Storetrax.com, Inc. v. Gurland

HARRELL, J. This case considers whether a member of a corporation’s board of directors breached his fiduciary duty owed to the ⁴³ corporation when he, removed as an employee of the corporation, filed suit against the corporation in order to enforce severance pay provisions of his employment agreement, pursued summary judgment by default after the corporation failed to file a timely answer, and sought to enforce his money judgment, over the corporation’s opposition, by attaching the bank account of the corporation. The Circuit Court for Montgomery County held that the board member did not breach his fiduciary duty. The Court of Special Appeals affirmed. We also shall affirm.

I. Background Petitioner, Storetrax.com, Inc. (“Storetrax”), is a Delaware corporation with its principal place of business in Rockville, Maryland. Storetrax operates an internet-based commercial real estate listing service marketed principally to lessors of retail rental space. The business was founded originally in 1997 by Respondent, Joshua A. Gurland (“Gurland”), and incorporated in January 1998. On 25 October 1999, Respondent entered into a written agreement with a group of investors who acquired a majority interest in Storetrax’s shares.

Gurland remained a member of the board and, in conjunction with the stock sale, executed an employment agreement with Storetrax whereby he was named president and chief executive officer of the corporation. 1 The terms of the employment agreement provided for successive one-year terms, renewed automatically unless either ⁴⁴ party notified the other in writing “not less than ninety (90) days prior to the expiration of the Initial Term or any renewal term.” Storetrax further could terminate the agreement at any time, with or without cause, upon ten days written notice. The termination clause provided the following language: In the event that this Agreement is terminated by [Storetrax] for Cause ..., the Company shall pay the Employee the Base Salary due him under this Agreement (plus all accrued and unpaid benefits and reimbursable expenses) through the day on which such termination is effective, in accordance with the Company’s normal payroll practices. In the event that the Employee is terminated without Cause, the Company shall, subject to the provisions of this Agreement and in lieu of any other payment, pay to the Employee compensation equal to twelve (12) months of the Employee’s Base Salary as of the date of termination (plus any earned bonuses and all accrued and unpaid benefits and reimbursable expenses), payable in accordance with normal payroll practices. Gurland’s employment was terminated by the corporation on 15 November 2001.

Respondent continued to serve on the board of directors, however, until he resigned from that position on 5 December 2002. A dispute arose between the parties whether Gurland was entitled to the twelve months severance payment provided for by the termination provision of the employment agreement. Gurland drafted and delivered on 11 December 2001 a letter addressed to Storetrax and its board of directors outlining what he perceived to be his entitlement to severance payment. He stated: I regret that we have come to this point, and sincerely hope that we can resolve the severance issue amicably and in a timely fashion.

However, I have consulted an attorney and will not hesitate to avail myself of every possible remedy in the event of dispute. If the issue remains unresolved as of [21 December 2001] I will instruct my attorney to proceed. ⁴⁵ On 20 December 2001, counsel for Storetrax responded in a letter which communicated the board of directors’ view that Respondent was not entitled to severance payment. Specifically, the letter took the position that, because of the frequent changes in Respondent’s job title and related downward adjustments in his salary, the employment agreement was no longer in effect. Alternatively, the letter explained that, even if the agreement remained valid, “cause” existed for the termination. 2 The letter concluded [t]here is still an opportunity to part on amicable terms, provided that you withdraw your demand for severance.

If you desire to litigate this issue, the Company is prepared to defend itself, as well as to assert any counterclaims it may have against you for breach of your fiduciary duties as an executive and Director of the Company. The senior management of Storetrax and the Board of Directors (excepting yourself) have each reviewed this letter and the facts surrounding your demand for severance. Everyone concurs with the Company’s refusal to consider any severance package. In January 2002, a member of Storetrax’s board attempted to settle the severance pay dispute.

The board of directors communicated to Respondent a settlement offer. Respondent assured the board that he would consider the offer. There was no further correspondence between the parties. Gurland filed in the Circuit Court for Montgomery County on 31 January 2002 a complaint against Storetrax alleging breach of contract and seeking $150,000.00 in severance pay under the termination provisions of the employment agreement.

