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 district court also `must view the evidence presented through the prism of the substantive evidentiary burden.'" Byelick v. Vivadelli, 79 F. Supp.2d 610, 616 (E.D. Va. 1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-52 (1986)) (in the context of motion for summary judgment) B. The Constructive Fraud Verdict

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 Technologies, Inc., 65 F. App'x 450, 454 (4th Cir. 2003) (non-precedential) ("Virginia law may permit an individual shareholder to bring an action for breach of fiduciary duty against the directors or officers of a closely held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.

But even without this finding, the allegation concerning Envion's financial state in April 2012 does not render earlier statements about Carlucci's potential investment return false at the time those statements were made. See Byelick v. Vivadelli, 79 F.Supp.2d 610, 616–17 (E.D.Va.1999) (noting that to prevail on a Section 10(b) claim, the plaintiff must demonstrate that “the defendant made a statement of material fact that was false when made”). For these reasons, that portion of Carlucci's Section 10(b) claim that is timely is dismissed for failure to plead a material misrepresentation with requisite particularity.

When faced with the task of predicting state law, "[a] federal court may base its prediction on canons of construction, restatements of the law, treatises, recent pronouncements of general rules or policies by the state's highest court, well considered dicta, and the state's trial court decisions." Wells v. Liddy, 186 F.3d 505, 528 (4th Cir. 1999); see also Byelick v. Vivadelli, 79 F. Supp. 2d 610, 623 (E.D. Va. 1999). With this in mind, it is notable that the Supreme Court of Virginia has been willing to follow the Restatement of Torts, but has not broadly accepted all associated Restatement provisions. See Appalachian Power Company v. Sanders, 232 Va. 189, 349 S.E.2d 101 (1986) (rejecting certain sections of the Second Restatement).

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.

Specifically, the Liquidating Trustee alleges that these Defendants breached their duties of care and loyalty by perpetuating HDL's fraudulent scheme despite warnings from counsel and various other actions. See 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)); Glass v. Glass, 228 Va. 39, 47, 321 S.E.2d 69, 74 (1984) ("Corporate officers and directors have a fiduciary duty in their dealings with shareholders and must exercise good faith in such dealings."); see also Va. Code § 13.1-690 ("A director shall discharge his duties as a director, including his duties as a member of a committee, in accordance with his good faith business judgment of the best interests of the corporation."); Willard v. Moneta Building Supply, Inc., 258 Va. 140, 151 ("[I]n Virginia, a director's discharge of duties is not measured by what a reasonable person would do in similar circumstances or by the rationality of the ultimate decision. Instead, a director must act in accordance with his/her good faith business judgment of