Rel liquidating trust

10-May-2020 01:01 by 9 Comments

Rel liquidating trust

Count two states a claim for breach of the duty of care against Magnacca in his capacity as CEO. Radio Shack Corporation was a well-established retailer of consumer electrical goods for almost a century.

In return, Magnacca allegedly guided Radio Shack into an ill-fated recapitalization transaction with Standard General and away from other alternatives that would have brought more value to the company.

He caused Standard General to appoint Magnacca to the board of directors of American Apparel, a struggling company in which Standard General had a substantial interest. This articulation of the Revlon duty presents two initial problems for the Trust, the first of which is easily disposed of. The Trust alleges that Radio Shack was insolvent at all relevant times.

(AC ¶ 40) Kim advised Magnacca that it was an "important time for [Magnacca] to begin to establish [himself] beyond [Radio Shack]" because given what was happening at Radio Shack "having something else going on might be healthy." (Id.) The board of Radio Shack approved Magnacca's request to serve on American Apparel's board. Revlon and Lyondell speak in terms of procuring the best price for the benefit of stockholders. So, if Revlon applies, it is of no moment that no recovery may reach stockholders.

(AC ¶ 37) The plaintiff, RSH Liquidating Trust, was created by Radio Shack's plan of reorganization, which was confirmed on October 2, 2015. (AC ¶ 25) To assist Magnacca, the company hired Alix Partners to provide restructuring advice and Peter J. Capital Loan"); and a 0 million term loan with Salus Capital Partners (the "Salus Loan").

(AC ¶ 19) The Trust was empowered by the plan to continue this lawsuit, which originally was filed by the Official Committee of Unsecured Creditors for Radio Shack. Solomon Company ("PJSC") to assist in raising capital. (AC ¶¶ 27-28) Significantly, the Salus Loan prohibited Radio Shack from closing more than 200 stores in a year without Salus's consent.

According to the Trust, Standard General's attempts to co-opt Magnacca's loyalty manifested themselves both in actions and assurances.

It also alleges that Radio Shack's independent directors were fully aware of Magnacca's conflicted loyalties and yet permitted him to pursue his personal agenda, knowing that it likely would spell disaster for the company.

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That is because if there is no satisfactory answer, it suggests that the duty at issue is not loyalty, but care.

(Id.) Those operations ceased when the company closed more than half its operations, and sold substantially all of its remaining locations to Standard General.

(Id.) Standard General is an investment firm that manages "event driven" opportunity funds. Woodbury are former members of Radio Shack's board.

In this case, the plaintiff, a trust created for the benefit of Radio Shack's creditors, alleges that chief executive officer and director Joseph Magnacca engineered a transaction that delivered Radio Shack into the hands of Standard General, its largest shareholder, in order to further Magnacca's personal ambitions.