are the two individual defendants, because any recovery in a derivative suit would return the funds to the control of the defendant brothers, rather than to the injured party."[37]

The Wisconsin Court of Appeals recently decided a similar case, Jorgensen v. Water Works, Inc.[38] There the plaintiffs, two minority shareholders in a closely held car wash business, alleged that the defendants had breached their fiduciary duty by paying themselves dividends in the form of fees and bonuses and by removing the plaintiffs from the corporation's board of directors. The trial court dismissed the plaintiffs' claims, concluding that the harms were primarily to the corporation, not the plaintiffs. The Court of Appeals reversed the trial court, holding that under Wisconsin law a minority shareholder in close corporation was owed a fiduciary duty and could sue individually for breach of that duty.[39] The court said:

The complaint alleges that the defendant majority shareholders and directors breached their fiduciary duty to the Jorgensens and caused injury to the Jorgensens by paying themselves fees and bonuses which are, in fact, dividends, to the detriment of the Jorgensens; and caused injury by removing the Jorgensens from the board of directors and controlling the corporation as if they were the sole shareholders with no obligations to the Jorgensens. We agree with the Jorgensens that this alleges an injury that is primarily to the Jorgensens, not primarily to the corporation.[40]

However, Jorgensen suggests an important limitation on the use of a breach of fiduciary duty claim to sue directly for corporate mismanagement. The Jorgensen court was in the awkward position of harmonizing its decision with Read v. Read,[41] a case it decided two years earlier. In Read, the court rejected the plaintiff's argument that the defendants' misappropriation of assets and self-dealing was a breach of fiduciary duty that caused him individualized harm, holding instead that these allegations were derivative in nature.[42] Jorgensen did not overturn Read, but simply stated without analysis that the two cases were distinguishable on their facts. In fact, they are distinguishable only because in Jorgensen the plaintiffs were removed from the board of directors and thus deprived of a voice in the company, while in Read a flagrant "freeze-out" was not alleged.

Thus, it may be the case that, even in jurisdictions recognizing that majority shareholders of close corporations owe their minority counterparts a fiduciary duty, a court may require evidence of actual oppression against the minority before allowing plaintiffs to transform allegations of corporate mismanagement into a direct breach of fiduciary duty claim. For example, in James v. James,[43] a case decided just months ago by the Alabama Supreme Court, the plaintiff alleged that the majority shareholder - his brother - paid excessive compensation, wasted corporate assets and usurped corporate opportunities. He brought both direct and derivative claims, calling the direct claim "oppression/squeeze out." However, beyond the mismanagement of his brother, the plaintiff did not allege any oppressive acts directed at him personally. The court acknowledged that Alabama law recognized the existence of a fiduciary duty in the context of a close corporation, but it also observed that "a minority shareholder cannot parlay a wrong committed primarily against the corporation, which gives rise to a derivative claim only, into a personal recovery of damages under a squeeze-out theory by simply stating that the injury to the corporation is also 'unfair' to him as well."[44] For this reason, the court held that his claims were only derivative in nature and could not be brought directly.

A second possible limitation on the use of breach of fiduciary duty claims to sue directly for corporate mismanagement turns on the direction in which the duty runs. Some jurisdictions have held that a fiduciary duty runs from a majority shareholder to the minority shareholders, and not between minority shareholders. This may restrict a minority shareholder's ability to recover directly for the misdeeds of a fellow minority shareholder. In Palmer v. Fox Software, Inc.,[45] a Sixth Circuit case involving the interpretation of Ohio state law, the shareholder in a close corporation, Fox Research, Inc. ("Fox Research"), brought both individual and derivative claims against several defendants. The plaintiff shareholder alleged that the defendants had misappropriated Fox Research's corporate opportunities by taking information paid for by the company and using it to benefit their joint venture, Fox Holdings, Inc. ("Fox Holdings"). The plaintiff also sued the company's attorney for legal malpractice, alleging that he induced Fox Research's shareholders to sign releases and to grant exclusive and irrevocable software rights to Fox Holdings to enable it to complete a merger with Microsoft. The district court granted summary judgment to the defendants on the derivative claims, but allowed the individual claims to go to trial. The jury found for the plaintiff on the claims of misappropriation, constructive trust and legal malpractice.

