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Strasenburgh v. Straubmuller8/8/1995
ion of corporate opportunities resulted in injury to the corporation and plaintiff stockholder could not bring individual action); Loewen v. Galligan, 130 Ore. App. 222, 882 P.2d 104, 112 (Or. Ct. App.), review denied, 320 Ore. 493, 887 P.2d 793 (Or. 1994) (breach of fiduciary duty resulting only in loss of value of plaintiffs' investments is not the special injury required for an individual action).
However, other courts have allowed minority stockholders to bring actions individually for breach of fiduciary duty and fraud. In Borak v. J.I. Case Co., 317 F.2d 838 (7th Cir. 1963), aff'd, 377 U.S.426, 84 S. Ct. 1555, 12 L. Ed. 2d 423 (1964), plaintiff, on behalf of himself and other similarly situated shareholders, sought to enjoin a merger which, together with a stock option plan, plaintiff contended, was effectuated by illegal and fraudulent acts which illegally deprived him and other shareholders similarly situated of their preemptive rights to subscribe to shares of stock that were issued or set aside.
The court rejected defendants' argument that the suit had to be derivative because plaintiff was "affected by the circumstances alleged in the same way as all stockholders." Id. at 845. The court determined that there were two separate categories of shareholders, those who participated in and benefitted from the merger and stock option plan and those who did not. Ibid. Thus, the court concluded plaintiff's "proportionate interest in the corporation was diluted." Ibid. The Borak court explained that " director of a corporation acts as a fiduciary not only to the corporation but also to the stockholders." Ibid. The same facts may state both derivative and individual causes of action. Id. at 844-45.
Here, although plaintiffs do not allege a dilution of its proportionate interest in the corporation, nevertheless, as in Borak, supra, plaintiffs contend there are two classes of stockholders. Plaintiffs' theory is that only the majority older generational stockholders benefitted from the artificial deflation of the value of their shares because they were able thereby to maintain control of the company and minimize their estate and gift tax liability. Plaintiffs, on the other hand, suffered from the resulting financial illiquidity of their shares. This disparate impact, plaintiffs argue, constitutes a "special injury " to the minority shareholders. See also Kademian v. Ladish Co., 792 F.2d 614 (7th Cir. 1986).
In Dowling v. Narragansett Capital Corp., 735 F. Supp. 1105 (D.R.I. 1990), the court recognized that "disproportionate treatment is generally . . . sufficient to confer upon the shareholders adversely affected an individual right of action against the shareholders responsible." Id. at 1113 (citations omitted). The court in Dowling, supra, noted the "rationale" underlying the rule. Ibid. The court reasoned that if plaintiffs were required to bring a derivative suit, then the corporation would recover the damages, and "the defendants, as controlling shareholders, would reap much of the benefit from their alleged wrongdoing." Accord, Crosby v. Beam, 47 Ohio St. 3d 105, 548 N.E.2d 217, 221 (Ohio 1989); see In re: Tri-Star Pictures, Inc., 634 A.2d 319, 330 (Del. 1993), (special injury is "a wrong suffered that is not suffered by all stockholders generally"); see also Schumacher v. Schumacher, 469 N.W.2d 793, 797-99 (N.D. 1991) (minority shareholder may bring an action directly or individually for breach of fiduciary duty by controlling shareholder in a small, closely held corporation); accord, Noakes v. Schoenborn, 116 Ore. App. 464, 841 P.2d 682, 686 (Or. Ct. App. 1992) (minority shareholder of small, closely held corporation, may bring either derivative or direct action for m
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