ÿWPC7 …# VUNa %¯ 0(µbÝw.å4 ' e6 7 0J? 0T‰ 0^Ý 0h; 0r£ 0| 0†‘ 0 1u§ 0d U>€ B)¾ DCç AM*U*w¡ B±v~ÎvÓL D3 0@R AO’Æá 0D§ D/ë B˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÀÌÀääÀÀÌ0 (ÖÃ9 Z ‹6Times New Roman RegularX($¡¡- ù-Ö[×PØEÙÚ[ÛÓ€åDÒ 0Ôt03|xå2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)P ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ< Œ 9p`(&Times New Roman% Line 7 d 7Border 1dd€-!Cþÿ << Gÿÿ< Œ 9p`(Arial Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€ÔÝ  ÝÔ€#ÔÔ€#ÔÓ  Óò òÔ YYY ÔFILEDÔ€#XÔÌÌDecember€6,€1996ÌÌCecil€W.€CrowsonÌAppellate€Court€ClerkÔ  Ôó ó dPtPtHHÚ(ÿáÿâùFG(üHHÚ(d'hStyl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑGenevaÑÑ ÑÒ  inion Geneva ÒÒ  inion Geneva Ò%%%%'ÿÿdxd("ÿÿ$££Ò  ÒÒ  Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ÔÝ  ÝÑ  ÑÒ  ÒÒ ° ÒÒ  ÒÒ „ ÒÑ\R AØ'\ÑÑ\R AØ'\ÑÑ€ÑÑ7€ömXXdìdÈ7ÑÑ  ÑÑ  Ñ›Þ ÞÌLOUIS€A.€œMcREDMOND›,à àà àà à)à àÌPATRICK€J.€œMcREDMOND›,€JR.,€andà à)ÌMONICA€œMcREDMOND›€TERRY,à àà à)Ìon€behalf€of€ELK€BRAND€à àà à)ÌMANUFACTURING€COMPANY,à àà àœ)Ìà àà àà àà àà àà à)›Ìà àPlaintiffs/Appellants,à àà à)Ìà àà àà àà àà àà à)à àDavidson€Chanceryà àÌà àà àà àà àà àà à)à àNo.€€93„2368„IÌœVS›.à àà àà àà àà àà à)Ìà àà àà àà àà àà à)à àAppeal€No.Ìà àà àà àà àà àà à)à à01„A„01„9412„CH„00594ÌANDREW€œMARIANELLI›,à àà àà à)ÌWALTER€œMARIANELLI›,à àà àà à)ÌDAVID€MANNING,€EDWIN€S.€œPYLE›,à à)ÌGORDON€œFERRAGINA›,€œMILANO›à àà à)ÌCORPORATION,€AND€ELK€BRANDà à)ÌMANUFACTURING€COMPANY,à àà àœ)Ìà àà àà àà àà àà à)à àò òREVERSED€AND€REMANDEDó ó›Ìà àDefendants/Appellees.à àà à)ÌÌÌà@ àIN€THE€COURT€OF€APPEALS€OF€TENNESSEEÌà@ àMIDDLE€SECTION€AT€NASHVILLEÌÌà@ àAPPEAL€FROM€THE€CHANCERY€COURT€OF€DAVIDSON€COUNTYÌà@ àAT€NASHVILLE,€TENNESSEEÌÌà@ àHONORABLE€IRVIN€H.€œKILCREASE›,€JR.,€CHANCELLORÌ̜ـ€ÙÙ€€ÙßR€"$!A1-j|µ` ç `€€@ÿRß›Kenneth€R.€JonesÌœSHERRARD›€AND€ROEÌThird€National€Financial€CenterÌ424€Church€Street,€Suite€2000ÌNashville,€Tennessee€37219à àÌÌCYRUS€L.€BOOKERÌ315€œDeaderick›€Street,€Suite€1280ÌNashville,€Tennessee€37228„1280ÌÌJohn€P.€œBranham›ÌœBRANHAM›€&€DAYÌ1910€First€Union€TowerÌ150€Fourth€Avenue,€NorthÌNashville,€Tennessee€€37219ÌATTORNEYS€FOR€PLAINTIFFS/APPELLANTSÌÌJon€D.€RossÌPhilip€N.€œElbert›ÌJohn€A.€œCoates›ÌNEAL€&€œHARWELL›Ì2000€First€Union€TowerÌ150€Fourth€Avenue,€NorthÌNashville,€Tennessee€37219ÌATTORNEYS€FOR€DEFENDANT/APPELLEEÌELK€BRAND€MANUFACTURING€COMPANYÌÌà àà àà àà àà àà àò òPER€CURIAMó óÌÌLOUIS€A.€œMcREDMOND›,à àà àà à)à àÌPATRICK€J.€œMcREDMOND›,€JR.,€andà à)ÌMONICA€œMcREDMOND›€TERRY,à àà à)Ìon€behalf€of€ELK€BRAND€à àà àà à)ÌMANUFACTURING€COMPANY,à àà à)Ìà àPlaintiffs/Appellants,à àà àà à)Ìà àà àà àà àà àà à)à àDavidson€Chanceryà àÌà àà àà àà àà àà à)à àNo.€€93„2368„IÌœVS›.à àà àà àà àà àà à)Ìà àà àà àà àà àà à)à àAppeal€No.Ìà àà àà àà àà àà à)à à01„A„01„9412„CH„00594ÌANDREW€œMARIANELLI›,à àà àà à)ÌWALTER€œMARIANELLI›,à àà àà à)ÌDAVID€MANNING,€EDWIN€S.