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| L.A. Times / Don Bartletti ~ Reading Cinemas Movie Theatre |
The
Los Angeles Times is reporting on a family estate dispute and court drama thatis affecting the Los Angeles-based movie theater chain Reading InternationalInc. which has dozens of cinemas around the world, major real estate holdings,
and a nearly 200-year history with roots in the railroad and coal business. The
adult three children of Reading’s late chief executive, James J. Cotter Sr.,
are waging a battle for control of the company.
This
case is more complicated than the typical estate dispute in that it involves a
public company but it has some allegations that are common to many of them such
as whether the father had capacity to amend the trust, breach of fiduciary duty
and undue influence.
The
Los Angeles Times reported that the issues began after James J. Cotter Sr., a
Los Angeles businessman, resigned as CEO and chairman in August 2014
because of declining health, leaving son James Cotter Jr. in charge.
Cotter Sr. died in September 2014 at age 76. Shortly thereafter, his two
daughters went to court, alleging their brother improperly convinced their
father to add him to a trust that would control the voting shares of the
company.
The
article notes that Ellen and Margaret Cotter’s court papers claimed that James
Cotter Jr. unduly influenced their father while he was in the
hospital after suffering a fall in his home. The daughters said their
father lacked “the knowledge and understanding necessary” to make such
financial decisions. The daughters contend that after their dad was
admitted to the hospital, their brother convinced an estate attorney to
draft an amendment to the trust that made him a co-trustee. They allege he lied
to Margaret by saying the changes were made based on videos he took
of their father expressing his wishes.
Distressed
over her father’s failing health, Margaret tried to convince her father to sign
the amendment, the daughters’ petition said. Cotter Sr. signed the amendment
only after Margaret begged and “tears were shed," according to the
petition.
Cotter
Jr. struck back with his own petition, calling the allegations against him
“nonsense” and “fictional.” He said his father was “in full control of his
faculties” when he signed the amendment to the trust and accused his sisters of
“abusing their power… and breaching their duties.” He further
contended his sisters tried to prevent him from selling his Reading
stock, in order to “choke off” funds and force him to settle. Cotter Jr. owned
about 16% of Reading’s shares as of April 2016, according to a regulatory
filing.
In
June 2015, the company’s board of directors fired Cotter Jr. for undisclosed
reasons and put Ellen Cotter in charge. Cotter Jr. quickly sued his
sisters and other Reading directors, accusing them of staging a “boardroom
coup” to wrest away control of the company. He said in court
documents that his sisters, and company directors loyal to them, had him
forced out because he refused an ultimatum to give up his claim to the trust.
He
also accused the sisters of choosing their own financial interests over the
well-being of the company and trying to use Reading resources to pay for
personal expenses, including an expensive Thanksgiving dinner for
Ellen, the company’s CEO; Margaret, its vice chair; and their mother.
The
company said in a regulatory filing that “numerous of the factual allegations
included in the complaint are inaccurate and untrue,” and vowed
to “vigorously defend” against the claims. A trial date in the case has
not been set.
Posted by Henry (Hank) Moravec III
Moravec, Varga & Mooney
