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Strasenburgh v. Straubmuller8/8/1995
ajority shareholder's breach of fiduciary duty).
Defendants rely on Pepe v. General Motors Acceptance Corp., 254 N.J. Super. 662, 604 A.2d 194 (App. Div.), certif. denied, 130 N.J. 11 (1992), for the proposition that "shareholders cannot sue for injuries arising from the diminution in value of their shareholdings resulting from wrongs allegedly done to their corporations." Id. at 666 (citations omitted). However, in Pepe, supra, defendant had financed plaintiffs' automobile dealerships. Id. at 664. Its agents, also defendants, were not insiders, directors, officers or majority shareholders; they thus owed no fiduciary duty to the plaintiffs. Cf. Francis v. United Jersey Bank, 87 N.J. 15, 36, 432 A.2d 814 (1981) (the relationship of a corporate director to the corporation and its stockholders is that of a fiduciary); Maul v. Kirkman, 270 N.J. Super., 596, 617, 637 A.2d 928 (App. Div. 1994) (corporate directors owe a fiduciary duty to the stockholders).
We are satisfied the complaint states causes of action for breach of fiduciary and negligent representation based on the special injury alleged by plaintiffs. For the same reason, we reverse the dismissal of plaintiffs' RICO claims.
The Judge found that plaintiffs' state civil RICO claims, N.J.S.A. 2C:41-1 to -6.2, "do not state a cause of action" and "if they exist, they are derivative." The Judge did not address the sufficiency of the state civil RICO cause of action nor have plaintiffs raised the issue on appeal. Accordingly, we do not address the sufficiency of the RICO cause of action.
N.J.S.A. 2C:41-4(c) provides that "any person damaged in his business or property by reason of a violation of N.J.S. 2C:41-2 [prohibited activity] may sue therefor in any appropriate court." The federal statute, 18 U.S.C.A. ยง 1964(c), has the same language. Although federal courts, in interpreting the statute, have consistently held that stockholders whose only injury is a decline in the value of their shares have no standing to bring a RICO action, see, e.g., Roeder v. Alpha Indus., Inc., 814 F.2d 22, 29-30 (1st Cir. 1987) (decline in the value of plaintiff's stock affected stockholders generally and thus constituted an injury to the corporation), some courts have recognized a RICO cause of action where a plaintiff can demonstrate "specific direct harm to her personally". See, e.g., Small v. Goldman, 637 F. Supp. 1030, 1031 (D.N.J. 1986).
Here, as in Small, supra, plaintiffs have asserted direct injury to themselves individually as the result of alleged RICO violations because of the claimed disparate impact of defendants' artificial deflation of the stock. Thus, plaintiffs allege more than a mere reduction in the value of the stock and loss of opportunity to sell their shares at a good price. We are satisfied plaintiffs' claims are not derivative but are individual claims. The Judge erred in dismissing counts VII and VIII.
Our Conclusion that plaintiffs have stated individual and direct claims against defendants is based on our impression of the complaint as a whole and plaintiffs' theory of recovery based on the disparate impact of defendants' conduct. It should not be construed as precluding the possibility that the allegations ultimately may not be supported by the proofs. However, at this stage of the proceedings, we cannot state as a matter of law that the disparate impact of defendants' artificial deflation of the value of the stock, which benefitted the majority shareholders at the expense of the minority, does not create a basis for asserting individual claims for which plaintiffs are entitled to relief.
II.
Plaintiffs' claim of waste, however, cannot be supported by th
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