€œPYLE›,à à)ÌGORDON€œFERRAGINA›,€œMILANO›à àà à)ÌCORPORATION,€AND€ELK€BRANDà à)ÌMANUFACTURING€COMPANY,à àà à)Ìà àDefendants/Appellees.à àà à)ÌÌà àà àà àà àà àòòO€€P€€I€€N€€I€€O€€NóóÌÌÌÓÓà àThe€captioned€plaintiffs€have€appealed€from€a€summary€judgmentÏdismissing€their€suit€against€the€captioned€defendants.ÌÌà àThe€nature€of€the€suit€and€proceedings€are€as€follows:Ìà àThe€complaint,€as€amended,€alleges€that€plaintiffs€are€minorityÏstockholders€of€Elk€Brand€Manufacturing€Company,€hereafter€Elk;€thatÏthe€defendants,€œMarianelli›,€Manning€and€œFerragina›,€are€shareholders,Ïofficers€and€directors€of€Elk;€that€the€defendant€œPyle›€is€a€director€andÏlegal€counsel€of€Elk;€and€that€said€defendants€wrongfully€approved€andÏexecuted€an€improvident€contract€with€œMilano›€Corporation€wherebyÏœMilano›€and€said€defendants€were€unjustly€enriched€and€Elk€wasÏwrongfully€impoverished,€thereby€enriching€the€defendants€andÏdepriving€plaintiffs€of€their€rightful€share€in€the€real€profits€of€Elk.ÌÌà àThe€complaint€further€charged€that€defendants€breached€theirÏfiduciary€duties€by€self„€dealing€in€granting€a€profitable€contract€to€aÏcorporation€owned€by€them€and€in€concealing€their€self€dealing€fromÏplaintiffs.ÌÌÌà àThe€complaint€prayed:Ìà à1.€€€€For€a€judgment€in€favor€of€Elk€for€damages.Ìà à2.€€€€For€cancellation€of€the€contract€and€injunction€againstÏfurther€payments€thereunder.Ìà à3.€€€€For€refund€of€money€paid€by€Elk€under€the€contract.Ìà à4.€€€€For€a€complete€accounting.Ìà à5.€€€€Equitable€remedies.Ìà à6.€€€€Punitive€damages€to€Elk.Ìà à7.€€€€Attorneysðð€Fees.Ìà à8.€€€€Discretionary€costs.Ìà à9.€€€€General€relief.Ìà à10.€€A€jury€trial.ÌÌà àElk€intervened€as€a€defendant€and€moved€to€dismiss€because:Ìà à1.€€Independent€legal€counsel€has€advised€the€corporation€that€theÏsuit€is€not€in€the€best€interest€of€the€corporation.Ìà à2.€€Plaintiffs€are€not€qualified€under€applicable€Kentucky€statutesÏto€represent€the€stockholders€of€the€corporation.Ìà à3.€€The€plaintiffs€waited€three€years€without€complaining€aboutÏthe€contract.Ìà à4.€€Ulterior€motive€of€Louis€œMcRedmond›€to€force€the€defendants€toÏbuy€his€stock.Ìà àÌà àNo€answer€has€been€filed€by€any€defendant.ÌÌà àBy€agreed€order,€the€Trial€Court€scheduled€an€evidentiary€hearingÏupon€the€motion€to€dismiss.€€At€the€conclusion€of€the€hearing,€the€TrialÏJudge€granted€leave€to€the€parties€to€file€proposed€findings€of€fact€andÏconclusions€of€law,€which€was€done.ÌÌÌà àThe€judgment€of€the€Trial€Court€reads€as€follows:ÌÓÓ€à8 àà8 à€€This€action€is€before€the€Court€on€theÏdefendant€Elk€Brandððs€motion€to€dismiss€theÏshareholder€derivative€lawsuit€that€has€beenÏfiled€by€the€plaintiffs.€€Both€parties€in€thisÏaction€were€directed€to€submit€findings€of€factÏand€conclusions€of€law€to€this€Court.