• Shareholders are often employees of the company they own • Majority Shareholder will sometimes “fire” and dismiss a minority shareholder as an employee • This article discusses a recent New Jersey case where the minority shareholder was fired and then sued the company and her co-shareholders In a recent N.J. case a shareholder with a 12% ownership interest in a small corporation appealed her dismissal as an employee claiming minority shareholder oppression while employed as an at-will employee. She contended that she had a reasonable expectation of continued employment after a thirteen-year history with her former employer, and that her at-will employment designation was irrelevant. The employee had also signed a Shareholder Agreement which stated that she contracted to …
Trade Secret and Confidential Information Litigation: It’s All About the Facts
Most companies require employment agreements for important executives, high-level management and key personnel to protect trade secrets and confidential information. Employment Agreements which prohibit disclosure of trade secrets and confidential information are legal in NJ and will be enforced, if not unreasonable. New Jersey law allows for issuance of an injunction by the courts to protect a company’s trade secrets even without a post-employment agreement. State and Federal Trade Secret Laws The New Jersey Trade Secrets Act and the Federal Defend Trade Secrets Act of 2016, provide New Jersey businesses with some powerful laws protecting trade secrets. The New Jersey Trade Secrets Act offers strong remedies to businesses in the event an employee sets up to leave with confidential information …
A Court Cannot Appoint a Receiver for a Corporation or LLC Without Proper Legal Notice
A recent case from the Appellate Division reminds us that the court rules which address business litigation must be closely followed. A Trial Judge decision was reversed because he did not require the plaintiff to give notice of a proposed custodial receiver to the corporation, stockholder, and creditors of the corporation. New Jersey Court Rule 4:53-1 reads as follows: No order appointing a custodial receiver under the general Equity power of the court shall be granted without the consent of or notice to the adverse party, unless it clearly appears from specific facts shown by affidavit or by the verified complaint that the immediate and irreparable damage will result to the applicant before notice can be served and a hearing …
If You Don’t Pay Your Arbitration Fees, You Forfeit the Right to Arbitrate Your Dispute, Court Rules
If your contract requires mandatory arbitration and you fail to pay the arbitration fee in advance, you automatically waive your right to enforce an arbitration clause, the New Jersey Supreme Court said in a recently published case. The court rules that the failure to abide by contractual language mandating the advancement of arbitration fees amounts to a “material Breach” of the contract, and therefore invalidates the arbitration clause and will result in the dismissal of an arbitration claim. The failure to advance fees ‘goes to the essence’ of the dispute resolution agreement and amounts to a material breach. New Jersey courts had never before ruled whether a failure to advance arbitration fees amounted to a material breach of a dispute …
If Your Business Charter is Revoked in New Jersey, You Can’t Bring Legal Action
The judge concluded correctly that E&V’s failure to reinstate its revoked corporate charter precluded E&V from filing this action. Background E&V, a construction contractor filed a complaint against Deeper Life Bible Church (Bible Church), and several individual defendants. E&V alleged it contracted with Bible Church to build a Church building, that it performed the work, but Bible Church failed to pay the balance due. E&V sought final payment from Bible Church and the individual defendants. Several years ago, E&V lost its corporate charter in NJ for failing to file tax returns and quarterly withholding reports. Now being formally unauthorized to do business in NJ with a revoked certificate of incorporation, E&V improperly entered into the construction contract to build the …
When You Sign a Business Contract You Absolutely Must Negotiate Litigation Provisions Outside of New Jersey
By Fredrick P. Niemann of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, New Jersey Business Corporation and Contract Law Attorney I have written extensively about the importance of selecting New Jersey as the jurisdiction to decide cases and controversies involving your contracts and relationships with customers/vendors. Many contracts with (particularly) interstate and international companies generally designate a particular state as the place where all lawsuits and legal disputes must be filed and the law of that state applied. Much like mandatory arbitration clauses, State and Federal Courts are increasingly enforcing these mandatory jurisdiction and venue provisions as one way to reduce their case load. A recent case decided in California involved a New Jersey church and school where …
Can Shareholders Demand Access to Inspect a Corporation’s Records, Minutes of Meetings of Directors and Other Corporate Actions?
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Business and Corporate Law Attorney I was recently asked whether N.J.S.A. 14A:5-28 allows a shareholder(s)s to inspect the minutes of the board of directors and of an executive committee. That statue provides as follows: Each corporation shall keep books and records of account and minutes of the proceedings of its shareholders, board and executive committee, if any. The corporation shall keep at its principal office, its registered office, or at the office of its transfer agent, a record or records containing the names and addresses of all shareholders, the number, class and series of shares held by each and the dates when they respectively …
Can You Get an Injunction to Stop a Threatened Breach of a Covenant Not To Compete?
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County New Jersey Covenant Not to Compete Attorney The Applicable Law and Legal Standard to Obtain an Injunction Over time, the court has crafted a four-part framework for use in determining whether the grant or denial of preliminary injunctive relief is appropriate. Under this formulation, trial courts must consider (1) the likelihood of success on the merits; (2) the potential for irreparable harm if the injunction is denied; (3) the balance of relevant impositions, i.e., the hardship to the non-movant if enjoined as contrasted with the hardship to the movant if no injunction issues; and (4) the effect (if any) of the court’s ruling on the public …
Just How Far Must You Go To Serve A Lawsuit Upon a Defendant (Part 3 of a 3 Part Series)
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Trial & Litigation Attorney In Parts 1 and 2 of this blog post, I discussed the appeal of a tax sale foreclosure action and the court’s legal analysis. Read on for the outcome of the case. Here, plaintiff contends it properly served defendant pursuant to Rule 4:4-5(a)(2) by mailing the summons and complaint to defendant’s address, but such rule provides a party may be served by mail as long as the serving party adheres to Rule 4:4-4(b)(1)(C). But the court said that in order for the kind of service plaintiff endeavored to effectuate here to be effective, plaintiff first had to attempt personal service in accordance with …
What is the LLC Buy-Out Standard?
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, New Jersey LLC Attorney The New Jersey Revised Uniform Limited Liability Act (RULLA) contains an express provision granting relief to oppressed minority LLC members. The current LLC Act authorizes the remedy of a buy-out in lieu of dissolution. Unlike the corporate statue, which expressly provides that the buy-out be at fair value (assuming there is no contrary direction in a shareholders agreement), the current LLC Act does not specify at what value the buy-out is to be made. In an Operating Agreement LLC members, like shareholders in a shareholders agreement, can dictate the agreed value standard under which a member claiming oppression is to be …