He joined with the complaint a motion for summary judgment. Subsequent to filing the complaint, Respondent ⁴⁶ visited Petitioner’s office on two occasions, but did not inform anyone there of the pendency of the suit. Pursuant to Maryland Rule 2-124(d), service of process was made upon Storetrax’s resident agent on 1 February 2002. Despite proper service of the summons, complaint, and motion for summary judgment, the resident agent failed to deliver to the corporation the documents. 3 As a result, Storetrax failed to file a timely answer to the complaint, or a timely response to the summary judgment motion.

The Circuit Court granted, by way of default, Respondent’s motion for summary judgment on 8 March 2002, entering against Petitioner a judgment in the amount of $150,000. Respondent, in an effort to enforce the money judgment entered in his favor, petitioned ten days later for a writ of garnishment attaching Storetrax’s bank account. 4 The Circuit Court issued the writ on 19 March 2002. Petitioner had no actual notice of the suit until it received on 19 March 2002 notice of the attachment on its bank account. The following day, Storetrax’s bank garnished the corporation’s account in the amount of the judgment.

Counsel for Storetrax wrote a letter to Gurland on 21 March 2002 requesting that he agree “(1) to voluntarily set aside [the] default, and (2) to withdraw the garnishment of the Company’s bank account,” thus enabling the corporation to answer the ⁴⁷ suit and have its day in court. Respondent refused. Petitioner filed on 3 April 2002, pursuant to Maryland Rule 2-535, a motion to set aside the summary judgment entered by default. Storetrax also filed a motion to quash the writ of attachment.

The trial court denied both motions, and Storetrax noted an appeal to the Court of Special Appeals. The intermediate appellate court, in an unreported opinion, reversed the judgment, holding that it was an abuse of discretion for the Circuit Court to deny Storetrax’s motion to set aside the summary judgment. The case was remanded to the Circuit Court for further proceedings. On the eve of trial, Gurland moved for partial summary judgment as to whether Storetrax had terminated him for cause.

The trial court granted this motion. The case proceeded to trial to determine the remaining issues. A jury returned a verdict in favor of Gurland in the amount of $150,000. While Storetrax’s appeal was pending from the judgment in Gurland’s favor in the breach of contract action, Storetrax filed suit against Gurland in the Circuit Court on 8 November 2002, alleging primarily that Gurland, by pursuing his claim to judgment, breached the fiduciary duty that he owed to the corporation by virtue of his membership on the board of directors.

Petitioner asserted that “[a] s a director, Gurland owed fiduciary duties of due care, loyalty, and good faith to Storetrax.” Specifically, Petitioner alleged that Respondent breached this duty despite knowing that Storetrax was insolvent at the time of the lawsuit 5 and vehemently opposed and had a viable defense to the breach of contract claim. More ⁴⁸ over, Gurland: (1) never advised the corporation of the existence of his lawsuit in spite of several visits to the corporation’s offices subsequent to the filing of his complaint; (2) concealed the existence of the lawsuit in order to obtain garnishment, which was aimed at disrupting the corporation’s daily operations; (3) obtained summary judgment by default despite knowing that the corporation opposed his breach of contract claims; (4) attached Storetrax’s bank account in the amount of the judgment; and (5) opposed all attempts to have the judgment and garnishment set aside, notwithstanding express requests from Storetrax’s senior management that he acquiesce. The breach of fiduciary duty claim was tried at a bench trial in March 2004. The trial court found in favor of Gurland.

Petitioner appealed the trial court’s judgment in the breach of fiduciary duty case also. The Court of Special Appeals consolidated the two appeals for oral argument. The intermediate appellate court issued on 31 March 2006 a reported opinion reversing the Circuit Court’s grant of partial summary judgment in the contract ease on the basis that there was a triable question whether Gurland was dismissed “with cause.” See generally Storetrax.com, Inc. v. Gurland, 168 Md.App. 50, 67-77 , 895 A.2d 355, 365-71 (2006). The court affirmed, however, the trial court’s determination that Respondent had not breached his fiduciary duty owed the corporation as a director.

