A shareholder need not send the corporation’s Board of Directors a pre-suit demand before filing minority oppression litigation. A pre-suit demand may not be required before filing a derivative claim if such demand would be “futile.” In re PSE&G Shareholder Litigation, 173 N.J. 258, 278 (2002).
In other words, if it would be futile to ask the Board of Directors to cease and desist from engaging in activities which are injuring the corporation a pre-suit demand is not required. If, on the other hand the Board of Directors could curb the alleged damaging activities than a pre-suit demand is necessary before the shareholder may file a derivative claim on behalf of the corporation.
Scott Unger is a Shareholder in Stark & Stark’s Lawrenceville, New Jersey office concentrating in Shareholder & Partner Dispute Litigation. For questions, or additional information, please contact Mr. Unger.