Sometimes a shareholder has the right to assert derivative claims on behalf of the corporation against a wrongdoer. In other words, it is a lawsuit which is asserted by a shareholder against an officer or director whose unlawful acts caused the corporation to suffer damages. In re PSE&G Shareholder Litigation, 173 N.J. 258, 307 (2002).
Because the New Jersey Minority Oppression statute only applies in closely held corporations, a derivate suit can be used by a shareholder in corporation with more than 25 shareholders. If the corporation has less than25 shareholder, the complaining shareholder may plead minority oppression and assert derivative claims in the same litigation. In such a case where the shareholder sets both derivative and minority oppression claims, the Court can only grant ultimate relief on one of those claims. In other words, the Court cannot find that the shareholder was oppressed and sustain their derivative cause of action.
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.