€€BecauseÏthe€Court€was€forced€to€consider€evidenceÏoutside€the€pleadings,€the€Court€will€treat€ElkÏBrandððs€motion€as€a€motion€for€summaryÏjudgment.€€Upon€consideration€of€all€theÏevidence€presented€in€this€matter,€the€CourtÏadopts€the€findings€of€fact€and€conclusions€ofÏlaw€submitted€by€Elk€Brand.€€Therefore,€theÏCourt€GRANTS€Elk€Brandððs€motion,€and€dismissesÏthe€plaintiffsðð€complaint.€€Costs€are€taxed€to€theÏplaintiffs.ÌÌà8 àà8 àIt€is€so€ordered.ÌÌÌÓÓà àThe€ð ðFindings€of€Fact€and€Conclusions€of€Law€Proposed€byÏDefendant,€Elk€Brand€Manufacturing€Companyðð€consists€of€sixty„oneÏpages.€€It€contains€the€following€significant€provisions:ÌÓÓà8 àà8 à€€Plaintiffs€in€this€shareholder€derivative€actionÏchallenge€Elk€Brandððs€entry€into€the€œMSA›€withÏœMilano›.€€Plaintiffs€made€demand€upon€the€BoardÏof€Directors€of€Elk€Brand€on€April€15,€1993,€thatÏElk€Brand€terminate€the€œMSA›€with€œMilano›€andÏseek€recovery€of€all€sums€paid€to€œMilano›Ïpursuant€to€the€terms€of€the€œMSA›.ÌÌà8 àà8 à€€Defendant€Elk€Brandððs€motion€to€dismiss€thisÏderivative€action€arises€out€of€the€refusal€ofÍplaintiffsðð€demand€by€the€Board€of€Directors€ofÏElk€Brand.€€Defendant€Elk€Brand€seeks€dismissalÏof€this€action€on€two€grounds.€€First,€defendantÏElk€Brand€avers€that€this€Court€should€uphold€theÏbusiness€judgment€of€Elk€Brandððs€Board€ofÏDirectors€in€rejecting€the€demands€of€plaintiffsÏand€in€determining€that€this€action€should€beÏdismissed€as€not€in€the€best€interests€of€ElkÏBrand.€€Second,€defendant€Elk€Brand€avers€thatÏthe€derivative€plaintiffs€fail€to€meet€theÏrequirement€of€Rule€23.06€of€the€TennesseeÏRules€of€Civil€Procedure€and€œKy.Rev›.€State.Ïœðð271B›.7„400€that€they€fairly€and€adequatelyÏrepresent€the€interests€of€the€shareholders€andÏthat€the€action€be€brought€primarily€for€theÏbenefit€of€the€corporation.ÌÌà8 àà8 à€€The€Court€conducted€a€three„day€evidentiaryÏhearing€on€April€4,€5€and€6,€1994,€in€connectionÏwith€defendant€Elk€Brandððs€motion€to€dismiss.€ÏThe€Court€has€heard€and€has€considered€theÏtestimony€introduced€at€the€evidentiary€hearing.€ÏThe€Court€has€reviewed€the€depositionsÏintroduced€into€evidence€and€the€exhibitsÏintroduced€at€the€evidentiary€hearing.€€The€CourtÏhas€considered€the€briefs€submitted€by€theÏparties€and€the€entire€record€in€this€cause€andÏhas€concluded€that€defendant€Elk€Brandððs€motionÏto€dismiss€this€shareholder€derivative€actionÏshould€be€granted.ÌÌà8 àà8 à€.€.€.€.ÌÌà8 àà8 à€€Under€the€business€judgment€rule,€courtsÏpresume€that€a€corporationððs€directors,€whenÏmaking€a€business€decision,€acted€on€anÍinformed€basis,€in€good€faith,€and€with€theÏhonest€belief€that€their€decision€was€in€theÏcorporationððs€best€interests.€€òòSee€Lewis€v.€Boyd,óóÏ838€œS.W.2d›€at€220,€221;€òòœSpiegel›€v.€œBuntrock›,óó€571ÏA.œ2d›€at€774.€€The€burden€is€on€the€partyÏchallenging€the€boardððs€decision€to€establishÏfacts€rebutting€the€presumption.