North Carolina Business Litigation Report

Western Piedmont Anesthesia, P.A. v. Barnette, November 20, 2007 (Tennille)(unpublished)

The Court dismissed the derivative claim of a minority shareholder who alleged that the majority shareholders of the corporation had breached their fiduciary duty to the minority shareholders by failing to make distributions, failing to investigate allegations on that subject, and terminating the minority shareholder's employment. 

The Court held that this was not a proper derivative claim, because the shareholder had not alleged a cause of action belonging to the corporation or a remedy to which the corporation would be entitled.

The Court further found that even if the claim was derivative, that the minority shareholder did not fairly represent the corporation as required by North Carolina General Statute § 55-7-41(2).  The Court held:

The North Carolina Court of Appeals has applied the federal standard for determining when a shareholder “may fairly and adequately represent a corporation.” Robbins v. Tweetsie R.R., 126 N.C. App. 572, 579, 486 S.E.2d 453, 456, rev. denied, 347 N.C. 402, 494 S.E.2d 418 (1997). The federal standard uses a case by case analysis of whether a shareholder qualifies to represent the corporation. Id. (citations omitted). In Robbins, the court discussed the facts surrounding the plaintiff to conclude that plaintiff was not a suitable shareholder to bring a derivative suit. Id. at 579–80. Before the court addressed the facts of Robbins, it specifically set out that “a minority shareholder, who has uppermost a personal agenda rather than the best interests of the corporation, would [not] have standing to file and maintain a shareholder derivative action.” Id. at 578.

The Court held that the minority shareholder had a personal agenda that affected his ability to adequately represent the bests interests of the corporation. 

The Court also dismissed the shareholder's unfair and deceptive practices claim because the shareholder was a physician and the Court found the learned profession exception to applied.

Full Opinion

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

 

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Mack Sperling
Brooks Pierce, LLP
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