Wael Al-Mazeedi, Mitsue Oishi, and BTU Holdings Company lose another round against Abdulmohsen Hayat - complete Memorandum and Order issued on January 10, 2011 re: their Motion to Dismiss Hayat's Amended Complaint.

The following is the COMPLETE memorandum and order issued (January 10, 2011) by the trial judge in the Hayat vs. Al-Mazeedi, Oishi, and BTU Holdings Company lawsuit.  It's very informative reading for anybody wanting to get a better handle on the genesis of BTU's litigious "track record."

ABDULMOHSEN HAYAT, on his behalf and on behalf of all other shareholders of BTU HOLDINGS COMPANY and individually

vs.

WAEL AL-MAZEEDI, MITSUE OISHI, and BTU HOLDINGS COMPANY

1. Breach of Fiduciary Duty (Hayat v. Al-Mazeedi and Oishi)
2. Breach of Contract (Hayat v. Al-Mazeedi, Oishi, and Holdings)
3. Diversion of Corporate Opportunity (Hayat on behalf of Holdings v. Al-Mazeedi and Oishi)
4. Claim for Declaratory Judgment under M.G.L. c. 231A § 1 (Hayat v. Al-Mazeedi, Oishi, and Holdings)

link: Hayat Verified Amended Complaint

BTU Holdings Company, Wael Al-Mazeedi, and Mitsue OIshi filed a Motion to Dismiss Hayat's Verified Amended Complaint. The trial court judge DENIED their Motion to Dismiss on January 10, 2011 (except for Count 2, as to Al-Mazeedi and Oishi but NOT Holdings).

link: Memorandum and Order on Defendants' Motion to Dismiss Verified Amended Complaint

The "background" of the lawsuit as included in the Hayat Verified Amended Complaint as well as the relevant extracts regarding the specific detail of each of the counts above follows:


"Background" as included in the Hayat Amended Complaint

This is an action arising from a freeze-out in a closely-held corporation, also known as a "quasi-partnership." The Plaintiff, Abdul Mohsen Hayat ("Hayat") owns 44 percent of the stock of BTU Holdings Company ("Holdings"). The husband-and-wife Defendants own the remaining 56 percent of the stock of Holdings.

• For the past several years, the Defendants have denied Hayat access to corporate books and reports, failed to pay an agreed-upon monthly sum, failed to distribute dividends, and usurped corporate opportunities for themselves.
• The Defendants have also deprived Hayat of all rights and privileges arising from Hayat's ownership stake, all in violation of their fiduciary duties to Hayat and to Holdings.

COUNT I

(Breach of Fiduciary Duty)

(Hayat v. Al-Mazeedi and Oishi)

41. Hayat restates the allegations made in paragraphs 1 through 40 above, as if fully set forth herein.

42. As the directors and majority shareholders in a quasi-partnership company, one that was founded on the basis of a personal relationship of mutual trust and confidence, and with the understanding that Hayat would be actively involved in the management of the business, the individual Defendants Al-Mazeedi and Oishi, on the one hand, and the minority shareholder, Hayat, on the other hand, have a relationship of trust and confidence similar to that obtaining between partners.

43. The parties' quasi-partnership relationship gave rise to fiduciary obligations owed by directors and shareholders Al-Mazeedi and Oishi to Hayat, the minority shareholder.

44. Al-Mazeedi and Oishi breached their fiduciary duties to Hayat by misappropriating funds from Holdings for their own purposes, by diverting monies which ought to have been distributed to shareholders, and by freezing out Hayat.

45. Such misappropriations and actions contributing to the freeze-out caused direct harm to Hayat by denying him a personal payment in his capacity as a shareholder of any profits made by Holdings, which profits ought to have been distributed to the shareholders had Al-Mazeedi and Oishi acted in accordance with their fiduciary duties and the expectations Hayat derived from the quasi-partnership structure.

WHEREFORE, Hayat prays the Court enter judgment in his favor against Al-Mazeedi and Oishi, in an

amount to be determined by the Court, with interest and costs, including reasonable attorneys' fees.

