|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