On appeal, the Sixth Circuit held that the misappropriation claim was "wholly derivative" and reversed the jury's verdict. The court did note that the Ohio Supreme Court had held that majority shareholders owe minority shareholders a fiduciary duty, and that, where the majority uses its control to restrain the minority's opportunities in the company, the minority shareholders have a direct cause of action.[46] However, the court observed that the plaintiff had alleged that it was a minority shareholder who misappropriated Fox Research's information, not a majority or even a controlling shareholder.[47] Thus, the injuries complained of by the plaintiff "were shared by all of the other shareholders, including [the minority shareholder-defendant], whose minority shares were diminished in value to the same extent as all other shares."[48]

The court also reversed the judgment on the plaintiff's legal malpractice claim, holding that this claim too was derivative. The court acknowledged evidence that the attorney had represented the plaintiff personally for many years, but noted that the plaintiff argued in his brief that his damages "were what Fox Research should have obtained and ultimately paid pro rata to [the plaintiff] - but did not obtain or pay to him because of [the attorney's] wrongdoing."[49] Given the plaintiff's admission that his claim was for a pro rata share of the damages suffered by the corporation, the court concluded that the injury resulting from the malpractice was to the corporation, not to him personally.[50] Even if the plaintiff had not made such an admission, presumably this claim would have suffered the same fatal flaw of the misappropriation claim, since it too was brought against a minority shareholder, not a majority or controlling shareholder.

Equitable Judgments on Derivative Claims

Even in jurisdictions where courts refuse to allow essentially derivative claims to be brought individually, some courts have been willing to use their equitable powers to ensure that a successful derivative plaintiff in a close corporation receives the benefit of a judgment.

One recent example of this use of equitable powers is James v. James,[51] the Alabama Supreme Court decision discussed previously. There the plaintiff, Jerry James, was one of two minority owners of Indies House, Inc., while his brother Thomas was the majority owner of a close corporation, Franklin Homes, Inc. Jerry sued Thomas directly for "oppression/squeeze out" and derivatively on behalf of Indies House for breach of fiduciary duty. He alleged that Thomas had paid himself and his family excessive salaries and misused corporate cash, all of which effectively diminished Jerry's share of the liquidation of Indies House. A jury found in favor of Jerry on his claims, awarding him over $4 million in damages - a sum that apparently represented Jerry's 41.5 percent share of the total damages to Indies House as a result of Thomas' misconduct.

On appeal, one of the issues confronting the court was whether Jerry's claims were derivative or individual. Thomas argued that these were derivative claims, and that Indies House, not Jerry, was entitled to receive the damages awarded by the jury. The court agreed, but also asked whether it would be "equitable to give the damages to an already liquidated corporate entity or to give those damages directly to the shareholders?"[52] Citing a Wisconsin Court of Appeals decision,[53] the court held that, "[r]ather than award money damages to a corporation that was being liquidated, it was more equitable to award Jerry the portion of the money damages that he would have rightly received had the money been in the treasury of Indies House at the time it was liquidated."[54]

In James, because the corporation had been liquidated by the time the judgment was entered, it was reasonable for the court to order that the minority shareholder should receive his share of the damages directly. However, the logic of James would apply even where the corporation was still a going concern. The James court recognized that in an equitable proceeding "the judgment can be molded 'so as to adjust the equities of all parties and to meet the obvious necessities of each situation.'"[55] When a minority shareholder may be deprived of the benefit of a judgment because the majority shareholder still controls the company, equitable principles may be able to reach such a situation as well.

Conclusion

While there has been a considerable amount of litigation over whether a minority shareholder in a close corporation can bring a direct claim for the mismanagement of the majority shareholder, there is still no consensus on whether and how such a claim can be brought. It may be true that the trend favors recognition of these claims, but it is a slow evolution at best. Given the uncertain state of the law, a cautious plaintiff-shareholder should plead both direct and derivative claims in a complaint arising from the mismanagement of a close corporation.

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Footnotes:

[1] See Sanders v. Wang, 1999 Del. Ch. LEXIS 203 (Del. Ch. Nov. 9, 1999). For another example of a successful derivative suit, see Wallace v. Fox, 7 F. Supp. 2d 132 (D. Conn. 1998) (utility company received $25 million in settlement of several derivative suits filed after company’s trustees failed to comply with federal regulations and caused shutdown of three of company’s power plants).

[2] Wessin v. Archives Corp., 581 N.W.3d 380, 389 (Minn. App. 1998).

[3] R. Balotti & J. Finkelstein, Delaware Law of Corporations and Business Organizations § 13.6 at 623-24 (1986).

[4] See, e.g., Donovan v. Rothman, 2000 U.S. Dist. LEXIS 10065, *10 (S.D.N.Y. July 19, 2000) (shareholders in radiologist group professional corporation named hospital as defendant in derivative action alleging that it paid illegal kickbacks to defendant shareholders).

[5] See, e.g., Smith v. Smitty McGee’s, Inc., 1998 Del. Ch. LEXIS 87, *4 (Del. Ch. May 8, 1998).

