FIASILI HALECK, RAYMOND M. McMOORE, v.TRT, INC., AMERICAN SAMOA 2000, INC

FIASILI HALECK, RAYMOND M. McMOORE, SESE
McMOORE, on behalf of themselves and as shareholders of TRT,
Inc., Plaintiffs,
v.
TRT, INC., AMERICAN SAMOA 2000, INC., AGAOLEATU C.
TAUTOLO, AGAESE ACE TAGO, MURRAY R. DRAKE,
RAYMIE P. SNOW, and DOES I-XX, Defendants.
High Court of American Samoa
Trial Division
CA No. 20-02
September 16, 2002

 

[1] Complaint is interpreted in light most favorably to plaintiff in

deciding motion to dismiss for failure to state cause of action.
[2] Great specificity is not required to survive motion to dismiss as long
as pleadings give notice of nature of claims.
[3] Motions to dismiss are viewed with disfavor and are rarely granted.
[4] Fundamental incident of corporate ownership is right of shareholders
to inspect books and records of corporation whose stock they hold.
[5] In derivative action to inspect books and records of corporation, to
withstand motion to dismiss for failure to state cause of action, plaintiffs
need only plead that they are stockholders, they made demands to
examine records, they have proper purpose, and their demands were
refused.
[6] Complaint must be amended when each count of complaint fails to
incorporate previous paragraphs detailing allegations of action.
[7] Shareholder derivative actions are governed by T.C.R.C.P. 8-12 and
T.C.R.C.P. 23.1. Rule 23.1 requires that complaint be verified and allege
(1) that plaintiffs were shareholders at time of transactions about which
they complain; (2) that action is not collusive one to confer jurisdiction
on court of American Samoa; (3) efforts made to obtain relief requested
from directors of corporation and, if necessary, from shareholders; and
(4) reasons for failure to obtain such relief or for not making the effort.
Before RICHMOND, Associate Justice, and LOGOAI, Chief Associate
Judge.
Counsel: For Plaintiffs, Charles V. Ala´ilima
For Defendants TRT, Inc., American Samoa 2000, Inc., and
Agaoleatu C. Tautolo, William H. Reardon
ORDER DENYING MOTION TO DISMISS
Plaintiffs Fiasili Haleck (“Haleck”), Raymond McMoore and Sese
McMoore (together “the McMoores”) filed a five-count complaint styled
primarily as a shareholder’s derivative suit. Though the prayer suggests
that the first count is a derivative action, Haleck and the McMoores
developed this count for relief in their personal capacities. In the last
count, Haleck clearly asserts relief in her personal capacity. Defendants
TRT, Inc. (“TRT”), American Samoa 2000, Inc. (“AS2000”), and
Agaoleatu C. Tautolo (“Agaoleatu”) moved, pursuant to T.C.R.C.P.

12(b)(6), to dismiss the complaint on the ground that each of the five
counts failed to state a claim upon which relief can be granted.1 The
Court has considered counsel’s arguments and will deny the motion.
Standard of Review
[1-3] In deciding a motion to dismiss for failure to state a cause of
action, the complaint is interpreted in light most favorably to the
plaintiff. See Beaver v. Cravens, 17 A.S.R.2d 6, 8 (Trial Div. 1990);
T.C.R.C.P. 8(f). The facts as alleged in the complaint are accepted as
true. Abramson v. Brownstein, 897 F.2d 389, 391 (9th Cir. 1990). Great
specificity is not required to survive a motion so long as “the pleadings
give the defendant notice of the nature of the claims against him.”
Morse v. Regents of University of Colorado, 154 F.3d 1124, 1127 (10th
Cir. 1998); see also ASG Employees Federal Credit Union v. Gurr, 26
A.S.R.2d 87, 94 (Trial Div. 1994); T.C.R.C.P. 8(e)(1) (pleading shall be
simple, concise and direct). Indeed, when read in conjunction with
T.C.R.C.P. 8, motions to dismiss are “viewed with disfavor and [are]
rarely granted.” 5A CHARLES A. WRIGHT & ARTHUR R. MILLER,
FEDERAL PRACTIVE AND PROCEDURE § 1357 (1990); compare Pene v.
Am. Samoa Power Auth., 4 A.S.R.2d 152, 154 (Trial Div. 1987)
(dismissing without prejudice).
I. Sufficiency of the Pleadings
In light of this liberal standard, we conclude that all five counts of the
complaint properly put forth causes of actions.
A. Misrepresentation
In the first cause of action, Haleck and the McMoores claim that
Agaoleatu and Tago intentionally or negligently misrepresented to them
the interest that TRT would acquire in the McDonald’s franchise.
Drawing all reasonable inferences in favor of Haleck and the McMoores,
their pleadings, both explicitly and implicitly, support such a claim.2
1 As of the date of entry of this order, defendants Agaese Ace Tago,
Murray R. Drake, and Raymie P. Snow have not been served of record
with process, and have not answered the complaint or otherwise
appeared in this action.
2 In their opposition to the motion to dismiss, Haleck and the McMoores
frame their argument in terms of promoter liability for nondisclosure.
Technically, promoter liability applies to preincorporation activities. See
18 AM. JUR. 2D Corporations §§ 98-149 (1985). Under this theory,
Agaoleatu and Tago might be liable if their conduct were related to the