€€òòSee€œAronson›€v.ÏLewis,óó€473€A.œ2d›€at€812.€€The€Court€concludesÏthat€plaintiffsðð€proof€in€this€regard€wasÏwoefully€inadequate€and€failed€to€rebut€theÏpresumption€accorded€by€the€business€judgmentÏrule€that€the€directors€acted€on€an€informedÏbasis,€in€good€faith€and€in€the€honest€belief€thatÏrejection€of€plaintiffsðð€demands€and€dismissalÏof€this€action€was€in€the€best€interests€of€theÏcorporation.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€.€.€.€€Since€the€plaintiff€shareholdersðð€demands€inÏthis€case€were€made€and€were€refused€by€theÏboard,€the€ð ðfocus€of€the€judicial€inquiry€isÏwhether€the€boardððs€response€was€wrongful.ðð€€AsÏnoted€above,€the€tacit€admission€rule€has€beenÏadopted€in€Tennessee€in€òòLewis€v.€Boydóó,€838ÏœS.W.2d›€at€222.€€It€is€no€longer€necessary€for€theÏCourt€to€consider€questions€of€directorÏdisinterestedness€and€independence,€which€areÏthe€focus€of€judicial€inquiry€in€a€demand€excusedÏcase.€€òòSee€Levine€v.€Smith,óó€591€A.œ2d›€at€212.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€The€Elk€Brand€Board€took€formal€action€toÏoppose€a€continuation€of€this€action€and€to€seekÏits€dismissal€at€a€meeting€of€the€Elk€BrandÍBoard€on€September€18,€1993,€which€all€seven€ÏDirectors€attended.€€The€resolution€in€questionÏwas€approved€by€the€votes€of€five€directors:ÏDavid€Manning,€Walter€œMarianelli›,€AndrewÏœMarianelli›,€Edwin€S.€œPyle›,€and€R.€Curtis€Brasher.€ÏPlaintiff€Louis€A.€œMcRedmond›€and€his€brother,ÏPatrick€œMcRedmond›,€Sr.,€abstained.€€At€leastÏthree€of€the€members€of€the€Board,€then€presentÏand€voting€in€favor€of€the€resolution,€wereÏindependent€and€disinterested,€that€is,€AndrewÏœMarianelli›,€Edwin€S.€œPyle›,€and€R.€Curtis€Brasher.€ÏThis€vote€satisfied€the€requirements€ofÏKentuckyððs€safe„harbor€statute€for€directorÏapproval€of€conflict„of„interest€transactions.€ÏòòSeeóó€Ky.,€Rev.€Stat.€ðð€œ271B›.8„310(3).€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€The€evidence€before€the€Court€does€notÏdemonstrate€that€the€vote€of€the€disinterestedÏdirectors€to€terminate€this€litigation€wasÏunreasonable,€but€rather€the€Court€concludesÏthat€their€decision€was,€in€fact,€in€the€bestÏinterests€of€the€corporation.€€Moreover,€there€isÏno€evidence€to€support€a€conclusion€that€theÏdirectorsðð€decision€was€primarily€motivated€byÏpersonal€interest.€€The€Court€concludes€thatÏplaintiffs€have€wholly€failed€to€rebut€theÏbusiness€judgment€ruleððs€presumption€of€goodÏfaith€with€respect€to€the€decision€of€theÏdirectors€to€seek€termination€of€this€litigationÏas€inimical€to€Elk€Brandððs€best€interests.ÌÌà8 àà8 à€.€.€.€.ÌÌà8 àà8 à€€Based€upon€the€foregoing€analysis,€the€CourtÏconcludes€that€the€plaintiffs€have€failed€toÏrebut€the€business€judgment€ruleððs€presumptionÏthat€the€Elk€Brand€directors€acted€on€anÏinformed€basis€and€in€a€reasonable€manner€inÏvoting€to€reject€plaintiffsðð€demands€and€to€seekÏdismissal€of€this€derivative€litigation.