Storetrax, 168 Md.App. at 80-88 , 895 A.2d at 373-77 . Storetrax petitioned us for a writ of certiorari to consider the Court of Special Appeals’s decision relative to Gurland’s alleged breach of fiduciary duty. 6 We issued a writ of certiorari, 393 Md. 477 , 903 A.2d 416 (2006), in order to address the following issue: ⁴⁹ Did the Court of Special Appeals err in finding that a member of the board of directors of a corporation did not breach his fiduciary duties to the corporation when he sued for severance payment in his capacity as an aggrieved former employee, obtained summary judgment by default when the corporation failed to file an opposition to the motion for summary judgment, attached the bank accounts of the corporation in order to enforce the resultant monetary judgment, and opposed the corporation’s efforts to have that judgment and garnishment set aside? [ 7 ] II. STANDARD OF REVIEW Pursuant to Maryland Rule 8—131 (c) (2006 Repl. Vol.), “[w]hen an action has been tried without a jury, the appellate court will review the case on both the law and the evidence.

It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.” When reviewing the findings of fact of the Circuit Court, we determine not whether the court’s conclusions of fact were correct, but whether they were supported by a preponderance of the evidence adduced at trial. Urban Site Venture II Ltd. P’ship v. Levering Assocs. Ltd. P’ship, 340 Md. 223, 229-30 , 665 A.2d 1062, 1065 (1995) (citing Ins. Comm’r v. Nat’l Bureau, 248 Md. 292, 305 , 236 A.2d 282, 289 (1967)).

When an appellate court reviews a trial court’s determinations of legal questions or conclusions of law based on those findings of fact, however, the clearly erroneous standard does not apply. Heat & Power Corp. v. Air Prods. & Chem. Inc., 320 Md. 584, 591 , 578 A.2d 1202, 1205 (1990). Instead, it reviews de novo the trial court’s relation of those facts to the applicable law.

Space Aero Prods. Co. v. R.E. ⁵⁰ Darling Co., 238 Md. 93 , 208 A.2d 74 (1965) (“[W]hen an action has been tried by the lower court without a jury, the judgment of the lower court will not be set aside on the evidence unless clearly erroneous. If there is substantial evidence to support the lower court’s factual conclusion, that finding must be reviewed in the light most favorable to the prevailing party below. The conclusions of law based upon the facts, however, are reviewable by this Court.”) (internal citations omitted).

In other words, in order to determine in the present case whether Gurland’s actions constituted a breach o f his fiduciary duty owed to the corporation, this Court must undertake appellate review of the trial court’s disposition in two stages: First, we review for clear error the Circuit Court’s underlying findings of facts, leaving them undisturbed if supported by a preponderance of the evidence. Second, applying a de novo standard, we must determine whether the trial judge correctly concluded that the facts, as he found them to be, legally constituted a breach of fiduciary duty and bad faith. Della Ratta v. Larkin, 382 Md. 553, 577 , 856 A.2d 643, 657 (2004) (holding that the evidence adduced at trial was sufficient to support a trial court’s finding that a general partner in a limited partnership breached his fiduciary duty owed to the other partners).

III

DISCUSSION The Circuit Court’s findings of fact were supported amply by the record. The facts pertinent to this case were at the outset largely undisputed. The employment agreement set out in detail the termination provisions at the center of the controversy. The written correspondence between the parties supports the Circuit Court’s findings as to Gurland’s notice to the corporation that a court action would commence in the event that the parties were unable to resolve amicably the severance pay issue arising out of his termination.

Neither Gurland nor Storetrax point in their briefs to any evidence contradicting the Circuit Court’s factual determinations. Thus, we accept the trial court’s findings of fact as supported by a preponderance of the evidence. ⁵¹ The primary issue before this Court, therefore, is whether the trial court applied properly the pertinent law to its findings of fact in reaching the conclusion that Gurland, by his conduct in pursuing his severance pay claim, did not breach his fiduciary obligations owed to Store trax by virtue of his membership on the corporation’s board of directors. A. A Nod to Choice of Law Principles The parties expressed ambivalence before the Court of Special Appeals and here whether Delaware 8 or Maryland law should control the disposition of this case. Even though Storetrax is a Delaware corporation, all the events giving rise to the relevant cause of action occurred in Maryland. 9 As the Court of Special Appeals determined, the “internal affairs doctrine” probably required that the Circuit ⁵² Court apply Delaware law to the present case.

