July 5, 2020

Volume X, Number 187

July 03, 2020

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Can a Breach of Fiduciary Duty Suit Be Brought Directly?

In a recent posting, Professor Stephen Bainbridge breaks down the question of whether breach of fiduciary duty claims by a shareholder may be brought as direct, rather than, derivative claims.  The focus of his discussion is on breach of fiduciary claims brought against directors.  Some breach of fiduciary duty claims, however, are brought against majority shareholders.  See Jones v. H.F. Ahmanson & Co., 1 Cal. 3d 93 (1998).

In some cases, California courts have allowed minority breach of fiduciary duty claims to be brought directly against the majority shareholders.  In Jara v. Suprema Meats, Inc., 121 Cal. App. 4th 1238 (2004), the minority shareholder in a corporation with only three shareholders was allowed to bring his claim directly.  The Court found support for its conclusion by noting that one of the traditional justifications for requiring derivative actions was a desire to prevent a multiplicity of individual actions.  When there is only one minority shareholder, there is no danger of multiple shareholder actions.

"And the sign said . . ."

IMG_2204

I came across this sign a year ago, but I suppose using toilet paper to the "last minute" was a good idea even in those halcyon ante-pandemic times.

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About this Author

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

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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