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€Plaintiffsðð€brazen€attempt€to€use€thisÏderivative€action€as€leverage€to€force€Elk€BrandÏto€repurchase€their€shares€and€those€of€the€otherÏmembers€of€the€œMcRedmond›€family€is€a€classicÏabuse€of€the€derivative€suit€remedy.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€The€plaintiffsðð€demand€letter€and€the€proofÏintroduced€at€the€evidentiary€hearing€make€clearÏthat€the€primary€objective€of€the€derivativeÏplaintiffs€is€not€the€enforcement€of€theÏcorporationððs€claims,€but€rather€is€to€furtherÏtheir€own€individual€interests€by€coercing,€withÏthe€threat€of€this€expensive€litigation,€ElkÏBrandððs€repurchase€of€their€shares€and€those€ofÏthe€other€members€of€the€œMcRedmond›€family.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€.€.€.€€The€ð ðequitableðð€remedy€sought€by€plaintiffsÏin€the€fifth€prayer€for€relief€in€the€complaintÏreveals€clearly€that€this€lawsuit€was€broughtÏfor€the€personal€benefit€of€plaintiffs€and€not€forÏthe€benefit€of€Elk€Brand.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€.€.€.€€Plaintiffsðð€fifth€prayer€for€relief€asks€thisÏCourt€to€structure€an€ð ðequitableðð€remedy€thatÏreorganizes€the€ownership€of€Elk€Brand€stock.€ÏœMilano›€currently€owns€60%€or€12,505€shares€ofÏthe€total€of€20,841€shares€of€Elk€Brand€stockÏwhich€are€now€issued€and€outstanding.€ÏPlaintiffs€request€that€this€Court€divest€œMilano›Ïof€all€ownership€in€its€shares,€even€though€theÏshares€are€pledged€to€secure€a€substantial€loanÏfrom€Third€National€Bank,€who€is€also€theÏprimary€lender€of€working€capital€to€Elk€Brand.€ÏThe€Court€is€asked€to€treat€œMilano›ððs€1989Ïpurchase€of€the€shares€as€a€redemption€by€ElkÏBrand.ÌÌà8 àà8 à€€The€ð ðequitableðð€remedy€sought€by€plaintiffsÏwould€result€in€an€increase€in€the€percentages€ofÏownership€of€the€œMcRedmond›€family€in€Elk€BrandÏfrom€18.4%€to€46%€at€no€cost€to€theÏœMcRedmonds›.€€Plaintiffsðð€requested€ð ðequitableððÏremedy€is€plainly€designed€to€confer€unfairÏbenefits€upon€the€plaintiffs€personally.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à.€.€.€€Plaintiffsðð€economic€interests€areÏantagonistic€to€all€members€of€the€class€theyÏclaim€to€represent€whose€shares€have€been€votedÏto€approve€the€œMSA›€and€to€ratify€the€previousÏactions€of€the€Elk€Brand€Board€of€Directors.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€The€Court€has€also€considered€the€plaintiffsððÏunfamiliarity€with€this€litigation€and€the€degreeÏof€control€exercised€by€the€attorneys€over€theÏlitigation.€€òòSee€œRothenberg›€v.€SecurityÏManagement€Company,€Inc.,€óó667€F.œ2d›€at€961.€ÏNone€of€the€derivative€plaintiffs€whoseÏtestimony€was€presented€to€the€Court€byÏdeposition€had€any€significant€knowledgeÏconcerning€the€factual€basis€underlying€theÏallegations€in€the€complaint.