Shareholder and Litigation Disputes

Another frequent cause of a dispute is shareholder oppression, which is when minority shareholders believe that majority owners are acting in a way that unfairly prejudices their rights or interests. This can include actions such as withholding dividends, excluding minority shareholders from key decisionmaking, or misappropriating corporate opportunities. In these cases, minority shareholders may file a dispute and pursue litigation to protect their stake in the company.

Disputes can also stem from disagreements over the interpretation or enforcement of shareholder agreements. These agreements are meant to define each shareholder’s rights, responsibilities, and expectations, including decision-making authority, buy-sell provisions, and restrictions on transferring shares. When these terms are unclear or contested by shareholders, it may result in conflicts escalating into litigation.

Disagreements as to the valuation of a company’s worth or stock value can be cause for a dispute. Known as a valuation disagreement, this often happens during buyouts or exits by shareholders. This often requires independent valuation experts or court intervention to sort out.

Finally, litigation surrounding corporate governance is also prevalent. This includes disputes about the election or removal of directors, the validity of corporate resolutions, or the enforcement of bylaws. Such governance issues can divide shareholder groups and affect the company’s overall operations.

Disputes and The Florida Business Corporation Act

TheFlorida Business Corporation Actis the legal foundation governing shareholder disputes in the state. There are several relevant statutes from this act, which include:

Fla. Stat. § 607.0822– This outlines the notice requirements when communicating with shareholders. If a corporation does not comply with these requirements, it can be a basis for a shareholder dispute.

Fla. Stat. § 607.0206– This section outlines bylaw requirements for corporations. There is the possibility for the contents of the bylaws indirectly leading to shareholder disputes.

Fla. Stat. § 607.1301– This section covers shareholders’ appraisal rights available during certain business transactions.If there is a disagreement about prices for shares, appraisal rights can come into play.

Fla. Stat. § 607.0750– This outlines the requirements for a shareholder to take direct legal action against another shareholder, an officer, a director, or the company itself.

Fla. Stat. § 607.0804– This part of the act covers the election of corporate directors. If the election of a director is contested by a shareholder or multiple shareholders, it can result in a dispute and litigation.

Proving a Dispute

Proving a shareholder dispute in Florida requires meeting specific legal elements, which can vary based on the nature of the claim. However, most shareholder-related lawsuits hinge on two foundational requirements.

The first of these, known as standing, refers to the legal right to bring a claim. In order to have standing in a shareholder dispute, the plaintiff must be an actual shareholder of the corporation involved and must have personally suffered harm as a result of the defendant’s actions. Without a valid ownership interest or demonstrable injury, a shareholder is unlikely to succeed in bringing a claim before the court.

The second requirement for proving a dispute is causation. This is when the plaintiff must establish a direct link between the defendant’s conduct and the harm or financial loss suffered as a result. It is not enough to simply allege wrongdoing, and the plaintiff must clearly show that the actions or omissions of the defendant were the proximate cause of their damages.

If both of these elements are proven, a shareholder may pursue a range of remedies depending on the goals of the litigation and the impact on the corporation. Potential outcomes include monetary damages, injunctive relief to halt ongoing misconduct, the removal of corporate officers or directors, or, in more severe cases, judicial dissolution or forced sale of the company.

Defenses to Shareholder Disputes

There are several defenses in shareholder litigation that are commonly raised by defendants to challenge the legitimacy or viability of a plaintiff’s claims. The most common of these is lack of standing. A defendant may argue that the shareholder who is bringing the claim does not have the legal authority to sue, either because they do not own a sufficient number of shares or have failed to meet procedural requirements, such as making a proper demand on the board before initiating a derivative lawsuit. If these prerequisites are not met, a plaintiff’s case may be dismissed before substantive issues are even considered.

Another defense is the business judgment rule, which is a legal doctrine protecting corporate directors and officers from liability for decisions made in good faith, due care and in what can reasonably be viewed as in the best interests of the corporation. If it can be proven that a defendant’s actions fall within this protective framework, the courts are generally reluctant to second-guess those business decisions.

Defendants may also raise the statute of limitations as a procedural bar. Florida law imposes specific time limits within which shareholder disputes must be brought, depending on the nature of the claim. As an example, actions alleging breach of fiduciary duty or corporate waste must typically be filed within four years. If a plaintiff files after the limitations period has expired, the defendant can seek dismissal on the basis that the claim is legally time-barred.

The final defense involves a lack of evidentiary support. In this situation, the defendant may argue that the plaintiff cannot prove key elements of their case, such as a breach of fiduciary duty, causing of financial harm to the corporation or individual shareholder, or causation between the alleged misconduct and the claimed damages. Without sufficient documentation, credible witness testimony, or expert analysis, the plaintiff may fail to meet the legal burden of proof required to prevail in a shareholder litigation case.

Hiring Business Litigation Attorney

Shareholder disputes can often be complex matters to sort out. Due to the high financial stakes surrounding disputes of company assets, divisions and shares of stock, it is crucial that those pursuing a dispute or defending against one hire an experienced legal team to be on their side.

The business litigation attorneys at Di Pietro Partners PLLC have decades of combined experience working with shareholder disputes and protracted high stakes litigation. Our team will work to analyze the details surrounding a dispute and come up with the best legal outcome possible while protecting shareholder rights. Contact our office today to learn how we can help assist in your case.