The same duty that applies in a director or officer's dealings with shareholders applies with equal force with respect to their dealings with the corporation itself. See Rowland v. Kable, 174 Va. 343, 366, 6 S.E.2d 633, 642 (1940) ; see also Byelick v. Vivadelli, 79 F.Supp.2d 610, 623 (E.D.Va.1999) (“It is well settled that a Virginia corporation's directors and officers owe a duty of loyalty both to the corporation and to the corporation's shareholders.” (quoting WLR Foods v. Tyson Foods, Inc., 869 F.Supp. 419, 421 (W.D.Va.1994) (internal quotations and alterations omitted))).

In their respective briefs in support of, and in opposition to, the defendants' motion to dismiss, the parties discussed the somewhat conflicting decisional law that has emerged out of this district on the issue whether, in Virginia, an individual shareholder of a corporation may sue an officer or director of that corporation for breach of fiduciary duty. Compare American General Ins. Co. v. Equitable General Corp., 493 F. Supp. 721 (E.D.Va. 1980), with Byelick v. Vivadelli, 79 F. Supp.2d 610 (E.D.Va. 1999). It is unnecessary to examine Storey's breach of fiduciary duties claim in perspective of the American General Ins. Co. and Byelick decisions, however, because, since they were decided, the Supreme Court of Virginia authoritatively has decided the precise issue that the parties dispute.

The question whether the fiduciary duty of a director of a close corporation runs to stockholders individually, as well as to stockholders as a class, does not appear to have been decided in Virginia. Compare Byelick v. Vivadelli, 79 F. Supp.2d 610, 624-25 (E.D.Va. 1999) (predicting that the Virginia Supreme Court would recognize a claim against an inside director by a minority shareholder in a close corporation), with American Gen. Ins. Co. v. Equitable Gen. Corp., 478 F. Supp. 721, 740-41 (E.D.Va. 1980) (holding that the fiduciary duty of directors under Virginia common law attaches only to dealings with the shareholders as a class). We need not resolve this question here because we reject Berman's claims on different grounds.

Directors and officers of Virginia corporations owe fiduciary duties to their corporation and to the corporation's shareholders. Byelick v. Vivadelli, 79 F.Supp.2d 610, 623 (E.D. Va. 1999); A.I.M. Percolating Corp. v. Ferrodine Chem. Corp., 124 S.E. 442, 445 (Va. 1924). The law considers directors and officers to have a “quasi trust” relation with the corporation and the stockholders as a class, meaning that they “must act in the utmost good faith, and this good faith forbids placing himself in a position where his individual interest clashes with his duty to his corporation.” Rowland v. Kable, 6 S.E.2d 633, 642-43 (Va. 1940).

DCG & T ex rel. Battaglia/Ira v. Knight actually cuts against the defendants' argument because the court in that case noted that the Virginia statute in question "refers to a corporation's (and not a shareholder's) right to void an interested director transaction." 68 F.Supp.3d 579, 589 (E.D. Va. 2014) (quoting Byelick v. Vivadelli , 79 F.Supp.2d 610, 628 (E.D. Va. 1999) ). As such, the court held that the statute only applied in derivative suits, not shareholder class actions such as the case at hand.

In re Kaplan, 143 F.3d 807, 812 (3d Cir. 1998); Davis v. U.S. Gypsum Co., 451 F.2d 659, 662 (3d Cir. 1971) ("It is hornbook law that claims asserted for the benefit of stockholders qua stockholders in a corporation because of the tortious acts of its officers or those actions in conjunction with them is a class suit, a derivative action, and recovery is for the benefit of the corporation directly and indirectly to its stockholders. It is equally clear that where a corporation, tortiously conspires with others to damage an individual and does so a cause of action arises which belongs to the individual."); Schupp v. Jump! Info. Technologies, Inc., 65 F. App'x 450, 454 (4th Cir. 2003) (non-precedential) ("Virginia law may permit an individual shareholder to bring an action for breach of fiduciary duty against the directors or officers of a closely held corporation" (citing Byelick v. Vivadelli, 79 F. Supp. 2d 610, 625 (E.D. Va. 1999) (emphasis in original)). While "[b]reach of a fiduciary obligation is a tort claim, and thus requires the showing of a duty, a breach, an injury, and causation," Madsen does not challenge any of these elements.

The shareholders, however, are not plaintiffs in this case and any injuries they may have suffered as a result of the Defendants' actions are not properly before the Court. See Byelick v. Vivadelli, 79 F. Supp. 2d 610, 625 (E.D. Va. 1999) (noting that individual shareholders can bring suit against corporate directors for injuries personally suffered). Thus, if there is any duty to disclose, it would run to DII through its board of directors.

Dunford also seeks damages as a result of the conflict of interest. While a shareholder of a close corporation may have standing to assert such a claim against a director, see Byelick v. Vivadelli, 79 F. Supp.2d 610, 624-25 (E.D.Va. 1999), there is no evidence that Dunford has suffered any such damages. I have held his purchase of the stock and resulting indebtedness unassailable and since the Company's obligation to pay has been set aside, no damages are recoverable by the Company.

A director of a Virginia corporation owes fiduciary duties "both to the corporation and to the corporation's shareholders." Byelick v. Vivadelli, 79 F. Supp. 2d 610, 623 (E.D. Va. 1999) (internal citations omitted). Once a Virginia corporation becomes insolvent, the fiduciary duties owed by directors also extend to the corporation's creditors.

A director of a Virginia corporation owes fiduciary duties "both to the corporation and to the corporation's shareholders." Byelick v. Vivadelli, 79 F. Supp. 2d 610, 623 (E.D. Va. 1999) (internal citations omitted). Once a Virginia corporation becomes insolvent, the fiduciary duties owed by directors also extend to the corporation's creditors.