€€Each€relied€uponÏthe€advice€of€his€or€her€attorney€and€signed€theÏcomplaint€with€virtually€no€knowledgeÏconcerning€the€facts€in€this€case.€€ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€After€plaintiff€Louis€A.€œMcRedmond›€had€been€onÏthe€Elk€Brand€Board€of€Directors€for€a€year,€heÏattended€the€1993€annual€meeting€ofÏshareholders€of€Elk€Brand€on€January€16,€1993,Ïand€voted€his€1,616€shares€and€the€proxies€of€anÏadditional€1,384€shares€owned€by€œMcRedmond›Ïfamily€members,€including€proxies€for€theÏderivative€plaintiffs,€Monica€œMcRedmond›€TerryÏand€Patrick€J.€œMcRedmond›,€Jr.,€to€ratify€andÏapprove€the€acts€and€conduct€of€the€Board€of€Ô ƒ ÔÔ!  Ô€directors€through€the€date€ofÏthe€meeting.€€Thus,€in€1993,€Louis€A.€œMcRedmond›Ïvoted€a€total€of€3,000€shares€at€Elk€BrandððsÏ1993€annual€shareholders€meeting€in€favor€ofÏratification€and€approval€of€the€previous€actsÏand€conduct€of€the€Elk€Brand€Board€of€Directors.ÌÌà8 àà8 à€€The€œMSA›€was€approved€by€the€Elk€Brand€BoardÏof€Directors€in€1989€without€a€dissenting€vote.€ÏFor€over€four€years€Elk€Brand€and€itsÍshareholders€have€had€both€the€burdens€and€theÏbenefits€of€the€œMSA›.€€The€challenged€transactionÏhas€resulted€in€a€substantial€increase€in€ElkÏBrandððs€sales€and€record€profits€in€fiscal€yearÏ1993.€€Sales€and€profits€for€fiscal€year€1994€areÏahead€of€the€record€levels€for€1993.ÌÌà8 àà8 à€€Even€assuming€that€the€œMSA›€transaction€wasÏsomehow€unauthorized€in€1989,€in€the€face€of€allÏthe€overwhelming€evidence€to€the€contrary,€theÏœMSA›€would€still€be€valid€under€the€Kentucky€lawÏof€estoppel€and€ratification€by€acquiescence.€.€.€.ÌÌà8 àà8 à€.€.€.€.ÌÌà8 àà8 à€.€.€.€€23.€€The€Court€finds€that€it€is€disingenuousÏof€the€plaintiffs€to€argue€based€upon€aÏmechanistic€review€of€the€unconsolidatedÏfinancial€statements€of€Elk€Brand€and€œMilano›ÏCorporation€that€€the€œMSA›€has€had€the€net€affectÏof€decreasing€profits€at€the€Elk€Brand€level.€ÏSuch€analysis€ignores€the€dynamics€of€theÏbusiness€relationship€between€Elk€Brand€andÏœMilano›€and€the€benefits€realized€by€cementingÏthe€relationship€between€Elk€Brand€and€its€coreÏmanagement€group€through€œMilano›ððs€stockÏownership.€€When€the€traditional€business€of€ElkÏBrand€continued€to€dissipate€as€the€Board€hadÏanticipated,€œMilano›€Corporation€developed€newÏmarkets.€€The€losses€Elk€Brand€experienced€wereÏnot€caused€by€payments€of€commissions€toÏœMilano›.€€The€Court€finds€that€the€losses€wereÏcaused€by€production€inefficiencies€andÏescalating€costs.€€These€production€difficultiesÏwere€addressed€and€corrected€by€the€managersÍwho€had€linked€their€future€to€the€prosperity€ofÏElk€Brand€through€œMilano›ððs€stock€purchase.ÌÌà8 àà8 à€.€.€.€.ÌÌà8 àà8 à€€25.€€Plaintiffs€present€a€misleading€and€flawedÏanalysis€when€they€attempt€to€contract€œMilano›ððsÏfinancial€condition€to€that€of€Elk€Brand€basedÏupon€a€simplistic€comparison€of€financialÏstatements.