Amanda Heather Kahn v. Kenneth G. Walker, Charles Z. Walker Jr., Daniel K. Walker, Stanley Hahn, William B. Wells, Lawrence J. McLaughlin, William G. Hayter, Richard W. Darling, et al.
Published: May 15, 1999 | Result Date: Mar. 9, 1999 | Filing Date: Jan. 1, 1900 |Case number: NC023099 Verdict – $0
Judge
Court
L.A. Superior Long Beach
Attorneys
Plaintiff
Solomon B. Cera
(Cera LLP)
Todd S. Collins
(Berger & Montague PC)
Defendant
Facts
FACTS PER THE PLAINTIFF: On March 18, 1998, the plaintiffs filed a shareholders' derivative lawsuit against the currect directors of nominal defendant Farmers and Merchants Bank of Long Beach (the Bank) claiming that certain directors and others improperly diverted million of dollars in fees from the Bank to Farmers and Merchants Trust Company of Long Beach (Trust Company), which, since the early 1970s, has been an entity separate from the bank. The plaintiff alleged that both the Bank and the Trust Company are controlled by Kenneth G. Walker, the Bank's president and his family. The plaintiffs also claimed that the defendants were wasting the assets by providing office space and other services to the Trust Company without receiving adequate consideration therefor. The directors of the Bank denied that they have committed any wrongful act of any kind. FACTS PER THE DEFENDANT: The plaintiff Amanda Kahn, is the daughter of Alan Kahn, who is described in various publications as the scion of the value investing firm, Kahn Brothers, which is headquartered in New York. The plaintiff, Linda Kahn, is Alan Kahn's wife. Alan gave his wife and daughter one share of stock in Farmers & Merchants bank of Long Beach in 1994. On March 18, 1998, the plaintiffs filed what they characterized as a shareholders' derivative lawsuit against the current directors of the bank seeking an award of damages in the millions of dollars claiming that the directors improperly diverted "millions of dollars" in fees from the bank to Farmers & Merchants Trust Company of Long Beach, which, since the early 1970s, has been an entity separate from the bank. The plaintiffs claimed that the bank should still be in the trust company business although it has not been in the trust company business since 1972, when it "spun off" the Trust Company from the bank. The plaintiffs also claimed that the bank was wasting its assets by providing office space and other services to the Trust Company without receiving adequate consideration therefor. None of the current directors of the bank were directors of the bank in the early 1970s when the bank made its decision to spin off the Trust Company. Neither plaintiff, prior to filing their lawsuit, raised any complaint or comment about the fact that the bank had not been in the trust company business for over 26 years. Neither plaintiff complained about any alleged act or alleged failure to act on the part of any of the current directors of the bank before the plaintiffs filed their lawsuit. The directors of the bank denied that they have committed any wrongful act of any kind. They denied divering any funds from the bank to Trust Company. They denied receiving any funds in excess of the modest amounts that they are paid for their service as directors of the bank. Although the bank and the Trust Company do exchange some services, there is an annual calculation done, which is submitted to state regulators, to be sure that the bank is receiving adequate consideration, from the Trust Company, for any service or other benefit that it provides to the Trust Company.
Damages
The plaintiffs demanded damages in the millions of dollars.
Other Information
The directors demurred to the plaintiffs' amended complaint on the grounds that the plaintiffs complied with California Corporations Code º800(b)(2), which requires that the plaintiffs in a derivative action notify the directors in writing of the ultimate facts on which they based their complaint or that they deliver a copy of the proposed complaint to the directors before they initiate a lawsuit.
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