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Strasenburgh v. Straubmuller8/8/1995
" Printing Mart-Morristown v. Sharp Electronics Corp., 116 N.J. 739, 746, 563 A.2d 31 (1989) (citation omitted). "For purposes of analysis plaintiffs are entitled to every reasonable inference of fact," and the analysis "is at once painstaking and undertaken with a generous and hospitable approach." Ibid. (citation omitted). From this perspective, we cannot agree with the motion Judge's dismissal of the entire complaint at this preliminary stage of the proceedings because plaintiffs have stated causes of action based on their disparate impact theory on all but count IV of the complaint. Accordingly, we reverse the order dismissing plaintiffs' claims of common law fraud (count I), negligent misrepresentation (count II), breach of fiduciary duties (count III) and state civil RICO violations (counts VII and VIII). We affirm the dismissal of plaintiff's claims of waste (count IV).
I.
A stockholder's derivative action is "an action brought to enforce a secondary right on the part of one or more shareholders in an association, . . . because the association refuses to enforce rights which may properly be asserted by it." R. 4:32-5.
Jurisdictions disagree as to whether an action brought by minority shareholders of a close corporation against the directors for breach of fiduciary duty and fraud must be brought as a derivative action or may be brought individually.
In Cowin v. Bresler, 239 U.S. App. D.C. 188, 741 F.2d 410 (D.C. Cir. 1984), plaintiff, a minority shareholder, claimed that the corporation and its directors "manipulated the business for their personal profit at the expense of the minority shareholders." Id. at 412. Plaintiff alleged mismanagement, fraud, self-dealing, and breach of fiduciary duty. Ibid. The court rejected plaintiff's claims, explaining that "when an injury to corporate stock falls equally upon all stockholders, then an individual stockholder may not recover for the injury to his stock alone, but must seek recovery derivatively in behalf of the corporation." Id. at 414 (citation omitted). "Mismanagement which depresses the value of stock is a wrong to the corporation . . . to be enforced by a derivative action." Ibid., quoting Bokat v. Getty Oil Co., 262 A.2d 246, 249 (Del. 1970).
The Cowin court further explained that an individual action may be brought only if there is a "special injury " to the minority stockholder. Id. This occurs when there is either a duty to the complainant that is independent of the duty to all the shareholders, or when the injury to the shareholders is distinct from the injury to the corporation. Ibid. The court concluded that the directors' fiduciary duty to the shareholder was the same as the duty owed to the corporation and that plaintiff's claim, analogous to plaintiffs' claim here, that the company sought to artificially deflate the value of its own stock was "an allegation of harm primarily to the corporation shared by each stockholder proportionate to their holdings." Id. at 416.
This view has been adhered to in numerous cases. The Pullman-Peabody Co. v. Joy Mfg. Co., 662 F. Supp. 32 (D.N.J. 1986). Accord, Sax v. World Wide Press, Inc., 809 F.2d 610, 614 (9th Cir. 1987) (depletion and diversion of corporate assets through mismanagement were injuries to the corporation, and plaintiff stockholder could not bring individual action); Kramer v. Western Pacific Indus., Inc., 546 A.2d 348, 350-53 (Del. 1988) (breach of fiduciary duty, resulting in waste of corporate assets, harmed the corporation, and plaintiff stockholder could not bring an individual action); Phoenix Airline Servs., Inc. v. Metro Airlines, Inc., 260 Ga. 584, 397 S.E.2d 699, 701-02 (Ga. 1990) (breach of fiduciary duties and usurpat
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