This week, Judge Jolly permitted a 50% shareholder to
pursue derivative and individual claims against her co-shareholder. He found
that the plaintiff had satisfied the demand requirement of G.S. sec. 55-7-42,
and that she fit an exception to the general rule that a shareholder cannot
pursue an individual cause of action for the diminution or destruction of the
value of her stock.
The decision came in LeCann
v. Cobham, a long running bitter dispute between dentists who operated a
number of entities providing dental care. LeCann said that Cobham had
diverted funds from a practice in which they shared ownership to another dental
practice operated solely by Cobham.
G.S. sec 55-7-42 says that a shareholder "may not
commence a derivative proceeding" without having made a written demand
"upon the corporation to take suitable action." In discussing
the adequacy of LeCann's demand, Judge Jolly quoted Russell Robinson, who says
that no specific form of demand is required by the statute:
except to require that it be in writing; but to serve its
purpose it should set forth the facts of share ownership and describe the
redress demanded with enough particularity to allow the corporation either to
correct the problem, if any, without a lawsuit or to bring its own direct
ROBINSON ON NORTH CAROLINA CORPORATION LAW, § 17.03
(7th ed. 2009).
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its entirety on North
Carolina Business Litigation Report, a blog for lawyers focusing on issues
of North Carolina business law and the day-to-day practice of business
litigation in North Carolina courts.
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