Split Verdict Returned in Part 1 of Split Trial

Brief by Ed Quillen

Internet – Mountain Computer Wizards – April 1999

Split Verdict Returned in Part 1 of Split Trial

A six-person jury in Salida returned a split verdict in the first phase of a two-part trial that involved a lawsuit between principals in Mountain Computer Wizards, a regional Internet service provider (chaffee.net).

The suit, filed last year, was brought by Howard Eugene “Tres” Melton of Buena Vista, one stockholder in MCW. He charged that two minority stockholders — Joseph Conrad and Margaret Williamson — had essentially contrived to wrest control of the company away from him by, among other things, issuing stock to a new investor, Cindy Quinn.

After five days of trial, the jury found for both parties. On one of Melton’s allegations, it ruled in favor of Conrad and Williamson: That as corporate directors, they did have the authority to issue the additional stock to Quinn, and so her shares are valid.

But the jury also found that Williamson and Conrad had breached their “fiduciary duty” to Melton.

District Judge Kenneth Plotz, who presided over the trial, explained afterward that in a closely held corporation like MCW, the directors have an obligation to keep each other informed of corporate plans, and that Melton had been kept in the dark until the May 5 meeting at which the stock was issued.

“The jury found that they [Williamson and Conrad] had a fidiciary duty to inform Melton of their plans to issue more stock so they could add equipment and telephone lines, and they failed to do that,” Plotz said.

That was the first part of a “bifurcated trial.” The second part, which will be scheduled soon, will determine the damages that Melton is entitled to collect, unless the parties reach a settlement before then.

Williamson said that now that the first part of the suit is over, “We’ve been able to focus on serving our customers, rather than preparing for litigation.” The company has added 24 lines to its Salida node, all with high-speed V.90 modems, “and we hope to be adding more soon.”