Practice point: The corporation's minority shareholders brought this action against the majority shareholders, officers, and directors, alleging among other things, that defendants improperly diverted corporate opportunities to other companies owned by them, excluding plaintiffs from those opportunities.
The Appellate Division reversed the motion court's dismissal. While the complaint fails to set forth with particularity plaintiffs' demand that the board commence an action against defendants, pursuant to Business Corporation Law § 626[c], the complaint adequately sets forth plaintiffs' reasons for not making a demand, also pursuant to § 626[c]. It alleges that defendants, as the corporation's sole directors, were self-interested in the challenged conduct because they received a personal benefit as the owners of the corporations to which they diverted corporate opportunities. In addition, plaintiffs allege that defendants, in their role as directors, ignored plaintiffs' earlier attempts to compel them to cease their alleged wrongdoing.
Student note: The Appellate Division also found that it was inappropriate for the motion court to dismiss the breach of contract cause of action in light of the allegations that defendants, as directors, did not act in good faith.
Case: Soho Snacks Inc. v. Frangioudakis, NY Slip Op 05603 (1st Dept. 2015)
Here is the decision.
Tomorrow's issue: A double-parked vehicle and summary judgment as to liability.