Reference no: EM131774358

Sally Black is on the board of Best Body Fitness, Inc., which owns fitness clubs in California. Black owns 15 % of the Best Body stock and is also the manager of the tanning division operating in the clubs. After the January financial report showed that Best Body’s tanning division was operating at a substantial net loss, the board of directors, led by Marty Levinson, discussed terminating the classes. Black successfully convinced a majority of the board that the tanning division was necessary as part of its overall marketing strategy. By April, the division’s financial losses had risen. The board hired a business analyst, who conducted surveys and determined that the tanning operations did not significantly increase membership.

A shareholder, Diego Perez, discovered that Black owned stock in TanGlow, Inc., the company from which Best Body purchased its tanning equipment. Perez notified Levinson, who privately reprimanded Black. Shortly thereafter, Black and Manfred Vail, who owned 37% of the Best Body stock and also held shares of TanGlow, voted to replace Levinson on the board of directors, and voted to continue the tanning division operations.

Define Black’s duties owing to Best Body as a shareholder, director, and manager. On what basis might Best Body bring an action against Black, and what defenses might be available to Black? If Best Body did not bring an action against Black, does Perez have a remedy?