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€27.€€Further,€the€Court€has€carefully€reviewedÏthe€allegations€of€the€complaint,€and€it€does€notÏcontain€specific€or€particularized€facts€allegingÏthat€members€of€the€Elk€Brand€Board€were€notÏdisinterested€and€not€independent€or€that€theyÏwere€unwilling€or€incapable€of€properlyÏconsidering€such€a€demand€by€minorityÏshareholders.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€50.€€Having€critically€reviewed€them,€the€CourtÏfinds€that€Mr.€Harrisonððs€findings€andÏrecommendations€to€the€Elk€Brand€Board€wereÏmade€in€good€faith,€are€fully€supported€by€theÏrecord€of€his€investigation€and€are€totallyÏconsistent€with€the€best€interests€of€Elk€BrandÏas€articulated€in€his€report.€.€.€.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à€€98.€€The€Court,€having€reviewed€the€verifiedÏcomplaint€and€other€pleadings,€having€carefullyÍconsidered€the€testimony€of€the€witnesses,€bothÏlive€and€by€deposition,€and€having€reviewed€allÏof€the€exhibits€that€have€been€introduced,€isÏconvinced,€and€specifically€finds€as€a€matter€ofÏfact,€that€the€continuation€of€this€litigationÏwould€not€be€in€the€best€interests€of€Elk€Brand.€ÏMr.€Brasher,€among€others,€testifiedÏcompellingly€about€his€concerns€in€this€regard.€ÏIndeed,€based€upon€all€of€the€proof,€it€is€theÏfinding€of€this€Court€that€to€allow€thisÏlitigation€to€proceed€would€be€detrimental€toÏthe€interests€of€Elk€Brand.ÌÌÌÓÓà àThe€foregoing€excerpts€from€the€record€illustrate€the€confusingÏpicture€presented€to€this€Court.€€What€began€as€a€ð ðmotion€to€dismissððÏon€narrow€grounds€mushroomed€into€a€judgment€upon€the€merits€ofÏplaintiffsðð€suit€without€the€jury€trial€requested€in€the€complaint.€WhileÏthe€Trial€Court€designated€its€judgment€as€summary€in€nature,€neitherÏthe€finding€of€fact€nor€the€judgment€refers€to€uncontradicted€evidence.ÌÌà àA€motion€to€dismiss€is€akin€to€a€demurer€under€former€practice€inÏthat€it€admits€all€matters€properly€pleaded€and,€therefore€is€a€test€ofÏthe€leading€pleading.€€òòSanders€v.€Vinson,€óó558€œS.W.2d›€838€(Tenn.€1977).ÌÌà àœTRCP›€Rule€12.02€provides€that,€where€evidence€is€considered,€theÏmotion€may€be€considered€as€one€for€summary€judgment.€€If€this€occursÏthe€rules€for€summary€judgment€apply.€€The€pole€stars€of€summaryÏjudgments€are€no€genuine€issue€of€material€fact€and€entitlement€toÏjudgment€as€a€conclusive€matter€of€law.€€òòDaniels€v.€White€œConsol›.ÏœIndus›.,€Inc.,€óóTenn.€App.€1985,€692€œS.W.2d›€422.€€òòMansfield€v.€ColonialÏFreight€Systems,€óóTenn.€App.€1993,€862€œS.W.2d›€527.€€It€is€alsoÏfundamental€that€the€movant€has€the€burden€of€producing€or€pointingÏout€the€uncontradicted€evidence€which€entitles€him€to€judgment€as€aÏmatter€of€law.€€òòByrd€v.€Hall,€óóTenn.€1993,€847€œS.W.2d›€208.