Cunningham v. Magidow CA2/1

Filed 10/31/13 Cunningham v. Magidow CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

KATHLEEN CUNNINGHAM, B239120

Plaintiff and Appellant, (Los Angeles County Super. Ct. No. YC060725) v.

NORMAN MAGIDOW et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Los Angeles County. Dudley W. Gray II, Judge. Reversed in part with directions. Spierer, Woodward, Corbalis & Goldberg and Stephen B. Goldberg for Plaintiff and Appellant. Law Office of Shula Roth-Barash, Shula Roth-Barash; Greines, Martin, Stein & Richland LLP, Cynthia E. Tobisman, and Sheila A. Wirkus for Defendants and Respondents. ______

Kathleen Cunningham brought this shareholder derivative action on behalf of Royal Airline Linen, Inc. (Royal) against Norman Magidow and Anthony Griffin for breach of fiduciary duty and usurpation of corporate opportunity. The superior court granted summary adjudication in favor of defendants on all claims but one. The surviving claim proceeded to a bench trial, at which Cunningham prevailed. Cunningham now appeals from the judgment, challenging the summary adjudication rulings against her. We reverse. BACKGROUND Royal is a provider of linen and laundry services to airlines and hotels. Griffin has been the president of Royal since April 2004, but he is not a shareholder or director. Magidow and Cunningham are Royal’s directors, and each of them owns half of Royal’s stock. Magidow is also Royal’s chief executive officer, and Cunningham has been a vice president of the corporation since 2004. On September 9, 2009, Cunningham filed this shareholder derivative action. The operative second amended complaint alleges claims against Magidow and Griffin for breach of fiduciary duty and usurpation of corporate opportunity.1 Cunningham alleged the same two grounds for both claims. First, she alleged that Magidow arranged for Royal to purchase plastic film at inflated prices from Worldwide Plastics, Inc., which Magidow owned, but Magidow failed to disclose his conflict of interest. Second, Cunningham further alleged that Magidow and Griffin created a separate entity, Premier Linen Service, Inc. (Premier),2 to operate as a middleman between Royal and its hotel clients, and that Magidow and Griffin secretly used this arrangement to profit personally from Royal’s hotel laundry business at Royal’s and Cunningham’s expense.