B. Injunctive Relief
In the second cause of action, Haleck and the McMoores on behalf of
themselves and similarly situated shareholders seek an injunction barring
Agaoleatu, Tago, Drake, and Snow from continuing to represent
themselves as TRT’s current board. This stems from the allegations that
Agaoleatu, Tago, Drake, and Snow do not constitute a duly appointed
board. Assuming this to be true, all acts of this new board are unlawful
and void. See Beaver v. Cravens, 19 A.S.R.2d 14, 26 (Trial Div. 1991).
An injunction may therefore be the appropriate remedy. See Lutali v.
Foster, 24 A.S.R.2d 39, 41 (Trial Div. 1993).
C. Audit
[4] By the third cause of action, Haleck and the McMoores on behalf of
themselves and similarly situated shareholders also seek access to the
records of TRT and AS2000 for purposes of conducting a pretrial
independent audit. “One of the basic incidents of corporate ownership is
the right of shareholders . . . to inspect the books and records of the
corporation whose stock they hold.” Fleisher Dev. v. Home Owners
Warranty Corp., 856 F.2d 1529, 1530 (D.C. Cir. 1988); see also
A.S.C.A. § 30.0160(b).3 The right was originally recognized under the
common law but most jurisdictions, including American Samoa, have
enacted statutes that should be read as enlarging or, at the very least,
codifying that right. See, e.g., Schwartzman v. Schwartzman Packing
Co., 659 P.2d. 888, 891 (N.M. 1983); 18 AM. JUR. 2D Corporations §
348 (1985). Despite the arguments to the contrary put forward by
Agaoleatu, TRT, and AS2000, we therefore conclude that a right to
incorporation of AS2000. However, if liability stems from their conduct
in soliciting money for TRT, then the tort of misrepresentation seems to
better suit their legal theory of recovery. In either case, we will not
dismiss as long as the pleadings contain “allegations respecting all the
material elements to sustain recovery under some viable legal theory.”
Lewis v. ACB Business Servs., Inc., 135 F.3d 389, 406 (6th Cir. 1998)
(emphasis added; citations omitted).
3 A.S.C.A. § 30.0160(b) provides, in part:
Any corporation organized under the laws of American Samoa
shall be subject to the right of . . . any person who is a
stockholder of record of any such corporation, to call for the
production of and to examine, in person or by duly authorized
agent or attorney, at any reasonable time or times and for
proper purpose, the stock records, minutes and records of
stockholders meetings, and the books and records of accounts,
and to make extracts therefrom.