COUNT II

(Breach of Contract)

(Hayat v. Al-Mazeedi, Oishi, and Holdings)

46. Hayat restates the allegations made in paragraphs 1 through 45 above, as if fully set forth herein.

47. The Defendants and Hayat had a contract by which Hayat would receive $20,000 per month, with an annual 5 percent increase, from Holdings.

48. Since January 2006, the Defendants have caused Holdings to withhold such payment, in breach of the contract.

49. Hayat has suffered damages as a result of the Defendants' breach.

WHEREFORE Hayat prays the Court enter judgment in his favor against the Defendants, in an amount to be

determined by the Court, with interest and costs, including reasonable attorneys' fees.

COUNT III

(Diversion of Corporate Opportunity)

(Hayat on behalf of Holdings v. Al-Mazeedi and Oishi)

50. Hayat restates the allegations set forth paragraphs 1 through 49 above, as if fully set forth herein.

51. In taking the $8 million consulting fee, Al-Mazeedi and Oishi failed first to offer the opportunity to a BTU Group company in which Holdings had a controlling ownership interest.

52. Al-Mazeedi and Oishi failed to offer the consulting opportunity to Hayat or, upon information and belief, to any entity affiliated with Hayat, and they failed even to inform Hayat of their consulting arrangement.

53. Upon information and belief, Al-Mazeedi and Oishi transferred the management agreement with Power II to BTU Power Management Asia, without offering the opportunity to a BTU Group company in which Holdings had a controlling ownership interest.

54. Upon information and belief, Al-Mazeedi and Oishi transferred the management agreement with Power II to BTU Power Management Asia, without offering the opportunity to Hayat or to any entity affiliated with Hayat, and they failed even to inform Hayat of the transfer.

55. Al-Mazeedi and Oishi have caused harm to Holdings by improperly diverting Holdings' assets for their exclusive and personal benefit, without conferring a reciprocal benefit on the corporation.

56. Al-Mazeedi and Oishi's acts of self-dealing have provided them and/or entities that they control with substantial benefits at the expense of Holdings.

WHEREFORE, Hayat, derivatively on behalf of Holdings and the shareholders thereof, prays the Court enter judgment in plaintiffs' favor against Al-Mazeedi and Oishi in an amount to be determined by the Court, with interest and costs, including reasonable attorneys' fees.

COUNT IV

(Claim for Declaratory Judgment under M.G.L. c. 231A § 1)

(Hayat v. Al-Mazeedi, Oishi, and Holdings)

57. Hayat restates the allegations set forth in paragraphs 1 through 56 above, as if fully set forth herein.

58. There exists an actual controversy with respect to the scope of Hayat's rights as a shareholder of Holdings.

59. Unless the Court clarifies the scope of Hayat's rights as a shareholder, the Defendants will continue to orchestrate their "freeze-out."

WHEREFORE Hayat prays the Court enter judgment in his favor against the Defendants, declaring the extent and scope of his rights as a shareholder in a quasi-partnership company such as Holdings, including but not limited to Hayat's right: 

1. to participate actively in the management of Holdings and the BTU Group companies; 
2. to serve as a member of the board of directors of Holdings and the BTU Group companies; 
3. for an accounting of the profit and loss accounts and balance sheets of Holdings and the BTU Group companies on an annual basis, in the context of an ordinary general meeting or otherwise; 
4. to have all sums improperly diverted from Hayat or Holdings (and/or the BTU Group companies) by Al-Mazeedi and Oishi, either directly via improper withdrawals of profits and payment of expenses, or indirectly via diversion of corporate opportunities, restored to Hayat and Holdings (and/or the BTU Group companies:
5. to recover his share of the profits of Holdings and the BTU Group companies, both retrospectively and prospectively; 
6. to recover his share of the profits, both retrospectively and prospectively, of companies to which Al-Mazeedi and Oishi have improperly diverted corporate opportunities of Holdings (and/or the BTU Group companies); and 
7. to receive the agreed upon monthly payments.