Norman v. Nash Johnson & Sons' Farms, Inc

In Norman v. Nash Johnson & Sons' Farms, Inc., 140 NCApp 390, 405, 537 S.E.2d 248 [NC App 2000], the plaintiffs, minority shareholders in a closely held corporation, asserted individual claims against the majority shareholders for, inter alia, breach of fiduciary duty (id.). The trial court dismissed the complaint based on a lack of standing, finding that the claims were derivative in nature (id. at 395). The North Carolina Court of Appeals reversed, holding that the minority shareholders had standing to assert both individual and derivative claims. It reasoned that it was appropriate to allow minority shareholders to file individual actions "when a dispute arises within the context of a family owned corporation, or other corporation in which all shares of stock are held by a relatively small number of shareholders" (id. at 404). It found that when the close relationship between the shareholders in a closely held corporation breaks down, "the majority shareholders are obviously in a position to exclude the minority shareholders from management decisions, leaving the minority shareholders with few remedies" (id.). The Court also pointed to other factors, which are relevant to the instant case, justifying individual claims by a minority shareholder who asserts wrongful conduct and corruption by the majority shareholders. "It would be unrealistic to expect the interests of the plaintiff minority shareholders who prevail in a derivative action to be protected by defendant majority shareholders who have allegedly converted, appropriated, and wasted corporate assets" (id. at 405). Further, it reasoned that if the action by the minority shareholders is treated as a derivative action, the burdensome procedural requirements of derivative litigation would apply (id.). With regard to businesses controlled by the majority shareholders and with which the corporation had dealings, the Court found that those businesses were not independent third parties. Instead, they were "inextricably wedded" to the majority shareholders based on the plaintiff's allegations that the businesses entered into a conspiracy with the majority shareholders to take corporate assets and opportunities, and redirect them to the majority shareholders (id. at 406.)