An injunction is when a court orders someone to do something, or not to do something. These can be very difficult to obtain – in some circumstances – and are often not granted when money damages at the end of a lawsuit can make the aggrieved party whole. In shareholder dispute litigation, injunctions are often a critical tool. A court can order the majority shareholder not to take certain actions that would be hard to unwind at the end of the case. For example, if, during the pendency of a shareholder dispute litigation, it is uncovered that the majority owner was stealing from the company, the court can order him or her to have no further access to corporate funds, and can even appoint a third party (special fiscal agent) to take over the company’s finances.
I have written many times how the termination of a shareholder/employee can, under the right circumstances, be considered shareholder oppression. Usually, the first thing a prospective client asks in such a situation is, will the court order the company to take me back? After all, why should the company and the majority shareholders be permitted to use company money to pay their legal fees, when I no longer even have a paycheck to pay my mortgage – let alone pay legal fees?
This makes perfect sense, but that is unfortunately not the way courts usually have seen it, at least until fairly recently. Historically, it was extraordinarily difficult to obtain an order reinstating an employee in these circumstances. However, a new court decision in New Jersey has made it easier for a court to enter an order maintaining the status quo. Clearly, an order of reinstatement of employeement status would seem to maintain the status quo, and may fit squarely under this new policy. However, courts are still reluctant to interfere in the inner workings of a company. As with many things in this area of the law, the answer to whether a court will now reinstate a terminated shareholder/employee is – it depends. For example, a termination that seems to have no legitimate basis will likely be viewed much differently than one for theft.
If you are an employee who has been terminated and you are seeking to be reinstated while pursuing shareholder dispute litigation in New Jersey, you should meet with an attorney with experience with these types of cases to discuss whether this change in the law can benefit you.
If you have any questions about this post, or other related matter, please email me at dcroberts@norris-law.com.