Colaco v. Cavotec SA

Appellants Inet Airport Systems, Inc., Inet Airport Systems, LLC, Michael Colaco, and April Barry appealed a judgment entered against them in this action arising from Inet’s sale of its assets to respondents Cavotec SA and Cavotec Inet US, Inc. (collectively Cavotec). Colaco was Inet’s sole shareholder and its chief executive officer and Barry was Inet’s director of administration. After the transaction, Colaco became Cavotec Inet US, Inc.’s president and a member of its board of directors, and Barry became the company’s chief financial officer. Following a lengthy trial, the jury awarded Cavotec $1.313 million against Inet, Colaco, and Barry, jointly and severally, based on the jury’s findings that: (1) Inet breached its asset purchase agreement with Cavotec by failing to forward all postclosing customer payments Inet received on Cavotec’s behalf; (2) Colaco and Barry breached the fiduciary duties they owed as Cavotec officers by causing Inet to withhold customer payments and creating false and backdated invoices to conceal Inet’s failure to pay; (3) Colaco’s conduct breached the employment contract he entered into as Cavotec Inet US Inc.’s president; and (4) Colaco and Barry converted Cavotec’s funds for their personal use. The jury also awarded Cavotec punitive damages against Colaco only. The Court of Appeal agreed the trial court erred in denying Inet’s motion: the jury’s verdict excused Cavotec from its obligation based on Inet’s breach and awarded Cavotec damages for the same breach, which was an impermissible windfall that allowed Cavotec to retain the assets it purchased from Inet without paying the full purchase price. The Court found Colaco and Cavotec Inet US, Inc. agreed California law would govern all their rights and liabilities; Colaco failed to explain how Delaware had a materially greater interest in applying its law on the fiduciary duty claims raised in this case. The Court also rejected Colaco’s contention the asset purchase agreement barred Cavotec’s claims for breach of his employment contract and punitive damages. The Court concluded Cavotec’s $1.313 award against Inet had to be offset against its failure to make a second $2 million payment owed under the APA. The Court did not disturb Cavotec’s $2 million punitive damage award against Colaco. The Court concluded Barry could not establish any error was prejudicial to her. View "Colaco v. Cavotec SA" on Justia Law