That doctrine has been annunciated by this Court as: With regard to foreign corporations, Maryland courts have traditionally declined to interfere in management disputes under the “internal affairs doctrine.” See, e.g., Berger v. Bata Shoe Co., Inc., 197 Md. 8 , 78 A.2d 186 (1951); O’Hara v. Frenkil, 155 Md. 189 , 141 A. 528 (1928); Condon v. Mutual Reserve Fund Life Assn., 89 Md. 99 , 42 A. 944 (1899); North State Copper & Gold Min. Co. v. Field, 64 Md. 151 , 20 A. 1039 (1885); Wilkins v. Thorne, 60 Md. 253 (1883). As described by the Supreme Court in Edgar v. MITE Corp., 457 U.S. 624 , 102 S.Ct. 2629 , 73 L.Ed.2d 269 (1982): “[t]he internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs-matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders-because otherwise a corporation could be faced with conflicting demands.” 457 U.S. at 645 , 102 S.Ct. at 2642 . N.A.A.C.P. v. Golding, 342 Md. 663 , 673-74, 679 A.2d 554 , 559 (1996).

Thus, the laws of the state of incorporation generally will govern matters involving the internal workings of a corporation except where, considering a set of common law factors annunciated in the Restatement (Second) of Conflicts of Laws, 10 a different state has the most significant relationship with the controversy. ⁵³ The parties have not provided, and we cannot discern the difference, if any, in the outcome of this case whether the laws of Maryland or Delaware are applied to the facts of the present case. Counsel for Petitioner conceded at oral argument before this Court that there appears to be no difference between Maryland and Delaware law in terms of the duties owed a corporation by the members of its board of directors. Thus, any technical error on the part of the Circuit Court in its analysis of choice of law principles was harmless. B. Breach of Fiduciary Duty 1.

Filing the Initial Lawsuit and Pursuing the Entry of Summary Judgment by Default. It is well-settled that directors of a corporation “[o]ceupy a fiduciary relation to the corporation and its stockholders.” Booth v. Robinson, 55 Md. 419, 436-37 (1881); see Merchants Mortgage Co. v. Lubow, 275 Md. 208, 215 , 339 A.2d 664, 669 (1975); Cumberland Coal & Iron Co. v. Parish, 42 Md. 598, 605-06 (1875); Malone v. Brincat, 722 A.2d 5, 10 (Del.1998) (“The directors of Delaware corporations stand in a fiduciary relationship not only to the stockholders but also to the corporations upon whose boards they serve.”) (citing Guth v. Loft, 5 A.2d 503, 510 (Del.1939)). This fiduciary relationship requires that a director “perform his duties ... :(1) In good faith; (2) In a manner he reasonably believes to be in the best interests of the corporation; and (3) With the care that an ordinarily prudent person in a like position would use under similar circumstances.” MD. CODE ANN.

(1976, 1999 Repl. ⁵⁴ Vol.), CORPS. & ASS’NS ART., § 2-405.1(a); see also Werbowsky v. Collomb, 362 Md. 581, 599 , 766 A.2d 123, 133 (2001); Devereux v. Berger, 264 Md. 20, 29 , 284 A.2d 605, 611 (1971) (holding, prior to adoption of § 2-405.1, that directors of a corporation owe both a duty of care and loyalty to a corporation). As such, directors of a corporation “are entrusted with powers which are to be exercised for the common and general interest of the corporation, and not for their own private individual benefit.” Booth, 55 Md. at 436-37 . Stated another way, “The affairs of corporations are generally intrusted to the exclusive management and control of the board of directors; and there is an inherent obligation, implied in the acceptance of such trust, not only that they will use their best efforts to promote the interest of the shareholders, but that they will in no manner use their positions to advance their own individual interest as distinguished from that of the corporation, or acquire interests that may conflict with the fair and proper discharge of their duty. The corporation is entitled to the supervision of all the directors, in respect to all the transactions in which it may be concerned; and if one of the directors is allowed to place himself in the position of having his conduct and accounts made the subject of supervision and scrutiny, he, of course, cannot act, in regard to those matters, both for himself and the corporation. ” Indurated Concrete Corp. v. Abbott, 195 Md. 496, 503-04 , 74 A.2d 17, 20 (1950) (quoting Cumberland Coal & Iron Co., 42 Md. at 605-06 ).

