Facts

Armory Credit Opportunity Fund LP, or Armory, filed a complaint against Terence O'Toole, Jose Liberman, Lenard Liberman, and Winter Horton, as well nominal defendant, LBI Media Holdings Inc., or Holdings.

PLAINTIFF'S CONTENTIONS:
Armory alleged that it was a creditor of Holdings. Armory alleged that Holdings made a series of unlawful distributions to Jose Liberman, Lenard Liberman, and Horton, who were all on the board of directors of Holdings. Armory further alleged that these various loans matured in 2009, but they were never repaid. Plaintiff also alleged that these loans were classified as stockholder deficiency at the end of 2011 and were forgiven in 2012. Armory also contended that Holdings made unlawful distributions, in the form of bonus payments to Jose Liberman and Lenard Liberman in 2012. Plaintiffs alleged that these bonus payments and forgiveness of insider loans amounted to over $6.2 million and that Holdings was insolvent and not able to pay its debts.

DEFENDANT'S CONTENTIONS:
O'Toole argued that, unlike the other defendants who served on Holdings' board of directors, he was disinterested in the approval of the loans and bonus payments and did not receive any benefit from them. O'Toole also argued that Armory failed to allege facts to rebut the presumption that his decisions were made in good faith.

Damages

Armory alleged damages in the amount of $3,200,000 for the unlawful distributions made to the Liberman defendants.

Result

The court sustained O'Toole's demurrer with leave to amend.

Other Information

FILING DATE: Jan. 23, 2014.