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NJ Shareholder Dispute Litigation – Looking Out for Your Own Interests

In New Jersey Shareholder Dispute Litigation, Your Concern Must be Your Own Interests, Not the Interests of Other Minority Shareholders, or Even Family Members

When a new client comes in complaining that he is being treated unfairly by his business partners and hears that he may have the right to be paid for his shares, that potential remedy is often appealing. After all, it frequently takes years for a business relationship to fall apart, and in those years, the company’s value may be building up. Your shares are often worth more than you think. However, it is fascinating to me that so many clients say they want to be bought out, but don’t necessarily want to sue their business partners for other than cost reasons.

A strong letter writing campaign, with pointed correspondence from an attorney well-versed in shareholder rights and shareholder dispute litigation, may be attempted first, and could possibly work. If it does, significant legal fees may be avoided. But letters usually get you only so far. When it sinks in that filing suit is really the only viable option, clients often restrict the allegations they want made in the suit. Sometimes a client who believes his business partners are committing fraud – literally stealing from the company – actually does not want to use buzzwords like “theft” or “embezzlement,” because he doesn’t want to anger other family members (in a family-owned company). Or, he may not want to alienate the other minority shareholders, with whom he still has a relationship, or at least believes he does.

The reason for this hesitancy is often that the business partners are family members or close friends, or at least people who at one point were close friends. However, when I remind the client that these are the same people engaging in the acts he just spent an hour and a half complaining about, the message usually sinks in.

A minority shareholder who believes he is being oppressed by the majority, but does not want his lawsuit to alienate others involved in the company, including other minority shareholders, needs to ask himself two critical questions. First, how do you expect to protect your own rights when you are more concerned with the impact your lawsuit may have on others than you are with what is being done to your shares in the business?

The second question I tell clients to ask themselves has to do with those whose opinions of his suit the client is so concerned about. It is simply, “Where have they been?” When you discovered that the majority shareholder was using the company as his personal piggy bank, did the other family members rally around you and against the majority shareholder? Or were you left in the wilderness to complain on your own? When you, a 15% shareholder, were denied access to the books and records of the company, did the two other 15% shareholders assist you in any way? Did they give you the documents you were looking for? If they were truly your friends, and their opinions worthy of your concern, would they not have assisted you in standing up for your rights?

A reckless lawsuit brought without legitimate purpose could tear a company apart. But if your concerns are legitimate, and you have a valid shareholder oppression lawsuit, your focus should be on your own rights, not on what your suit may do to your company.