This fiduciary duty, furthermore, is not intermittent or occasional, but instead “the constant compass by which all director actions for the corporation and interactions with its shareholders must be guided.” Malone, 722 A.2d at 10 . The Court of Special Appeals in the present case was correct to point out, however, that situations may arise where a corporate director, despite the requirement that a director ⁵⁵ adhere strictly to his or her fiduciary obligations, may proceed with an individual plan of action even though the director’s interests conflict directly with those of the corporation on whose board he or she sits. Storetrax, 168 Md.App. at 83 , 895 A.2d at 374-75 . “ ‘[A]n interest conflict is not in itself a crime or a tort or necessarily injurious to others’ and ‘in many situations, the corporation and the shareholders may secure major benefits from a transaction despite the presence of a director’s conflicting interest.’ ” Shapiro v. Greenfield, 136 Md.App. 1, 14 , 764 A.2d 270, 277 (2000) (quoting DENNIS BLOCK, NANCY BARTON, & STEPHEN RADIN, 1 THE BUSINESS JUDGMENT RULE: FIDUCIARY DUTIES OF CORPORATE DIRECTORS 266 (5th ed.1998) (citing in turn 2 Model Bus. Corp. Act.

Ann §§ 8.60 to .63, Intro. Comment at 8-397 (3 d ed.1996))). Commentators and courts in other jurisdictions have held that “a director or other corporate officer is not precluded from bringing an action against the corporation merely because he or she is a director or other officer, although to some extent the director or officer then represents both sides.” 3 WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 960 (perm.ed., rev. vol.1999) (hereinafter “FLETCHER”); Hutchinson v. Phila. & Gulf S.S. Co., 216 F. 795, 798 (D.C.1914) (holding that no rule of law or equity prohibits a director from bringing suit against the company if he or she has a colorable claim); Henshaw v. Am. Cement Corp., 252 A.2d 125, 126-27 (Del.Ch.1969); see generally also Sullivan v. Easco Corp., 656 F.Supp. 531 (D.Md.1987) (addressing, under Maryland law, whether a corporate director’s right to exercise stock options, pursuant to an employment agreement between the director and the corporation obtained during the course of his employment as officer of the corporation, expired upon termination of his position).

Counsel for Petitioner conceded at oral argument before this Court that Gurland was not precluded from filing or maintaining the complaint against Storetrax. Counsel posited rather that the breach of fiduciary duty occurred when Gur ⁵⁶ land was silent “in the face of Storetrax’s obvious ignorance of the lawsuit.” When Petitioner did not file a response to Respondent’s complaint and motion for summary judgment, according to Storetrax, Gurland should have been aware that some problem existed with notice to the corporation and, by pursuing summary judgment by default, Gurland put his personal interests ahead of the corporation in violation of his fiduciary obligations. We have not addressed such a situation before, nor have we been able to find authority from another jurisdiction directly on point with the factual circumstances of the present case. We find apt, however, the reasoning employed by Maryland’s intermediate appellate court here analogizing the conflicts which arise when a director sues his or her own corporation with those conflicts of interest which occur when a contract is entered between a corporation and one of its directors with a financial interest in the subject matter of the transaction.

When a member of a corporation’s board of directors conducts business with his or her own corporation, as was the case here, there is an appreciable possibility that, at some point, the director’s interests will diverge from the interests of the corporations. Where such a conflict of interest arises, courts scrutinize closely those dealings in order to ensure that the transaction is carried out consistent with notions of good faith and fair dealing on the part of the director. See, e.g., Chesapeake Constr. Corp. v. Rodman, 256 Md. 531, 536 , 261 A.2d 156, 158 (1970); Indurated Concrete Corp., 195 Md. at 503-04 , 74 A.2d at 20 ; McRedmond v. Estate of Marianelli, 46 S.W.3d 730, 739-40 (Tenn.Ct.App.2000); Boston Children’s Heart Found., Inc. v. Nadal-Ginard, 73 F.3d 429, 433-34 (1st Cir.1996) (applying Massachusetts law).

