November 27, 2022

Volume XII, Number 331

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Alleged Corporate Murder Merits A Jury Trial

"Murder most foul, as in the best it is.
But this most foul, strange and unnatural."*

The California Constitution declares that trial by jury is an "inviolate right" that "shall be secured to all".  Cal. Const. Art. I, §16.  Despite this expansive language, this right in the civil context is generally limited to cases in which the "gist" of the action is legal.  If the "gist" is equitable, there is generally no right to a jury.  Thus, a party's right to a trial by jury depends upon the court's view of the "gist" of the action.

"Business is business, and it's a murder most foul"**

Drawing the line between legal and equitable actions becomes a bit more complicated when fiduciaries are involved.  In ZF Micro Solutions, Inc. v. TAT Capital Partners, Ltd., 2022 WL 4090879, the cross-complainant alleged that "TAT Capital Partners, Ltd., murdered its [the cross-complainant's] predecessor by inserting a board member who poisoned it".   The trial court decided that there was no right to a jury trial and the cross-complainant appealed.  Writing for the court, Justice William W. Bedsworth found that the "gist" of the claim was for compensatory damages for the "murder" of the predecessor corporation and that there were no competing equities to be weighed.  Thus, the trial court erred in denying a jury trial.

The Court's holding creates an interesting puzzle.  In Rankin v. Frebank, 47 Cal. App. 3d 75, 121 Cal. Rptr. 348 (1975), the California Court of Appeal held that there is no right to a jury trial in a derivative action.  In doing so, it rejected the U.S. Supreme Court’s approach to the Seventh Amendment in Ross v. Bernhard, (1970) 396 U.S. 531 [24 L. Ed.2d 729, 90 S.Ct. 733].  See also Caira v. Offner, 126 Cal. App. 4th 12, 39, 24 Cal. Rptr. 3d 233, 253 (2005).  The cross-complaint in ZF Micro Solutions, Inc. was brought by the corporation and not as a derivative action.  It does not make a lot of sense (at least to me) that a right to trial by jury inheres when the action is brought by the corporation but not when the action is brought derivatively by the shareholders.


FOOTNTOES

*Wm. Shakespeare, The Tragedy of Hamlet Prince of Denmark, Act I, Sc. V

** Bob Dylan

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 251
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
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