Rifkin v. Steele Platt
Colorado Court of Appeals
824 P.2d 32 (Colo. App. 1991)
Steele Platt and Fas-Wok, Inc. (defendants) sold their controlling interest in The Boiler Room to Robert Rifkin and others (plaintiffs). The new owners sued, claiming Platt had misappropriated company funds and breached his fiduciary duties while he ran the business, and the trial court agreed, entering judgment for the plaintiffs. Platt appealed, arguing under Bangor Punta Operations, Inc. v. Bangor & Aroostook R.R. that a shareholder who buys at a fair price can't later recover for mismanagement that predates the purchase. The parties agreed the alleged breach happened before the sale but disputed whether the purchase price already reflected it.
Whether a shareholder who acquired all or substantially all of a company's shares from a seller at a fair price may recover, on the corporation's behalf, for that seller's prior mismanagement.