Recent NJ Cases Involving Shareholder Agreements Offer Much Guidance to Counsel and Clients – Part 1 of 2

HNWShareholder Rights Litigation

Case 1

  • I’ve written often about the importance of having legal disputes resolved by the courts in NJ.
  • Our law states that “Subject to public-policy constraints, agreements that obligate parties to resolve disputes outside NJ (forum-selection clauses) are generally enforceable” in New Jersey.
  • A recent case involved the applicability of a “forum selection clause” in a shareholder agreement.

Facts of the Case

Minority shareholders brought suit against shareholders and officers and directors for dilution of their shares.  The defendants responded with a motion to dismiss based on a forum selection clause that required “any dispute arising out of” the shareholder agreement be brought in Delaware.  The plaintiffs argued that their claims for breach of fiduciary duties by corporate owners did not arise out of the shareholder agreement.  The trial court granted the motion to dismiss.  That decision was appealed.

The Appellate Court held that the determination of whether the non-contractual claims fell within the scope of the forum selection clause depended upon “a ‘common-sense examination’ of the facts of the case.

Interestingly, the court emphasized that the use of the term “dispute” rather than “claim” was significant because a “dispute” is a broader term, leaving open the possibility that the plaintiff’s position might have been valid if the forum selection clause had stated “all claims arising out of the agreement.”  However, the court also held that the CEO and CFO, neither of whom had signed the shareholder agreement in an individual capacity, could not rely on the forum selection clause.  So the outcome of the case was to allow the case to remain in the home state of the shareholders rather than transferring the case to Delaware.

To discuss your NJ shareholder matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Shareholder Attorney

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