€€Until€theÏmovant€satisfies€this€initial€burden,€the€opponent€of€the€motion€has€noÏduty€to€produce€or€point€out€any€evidence.ÌÌà àAs€stated€above,€the€only€defensive€pleading€before€the€TrialÏCourt€was€the€motion€to€dismiss€of€the€intervenor„defendant,€Elk,Ïwhich€presented€only€two€grounds€for€dismissal:€(1)€reasonableness€ofÏthe€action€of€the€board€of€directors€in€refusing€to€authorize€this€suit,Ïand€(2)€lack€of€standing€of€plaintiffs.ÌÌòòÓ  ÓREASONABLENESS€OF€REFUSALóóÌÓ  Óà àIf€a€majority€of€directors€has€wrongfully€voted€to€siphon€profitsÏof€the€corporation€to€another€corporation€in€which€they€own€anÏinterest,€thereby€depriving€a€minority€of€stockholders€their€share€ofÏthe€profits€to€which€they€are€entitled,€such€a€majority€of€directorsÏcannot€defeat€the€suit€of€the€minority€by€disapproving€the€suit€broughtÏby€the€minority€on€behalf€of€the€corporation.€€If€this€were€true,Ïminority€stockholders€would€have€no€recourse€against€suchÏmachinations€of€the€majority.ÌÌà àThe€first€ground€of€the€motion€to€dismiss€is€without€merit.ÌÌòòÓ  ÓSTANDING€OF€PLAINTIFFSóóÌÓ  Óà àNeither€the€Kentucky€statute€nor€the€Tennessee€rule€requires€aÏminority€group€of€stockholders€to€have€interests€identical€with€thoseÏof€the€majority€whose€actions€are€challenged.€€The€applicable€portion€ofÏthe€Kentucky€Statute€states:€€ÌÓÓà8 àà8 àThe€derivative€proceeding€shall€not€beÏmaintained€if€it€appears€that€the€personÏcommencing€the€proceeding€does€not€fairlyÍrepresent€the€interests€of€the€shareholders€inÏenforcing€the€right€of€the€corporation.ÌÌÌÓÓà àIt€is€clear€that€all€shareholders€of€Elk€will€share€in€the€benefitsÏof€a€successful€prosecution€of€this€suit.€€Some€of€them€may€sufferÏpersonal€loss,€or€loss€of€dividends€from€their€separately€ownedÏcorporation,€but€this€does€not€prevent€plaintiffsðð€suit€which€is€for€theÏbenefit€of€all€stockholders€of€Elk.ÌÌà àœTRCP›€Rule€23.6€reads€in€pertinent€part€as€follows:ÌÓÓà8 àà8 àThe€derivative€action€shall€not€be€maintained€ifÏit€appears€that€the€plaintiff€does€not€fairly€andÏadequately€represent€the€shareholders€orÏmembers€òòsimilarly€situatedóó€in€enforcing€theÏright€of€the€corporation€or€association.ÌÌÌÓÓà àIt€is€clear€that€the€plaintiffs€fairly€and€adequately€represent€theÏstockholders€similarly€situated€without€prejudicing€the€remainder€ofÏthe€stockholders€who€appear€to€have€recouped€their€lost€dividends€fromÏElk€by€the€profits€derived€by€their€other€corporation.ÌÌà àAll€other€subjects€of€the€sixty„one€page€ð ðFinding€of€Fact€andÏConclusions€of€Lawðð€are€superfluous€to€the€matter€at€hand,€theÏdisposition€of€the€motion€to€dismiss€filed€by€Elk.ÌÌà àThe€judgment€of€the€Trial€Court€is€reversed.€€Costs€of€this€appealÏare€taxed€against€the€defendants.€€The€cause€is€remanded€for€furtherÏproceedings.ÌÌò òà àReversed€and€Remanded.ó óÌà àà àà àà àà àà àà àò òPER€CURIAMó óà à