L.B. Industries Inc. v. Smith

L.B. Industries and several other contract creditors of Homestake Consulting and Investments, Inc., contend that David Smith, a corporate director of Independent Power Developers, Inc., and his employer Control Data Capital Corporation, a minority shareholder of Independent Power, are liable for the fraudulent misrepresentations allegedly made to L.B. Industries by William Delp, the president of Independent Power and Homestake Consulting. Although L.B. Industries acknowledges that neither Smith nor Control Data specifically directed, actively participated in, or knowingly acquiesced in Delp's alleged fraudulent activities, it argues that they should be held derivatively liable for Delp's alleged wrongdoing because Smith, as one of Independent Power's corporate directors, had some degree of knowledge of Delp's activities. The district court granted summary judgment in favor of Smith and Control Data, ruling that their relationship to Delp's alleged fraudulent activities was too remote for them to be derivatively liable. We affirm. We review the district court's grant of summary judgment de novo. Barry v. Blue Cross of California, 805 F.2d 866, 868 (9th Cir. 1986). Viewing the record in the light most favorable to L.B. Industries, we must determine whether there are any genuine issues of material fact and, if not, whether Smith and Control Data are entitled to summary judgment as a matter of law. See Ashton v. Cory, 780 F.2d 816, 818 (9th Cir. 1986).