Court OKs Group’s Claim to 20% of ComputerLand Stock
SAN FRANCISCO — A state appeals court has upheld a jury verdict awarding an investor group 20% of the stock of the computer franchise giant ComputerLand in a case that started with a $250,000 loan.
The 80-page ruling by the 1st District Court of Appeal, issued late Thursday, included harsh words for the management as well as for the legal arguments of ComputerLand founder William Millard, who has been driven from control of the Oakland-based company.
Millard “was continuously engaged in a kind of shell game (with his corporations) whereby one would be informally merged with another,†said Justice Robert Merrill in the 3-0 decision. He also said Millard kept “chaotic (and frequently non-existent) corporate records†and offered “speciously legalistic†arguments in the appeal that contradicted his claims at trial.
The court upheld a jury’s findings that the terms of a $250,000 loan to Millard more than 12 years ago, in the early stages of his venture, included the right to exchange the note for 20% of the stock in Millard’s computer business.
The note was later bought by a group of investors called Micro/Vest, which sued ComputerLand after Millard refused to transfer the stock in 1981.
$500-Million Total Value
In addition to the stock, an Alameda County Superior Court jury awarded Micro/Vest $141 million, mostly in punitive damages. The damages were dropped in December, 1985, in a partial settlement that included Millard’s resignation from the board of directors.
Micro/Vest lawyer Herbert Hafif on Friday confirmed reports that the settlement gave the investment group an additional 8.5% of ComputerLand stock bringing the total to 28.5%. He said he expects the company to make a public stock offering this spring and estimated the total value of ComputerLand at $500 million.
The ruling is “the long-overdue culmination of an unnecessary legal battle,†Hafif said. He said ComputerLand “is now prospering after some tough times,†with new management and continued operation of its 500 computer stores.
Millard’s lawyer, Shirley Hufstedler, declined comment on the ruling, saying she had not seen it.
In appealing the jury verdict, Millard argued that the stock-conversion feature of the original $250,000 loan applied only to his original computer company, called IMS, which allegedly went out of existence after a merger. He also said he had agreed orally with one of the original lenders that the note and stock option would not be transferred to anyone without Millard’s consent.
The appeals court said Millard did not make those arguments during the trial and also said the evidence was to the contrary.
Not only did IMS evidently remain in existence, Merrill said, but the loan applied to any of Millard’s computer businesses, including the later-formed ComputerLand. He also said the written loan agreement, presumably the best evidence of the parties’ intentions, made no reference to any restrictions on transfers and indicated that the loan could be assigned.
The court also rejected Millard’s argument that Micro/Vest should be denied any reward because it was allegedly a “sham corporation†formed for the purposes of prosecuting a lawsuit.