[6] See, e.g., Carlton Investments v. TLC Beatrice International Holdings, Inc., 1997 Del. Ch. LEXIS 86, *3 (Del. Ch. May 30, 1997).

[7] See, e.g., Noerr v. Greenwood, 1997 Del. Ch. LEXIS 121, *3-4 (Del. Ch. July 16, 1997).

[8] See, e.g., Edge Partners, L.P. v. Dockser, 944 F. Supp. 438, 442 (D. Md. 1996).

[9] Avacus Partners, L.P. v. Brian, 1990 Del. Ch. LEXIS 178, *21-22 (Del. Ch. Oct. 24, 1990).

[10] Klein v. Machala, Civ. No. 96-0798 (Suffolk Sup. Ct. July 5, 1997).

[11] Cowin v. Bresler, 741 F.2d 410, 415 (D.C. Cir. 1984).

[12] Id. see also Williams v. Mordkofsky, 901 F.2d 158, 164 (D.C. Cir. 1990).

[13] Cowin 741 F.2d at 415; see also Williams, 901 F.2d at 164.

[14] Arent v. Distribution Sciences, Inc., 975 F.2d 1370, 1373 (8th Cir. 1992).

[15] Lipton v. News Int’l, PLC, 514 A.2d 1075, 1079 (Del. 1986).

[16] 2 American L. Inst. Principles of Corporate Governance: Analysis and Recommendations § 7.01(d) cmt.e (1994).

[17] 731 A.2d 1212 (N.J. Super. Ct. App. Div. 1999).

[18] Id. at 1216 (quoting 2 American L. Inst. Principles of Corporate Governance: Analysis and Recommendations § 7.01(d) cmt.e (1994)).

[19] Id. (citing 2 American L. Inst. Principles of Corporate Governance: Analysis and Recommendations § 7.01(d) cmt.e (1994)).

[20] See Dunaway v. Parker, 453 S.E.2d 43 (Ga. App. 1994) (plaintiffs’ alternative claim for direct relief permitted where multiplicity of lawsuits unlikely and no possibility of prejudice to other interested shareholders).
[21] See Barth v. Barth, 659 N.E.2d 559, 562-63 (Ind. 1995) (adopting ALI rule and determining that trial court "has discretion to decide whether a plaintiff must proceed by direct or derivative action").

[22] See Arndt v. First Interstate Bank of Utah, 991 P.2d 584, 588 (Utah 1999).

[23] Richards v. Bryan, 879 P.2d 638 (Kan. App. 1994) (if action involves closely held corporation, court has discretion to treat derivative action as direct action).

[24] 592 N.W.2d 460 (Minn. 1999).

[25] Wessin v. Archives Corp., 581 N.W.3d 380 (Minn. App. 1998).

[26] Id. at 390.

[27] Id. at 389.

[28] 592 N.W.2d at 466.

[29] Id.

[30] 561 N.W.2d 1 (S.D. 1997).

[31] Id. at 14 (quoting Kagan v. Edison Bros. Stores, Inc., 907 F.2d 690, 693(7th Cir. 1990)).
[32] In rejecting the ALI rule, the Landstrom court cited South Dakota’s farming industry:

South Dakota is a state that contains substantial numbers of small corporations given the number of independently owned businesses and farms. Those who operate and manage these farms and businesses, often the majority shareholders, should not be subject to the demands of minority shareholders whose concern may be solely that of dividends and not the farm or business itself. Many of these small corporations and their management are ill-prepared to invest the time and money required to fend off a minority shareholder suit and are therefore influenced by the mere threat of such litigation.

Id. at 14 n.16.

[33] 328 N.E.2d 505 (Mass. 1975).

[34] Id. at 512 (citations and footnotes omitted).

[35] 874 F. Supp. 471 (D. Mass. 1995).

[36] Id. at 475.

[37] Id.

[38] 582 N.W.2d 98 (Wis. App. 1998).

[39] Id. at 105-106.

[40] Id. at 104.

[41] 556 N.W.2d 768 (Wis. App. 1996).

[42] Id. at 773.

[43] 2000 Ala. LEXIS 33 (Ala. Jan. 28, 2000).

[44] Id.

[45] 107 F.3d 415 (6th Cir. 1997)

[46] Id. at 419.

[47] Id. at 419-20.

[48] Id. at 420.

[49] Id. at 421-22.

[50] Id. at 422.

[51] 2000 Ala. LEXIS 33 (Ala. Jan. 28, 2000).

[52] Id. at *5.

[53] See Mulder v. Mittelstadt, 352 N.W.2d 223 (Wis. App. 1984).

[54] James 2000 Ala. LEXIS 33 at *8.

[55] Id. at *6 (citing, e.g., Couponas v. Morad, 380 So. 2d 800, 803 (Ala. 1980)).