Our San Diego attorneys have experience representing shareholders in disputes through mediation, arbitration, and trial in state and federal courts. We consider litigation within the context of each client’s business and personal interests and consider the full range of issues facing each client, including managing business relationships and litigation costs, to develop a strategic approach to solving our client’s needs.
Corporations are owned by its shareholders, whose powers and rights are often expressed in a written shareholder agreement – sometimes referred to as a buy-sell agreement or a stock-transfer agreement. Shareholder agreements generally bind shareholders to the rules and procedures, such as:
- How many shares can be bought or sold at any given time.
- Who may sell and purchase shares to a third party.
- What happens when a shareholder dies or becomes incapacitated.
- Who may serve on the company’s board of directors.
- How shareholder disputes will be handled, e.g., litigation or arbitration.
Shareholder Direct Actions
Shareholders may enforce a right against the corporation held directly by the individual shareholder. Bader v. Anderson, 179 Cal. App. 4th 775, 793 (2009). Shareholders often bring such direct actions involving for the following claims:
- Enforcement of Voting Rights
- Enforcement of the Right to Sell or Buy Shares
- Recovery of Dividends
- An Accounting
- Examine the Books and Records of the corporation
Under California law, an allegation that the action of the officers or directors of the corporation have decreased a shareholder’s stock value must be brought as derivative action, not a direct action. Schuster v. Gardner, 127 Cal. App. 4th 305, 312 (2005).
Shareholder Derivative Actions
Shareholders may also wish to bring a derivative action against the company or its board of members for injuries suffered by the corporation that the corporation has not pursued on its own behalf. Desaigoudar v. Meyercord, 108 Cal. App. 4th (2003) 173, 183. Derivative lawsuits can be complex and require compliance with the company’s rules and procedures as well as particular laws and regulations. In a derivative action, the shareholder essentially steps into the shoes of the company to bring the suit on behalf of the company and the other shareholders. Shareholders generally bring a derivative action when there has been a conflict of interest or breach of fiduciary duty on the part of a board member, executive, or corporate officer. Our attorneys are very familiar with derivative lawsuits to help shareholders through the process to enforce their rights and recover damages on behalf of the corporation.
Shareholders commonly seek to enforce their rights on behalf of the corporation for the following items:
- Breach of fiduciary duty, such as conflicts of interest and co-mingling of personal and corporate funds
- Breach of the covenant of good faith and fair dealing
- Failure to Disclose (or Concealment) of Material Information
- To Stop the Board from Pursing a Particular Action
Foldenauer Law Group has prosecuted many business disputes for our clients resulting in settlements and awards of millions of dollars. We have defended business owners and obtained “zero dollar” and “nuisance value” settlements. We have litigated cases resulting in early case dismissals and through jury or bench trial resulting in defense verdicts. We have built our success on nearly 30 years of combined experience and have a proven track-record. It’s no accident. We work exceptionally hard to obtain extraordinary results for our clients.
We are selective. We limit the number of cases we accept at any given time to ensure that our clients’ cases receive the extra time and effort needed to achieve extraordinary results.
To us – everything matters.