New York does not have one statute of limitations governing all breach of fiduciary duty claims. Rather, it has two: three and six years.
A 20% or greater shareholder in a closely held New York corporation may commence a special action for dissolution of the corporation on the grounds that those in control have either committed “illegal, fraudulent or oppressive actions toward the complaining shareholder” or have “looted, wasted or diverted for non-corporate purposes the corporation’s assets.”
In 1993, the New Jersey Supreme Court conferred great powers to Courts when adjudicating minority oppression claims. Brenner v. Berkowitz, 134 N.J. 488 (1993). Last year, the New Jersey Supreme Court conferred even greater equitable powers to Chancery Division Judges deciding inter-company disputes. Sipko v. Koger, Inc., 214 N.J. 364, 383-384 (2013).
On March 11, 2014, the Supreme Court of New York, New York County, denied a motion for summary judgment seeking to dismiss a Special Proceeding for Judicial Intervention seeking dissolution of three New York corporations premised upon violations of New York’s Minority Oppression Statute. Quazzo v. 9 Charlton Street Corp., 2014 N.Y. Misc. 1093; N.Y. Slip. Op. 30625 (U) (March 11, 2014).
An oppressed minority shareholder in a New York corporation may commence a special proceeding for judicial dissolution Business Corporation Law § 1104-a (a)(1) and (a)(2).
In 1982, the New Jersey Supreme Court in the oft-cited decision Crowe v. DeGioia, 90 N.J. 126 (1982), set forth the factors Courts should consider when petitioned for injunctive relief. For the past thirty-plus years, litigants arguing in favor of the issuance of an interlocutory injunction asserted their clients have demonstrated by “clear and convincing evidence” that: (1) there is no adequate remedy at law and the irreparable harm to be suffered in the absence of injunctive relief is substantial and imminent; (2) there is a reasonable probability of success on the merits; (3) the equities and hardships favors injunctive relief; and (4) the public interest will not be harmed. Id. at 520; McKenzie v. Corzine, 396 N.J. Super. 405, 414 (App. Div. 2007).
The Ohio Supreme Court in the seminal case Crosby v. Beam, 47 Ohio St. 3d 105 (1989) set forth protections for Ohio minority shareholders. Minority shareholders sought redress via the Ohio courts. In their complaint, the minority shareholders alleged that the majority shareholders had oppressed them by: (1) awarding themselves unreasonable salaries; (2) using corporate property for their personal enterprise; (3) having the company purchase life-insurance only for the majority’s benefit; and (4) taking improper, low-interest loans from the company.
Recently, the New Jersey Appellate Division affirmed a Monmouth County General Equity Judge’s finding in favor of an oppressed minority shareholder. Kaible v. Gropack, 2013 N.J. Super. Unpub. LEXIS 1453 (App. Div. 2013). The Appellate Division also affirmed the Trial Court’s verdict in favor of the oppressed minority shareholder which awarded him damages and attorneys’ fees pursuant to the New Jersey Minority Oppression statute. See N.J.S.A. 14A:12-7(c); & N.J.S.A.14A:12-7(8)(d).
Unlike the New Jersey Business Corporation Act (“BCA”), the Limited Liability Company Act, N.J.S.A. 42:2B-1 to -70 (“LLCA”) had no equivalent oppressed shareholder provision. See, Denike v. Cupo, 394 N.J. Super. 357, 378, 926 A.2d 869 (App. Div. 2007), rev’d on other grounds, 196 N.J. 502, 958 A.2d 446 (2008). Fortunately for oppressed members of a New Jersey LLC, the LLCA has since been repealed. See L. 2012, c. 50, (eff. March 18, 2013) (enacting the Revised Uniform Limited Liability Company Act [the "RULLCA"], making the RULLCA applicable to all New Jersey LLCs formed after the legislation’s effective date, and replacing the LLCA with the RULLCA as to all existing LLCs as of March 1, 2014).
Often oppressed minority shareholders cannot afford the cost to retain an attorney to stand up to the oppressor. The majority shareholder will use the company’s financial resources to pay their attorney while the oppressed minority shareholder will be forced to cover their attorney fees personally. Although, Courts have discretion to award counsel fees, rarely do… Continue Reading