With this in mind, under both Maryland and Delaware law, the director may find “safe harbor” by disclosing to the corporation the conflict of interest and pertinent facts surrounding the conflict so that a majority of the remaining disinterested shareholders or directors may ratify the ⁵⁷ transaction or, as the case may be, otherwise take action to protect the corporation’s financial interests. Section 2—419(a)—(b) of the Corporations and Associations Article, Maryland Code (1976, 1999 RepLVol.), governs such interested director transactions, and provides: (a) General Rule.—If subsection (b) of this section is complied with, a contract or other transaction between a corporation and any of its directors ... is not void or voidable solely because of any one or more of the following: (1) The common directorship or interest; (2) The presence of the director at the meeting of the board or a committee of the board which authorizes, approves, or ratifies the contract or transaction; or (8) The counting of the vote of the director for the authorization, approval, or ratification of the contract or transaction. (b) Disclosure and ratification.—Subsection (a) of this section applies if: (1) The fact of common directorship or interest is disclosed or known to: (i) The board of directors or the committee, and the board or committee authorizes, approves, or ratifies the contract or transaction by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum; or (ii) The stockholders entitled to vote, and the contract or transaction is authorized, approved, or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested directors ...; or (2) The contract or transaction is fair and reasonable to the corporation. See also Sullivan, 656 F.Supp. at 583-35 (discussing the history, purpose, and effect of § 2-419 as it pertains to employment agreements entered between a corporate director and the corporation); DEL.

CODE ANN. tit. 8, § 144 (1953, 2005 Supp.). Thus, § 2-419 provides that “an interested director transaction is not void or voidable solely because of the conflict of interest and creates a ‘safe harbor’ for certain transactions which satisfy the statute.” Shapiro , 136 Md.App. ⁵⁸ at 14, 764 A.2d at 277 . Under the statute, therefore, the transaction is not a breach of the interested director’s fiduciary obligations to the corporation as long as the interested director informs the corporation and its directors of the conflicting interests and gives the board an opportunity to approve the transaction, i.e., protect the corporation’s interests. Shapiro, 136 Md.App. at 14-15 , 764 A.2d at 277 .

Indeed, we have held that “[i]t is clear that officers and directors of a corporation stand in a sufficiently confidential relation to the corporation’s stockholders [and the corporation] to impose a duty upon them to reveal all facts material to the corporate transactions.” Parish v. Md. & Va. Milk Producers Ass’n, 250 Md. 24, 74 , 242 A.2d 512, 539 (1968), aff'd on reh’g, 261 Md. 618 , 277 A.2d 19 , cert. denied, 404 U.S. 940 , 92 S.Ct. 280 , 30 L.Ed.2d 253 (1971) (concluding that a director’s sale of assets of a dairy owned by a dairy farm cooperative, which, according to this Court, was analogous to a situation involving directors of a corporation, to a corporation for less than cost, without security, and without any payments, was gross negligence and mismanagement on the part of the director); Booth, 55 Md. at 436-37 (“The confidence reposed in [a corporate director], and the position they occupy towards the corporation and its stockholders, requires strict and faithful discharge of duty, and they are not allowed to derive from their position, either directly or indirectly, any profit or advantage whatever, except it be with full knowledge and concurrence of the company, represented by other than themselves.”) (emphasis added). 11 Although the analogy is by no means perfect, applying to the present case a requirement that the director notify the corporation of his intention to file a lawsuit against the corporation allows the director to assert his or her legal rights ⁵⁹ against the corporation while giving the corporation, at the same time, the opportunity to act in defense of its own interests. In other words, this approach strikes the proper balance between Gurland’s claimed legal right to seek severance payment under the terms of his employment agreement while, at the same time, requiring him also to fulfill his fiduciary obligation to act in Storetrax’s best interests. In the present case, there existed a conflict between Respondent’s interests as an aggrieved former employee and his duty as a director of the corporation.

His personal interests were adverse to those of the corporation because threatened or actual litigation is adversarial in nature. While Gurland endeavored to obtain severance payment under the employment agreement, he held at the same time a position of trust with Storetrax and was impressed with an obligation to act in the best interests of the corporation. Gurland’s seeking severance pay from Storetrax in the amount of $150,000 clearly was not in the corporation’s best interests. Under the circumstances, however, we believe that Respondent notified sufficiently the Petitioner of the imminence of a lawsuit such that he may claim the protections of the “safe harbor” annunciated above.

Respondent drafted and delivered to Storetrax on 11 December 2001 a letter outlining in detail his claimed entitlement to severance benefits under the termination provisions of the employment agreement. Included in that letter was a statement that Gurland had “consulted an attorney and [would] not hesitate to avail [himself] of every possible