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Strasenburgh v. Straubmuller8/8/1995
mproperly rejected two offers to purchase the company which would have generated a price per share ranging from $65 to $80. In addition, the complaint states that defendants created a one-year voting trust, "among a group of favored shareholders" without informing plaintiffs, whereby the majority of shareholders delegated their voting rights to defendants. They claim the voting trust was foisted upon a number of shareholders under false pretenses, which conduct plaintiffs contend was designed to isolate and further injure them.
Defendants successfully moved for dismissal of the complaint for failure to state a claim upon which relief can be granted pursuant to R. 4:6-2(e). They argued that Wheaton had completed a corporate restructuring from which plaintiffs and others had Dissented; that the Dissenters had "made formal statutory demand for payment of the fair value of their shares," pursuant to N.J.S.A. 14A:11-1 to -11 (appraisal proceeding), on the same day that they filed this action; and that by filing an appraisal proceeding, plaintiffs were "divested . . . of their status as [Wheaton] shareholders," and therefore, plaintiffs no longer had any right to pursue other relief against defendants, either individually or in a derivative capacity.
In sum, defendants argued that (1) the appraisal proceeding was plaintiffs' sole and exclusive remedy; (2) plaintiffs were not current shareholders by virtue of the appraisal proceeding and, therefore, lacked standing to pursue their claims in this action, either derivatively or individually; (3) plaintiffs' claims were derivative claims which could not be individually asserted because based on diminution in share value; (4) plaintiffs' claims failed to state a state civil RICO violation, N.J.S.A. 2C:41-2; (5) plaintiffs' state civil RICO claims were barred because they are derivative claims; and, (6) plaintiffs' remaining claims were too generally pleaded, and plaintiffs should not be permitted to amend their complaint to replead with more particularity.
Plaintiffs opposed the motion contending that their claims were not derivative, and even if they were, plaintiffs could also sue individually. Plaintiffs argued that their election to Dissent was not a bar to the present action, which was based on antecedent events unrelated to the appraisal proceeding which had occurred before the corporate restructuring, the event that triggered the appraisal proceeding. Moreover, plaintiffs argued that if their complaint was deficient, they should be granted leave to amend the complaint. The Judge heard oral argument and dismissed the complaint finding plaintiffs' claims for fraud and negligent representation "absolutely vague." The Judge also dismissed plaintiffs' claims for breach of fiduciary duty, waste, and determined their civil RICO claims to be "clearly derivative."
For purposes of the motion, the Judge assumed the value of the stock had been depressed by defendants' actions, as plaintiffs alleged, but found, nevertheless, that no special or specific injury had occurred to plaintiffs as opposed to the company or the shareholders generally. The record reflects that the Judge considered plaintiffs' allegations to be derivative claims only, which plaintiffs could not raise because of their status as Dissenting shareholders under N.J.S.A. 14A:11-5. Finally, the Judge denied plaintiffs' request to replead concluding that "they had plenty of time to do so. . . ." This appeal followed.
The standard of review on defendants' motion to dismiss for failure to state a claim upon which relief could be granted, pursuant to R. 4:6-2(e), is "limited to examining the legal sufficiency of the facts alleged on the face of the complaint.
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