(CN) - Bore-Flex Industries, a Missouri-based manufacturer of plumping pipes, won dismissal of a shareholder action alleging company directors improperly received payments on promissory notes issued to them.
The notes, executed as part of a recapitalization plan, held an interest rate of six percent per year. Director Carl Junger received payments totaling $710,000 from 2006-2011 on his note, while Director Michael Morgan received $365,000, and others received lesser amounts.
In 2011, Jungers and Morgan voted to adopt a resolution to amend the loan notes to provide for payment on par with the company's unsecured creditors.
This amendment meant that when the company was sold in 2011, the directors were partially repaid - Bore-Flex's assets did not cover the entire balances of the notes - and investors received nothing.
The stiffed investors sued the directors and their attorneys for breach of contract, but a state judge ruled for Bore-Flex, and a Missouri appeals court upheld that ruling last week.
"Nothing in those supplied definitions contradicts, modifies, or creates an ambiguity in any of the provisions in the notes. Thus, the trial court did not err in finding as a matter of law that that the notes did not have to be paid exclusively or solely from the sale of the [company's products]," the panel said in an unsigned opinion.
The court also granted Bore-Flex's motion for a protective order and the return of documents protected by attorney-client privilege.