Significant Ruling in Fryar Law Firm's Case

On January, 13, 2011, the United States Bankruptcy Court of the Southern District of Texas (Judge Bohm) issued a very significant and thoughtful opinion addressing important issues in Delaware and Texas shareholder oppression law. Fryar Law Firm originally filed Schermerhorn v. Centurytel in state court in Houston, Texas. Fryar Law Firm and its co-counsel represent former minority shareholders of SkyComm Technologies, Inc. (a Delaware corporation). Prior to the filing of the suit, SkyComm's wholly-owned subsidiary, Skyport Global Communications, Inc. (a Texas corporation) had been in bankruptcy and had been merged with SkyComm, leaving Skyport as the surviving corporation and extinguishing the shares of the SkyComm shareholders. Fryar Law Firm's lawsuit pleaded various claims for breach of fiduciary duties, shareholder oppression, and fraud against certain former directors and controlling shareholders of SkyComm. The defendant's removed the case to the bankruptcy court and moved to dismiss all claims as barred by the bankruptcy. In ruling on the motion, the Bankruptcy Court had to decide many important issues dealing with the effect of a bankruptcy on shareholder oppression claims and whether such claims are direct or derivative. While the motion was granted as to certain claims brought by the plaintiffs, the Court held that the majority of the claims were direct claims and survived the bankruptcy. Those claims will be remanded to state court.