inspection does exist in the Territory.
[5] In order to proceed at this stage in the lawsuit, Haleck and the
McMoores need only plead that they are stockholders, that they made
demands to examine the records, and that their demands were refused.
See generally 18 AM. JUR. 2D Corporations § 411, n.28 (1985).
Additionally, A.S.C.A. § 30.0160(b), as do most statutes, requires a
showing of proper purpose. The allegations of Haleck and the
McMoores meet these requirements and, within the facts of these
pleadings, their motives for inspection are indeed proper. See In re LTV
Secs. Litigation, 89 F.R.D. 595, 610 (N.D. Tex. 1981) (investigation of
improper corporate management deemed proper purpose); Hagy v.
Premier Mfg. Corp., 172 A.2d 283, 286 (Pa. 1961) (same).
D. Breach of Fiduciary Duty
In the fourth cause of action, Haleck and the McMoores for themselves
and similarly situated shareholders claim that Agaoleatu, as a director
and controlling shareholder of TRT, has breached his fiduciary duty to
the corporation. This cause of action has been properly plead and is
supported by our own case law. See Haythornwaite v. Transpac Corp., 6
A.S.R.2d 110, 111 (Trial Div. 1987).
E. Guarantee
In the fifth and last cause of action, Haleck in her personal capacity
claims that as guarantor of the bank loan to TRT, she is entitled to
payment of guarantee fees and that these payments have been withheld.
It appears that Haleck means to state that, in consideration for
undertaking to guarantee the loan, TRT agreed to pay Haleck guarantee
fees, and she therefore has a cognizable claim. The lack of an express
allegation to this effect is probably oversight. However, Haleck and the
McMoores should amend their pleadings to include a reference to the
basis for Haleck’s fees.
II. Pleading Amendments
Despite our ruling, there are certain deficiencies in the pleadings that
need to be corrected. The deficiencies are not, however, fatal to the case
pled by Haleck and the McMoores.
[6] First, in addition to matters noted above, each count of the complaint
failed to incorporate the previous paragraphs detailing the allegations of
the suit. Also, though the first count seeks redress for misrepresentation
against Agaoleatu and Tago, the reference in paragraph 11 to paragraph

6 seems to inadvertently point the finger at Drake. Both matters are
easily remedied.
[7] More important, however, is the fact that counts two, three, and four
are framed in terms of a shareholder derivative suit. Shareholder
derivative suits are governed not only by T.C.R.C.P. 8-12 but also by
T.C.R.C.P. 23.1. Rule 23.1 requires that the complaint be verified and
allege (1) that Haleck and the McMoores were shareholders at the time
of the transactions about which they complain; (2) that the action is not a
collusive one to confer jurisdiction on a court of American Samoa; (3)
the efforts made to obtain the relief requested from the directors of TRT
and AS2000 and, if necessary, from the shareholders; and (4) the reasons
for the failure to obtain such relief or for not making the effort. Haleck
and the McMoores must fairly and adequately represent the interests of
the shareholders or members similarly situated.4
Haleck and the McMoores have met most of these requirements. They
have not, however, alleged that the action is not a collusive one to confer
jurisdiction,5 or alleged whether or not it was necessary to request relief
from the shareholders.6 Haleck and the McMoores should make these
allegations explicit in their pleadings so as to be in conformity with
T.C.R.C.P. 23.1.
Order
For these reasons stated above, the motion to dismiss is denied.
4 Haleck and the McMoores do not have to plead this requirement,
however, as the burden is on the defendant to prove the conflict. See
Abeloff v. Barth, 119 F.R.D. 332, 335 (D. Mass. 1988).
5 The genesis for this requirement seems to come from the Federal Rules
of Civil Procedure. Those rules, in turn, stem from the pre-Erie days
where federal courts sitting in diversity jurisdiction may have provided a
more favorable forum for a plaintiff. After Erie, the rule has declined in
importance and a “conclusory allegation phrased in the language of the
rule normally will suffice.” 7C CHARLES A. WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE AND PROCEDURE § 1830 (1990).
6 Whether a demand on the shareholders is necessary is a question of
local law. Regardless, a demand is unnecessary “when the majority
shareholders are the alleged wrongdoers, are controlled by the alleged
wrongdoers, or have interest that would be adversely affected if the
corporation brought suit.” 7C CHARLES A. WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE AND PROCEDURE § 1832 (1990); see also
Brody v. Chem. Bank, 482 F.2d. 1111, 1114 (1973) (proper remedy is
not to dismiss but to allow plaintiff to replead).
241
However, Haleck and the McMoores must correct by amendment the
matters in their complaint noted above.
It is so ordered.