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Family Feud Becomes Brother's $7.5 Million Debt

By William Vogeler, Esq. | Last updated on

The Hatfields and the McCoys had the most famous feud in American history, but brothers William and Lester Lee had one of the ugliest in corporate history.

The brothers fought for more than a decade over their interests in a family business. When they disagreed over a proposed merger, Lester proceeded down a path of "trickery," "evasion," and "spoilation" that ultimately bankrupt their enterprise.

In The William R. Lee Irrevocable Trust v. Lee, the U.S. Seventh Circuit Court of Appeals said that left a $7.5 million corporate debt -- against Lester.

Corporate Judgment

Lester owned 516 shares to William's 484 shares in Lees Inns of America, a hotel business. In 1995, Lester had financial problems with another company and proposed merging it with Lees Inns.

Over William's objections, Lester used his controlling interest to approve the merger. William transferred his shares to a trust, but Lester drove the company into bankruptcy and dissipated the trust's interest.

The trust sued in bankruptcy to pierce the corporate veil and hold Lester responsible for a $7.5 million judgment. He argued he was immune from the corporate debt, but the court said he had manipulated the company to work an injustice against the trust.

"Lester's proposed immunity would encourage and reward post-merger 'trickery, evasion, procrastination, spoliation, botheration,' shell games, and fourberies," Judge Daniel Manion wrote for the Seventh Circuit. "Lester's proposed immunity makes no sense."

'Shell Games and Fourberies'

The appeals court affirmed a summary judgment against Lester, who also had argued that the the court could not decide the corporate veil issue in a summary proceeding.

But the appeals panel said he presented no triable issue of act, failed to include a statement of material facts in dispute, and did not raise conflicting inferences in the trial court.

Of course, Lester's botheration didn't help either.

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