Plaintiff argues that calling a special meeting of the board of
directors and ousting Defendant as president would be futile. The
reason for the futility is the annual stockholders meeting to
elect new directors which is scheduled for January 24, 1994.
Plaintiff argues that at this meeting Defendant Del, as the
majority shareholder, will elect a board of directors favorable
to himself which will appoint him president of the corporation.
This action has not happened yet, however, and it is pure
speculation that it will. The Court simply cannot speculate on
what might happen in the future to determine if it currently has
subject matter jurisdiction. This Court must determine its
subject matter jurisdiction based on the facts as they are
presented to it at the time it rules.
Another factor in favor of looking to the board of directors to
determine antagonism is Fed.R.Civ.Pro. 23.1. Rule 23.1 sets out
the pleading requirements for filing a shareholder derivative
action. The Rule states in part "[t]he complaint shall also
allege with particularity the efforts, if any, made by the
plaintiff to obtain the action the plaintiff desires from the
directors or comparable authority and, if necessary, from the
shareholders or members, and the reasons for the plaintiff's
failure to obtain the action or for not making the effort." This
pleading requirement indicates who the Supreme Court feels has
the power to handle such matters: the board of directors.
Obviously, Rule 23.1 is not controlling on this issue. Rule
23.1 cannot come into effect until the Court finds that it has
jurisdiction over this case. Rule 23.1 is, however, persuasive
authority. Consider the situation if the Court were to find the
"management" of Jack-Rich, Inc. antagonistic to this suit.
Defendant Jack-Rich, Inc. would remain a Defendant in this action
giving the Court subject matter jurisdiction. The next step in
the case would be to determine if Plaintiff's pleadings meet the
requirements of the Federal Rules of Civil Procedure.
Accordingly, the Court would have to look at Plaintiff Evelyn's
Complaint to determine if she had complied with Fed.R.Civ.Pro.
As pointed out above, Rule 23.1 requires Plaintiff's Complaint
to state with specificity the efforts they have made to obtain
the action they desire from the board of directors and the
failure to obtain the action or for not making the effort. In
this case Plaintiff could never meet this requirement. If
Plaintiff requested the action she desires from the board of
directors, she would receive that action since two of the three
directors favor the action Plaintiff is requesting. It would make
no sense, therefore, not to look to the board of directors in
this case to determine if the "management" of Jack-Rich, Inc. is
antagonistic to this suit.
In support of Plaintiff's position she has cited Liddy v.
Urbanek, 707 F.2d 1222 (11th Cir. 1983). In that case, the
plaintiff and defendant each owned fifty percent of a company.
Plaintiff brought a derivative suit under Fed.R.Civ.Pro. 23.1
against the defendant. The articles of incorporation listed
plaintiff as president and defendant Urbanek as
secretary-treasurer. Plaintiff was a resident of New Jersey. The
defendant was a resident of Florida. The company, a Florida
corporation, was not named as a party. Plaintiff brought the suit
in the District Court for the Southern District of Florida based
on diversity jurisdiction.
The District Court did not address the issue of diversity
jurisdiction and plaintiff won a substantial jury verdict. On
appeal, the defendant raised lack of subject matter jurisdiction
for the first time. Defendant argued that the company was an
absent indispensable party which should have been a named
plaintiff destroying diversity jurisdiction. Plaintiff argued
that the company was antagonistic to the law suit and, therefore,
would have remained a defendant, maintaining diversity
The Eleventh Circuit agreed with the defendant that the company
was an absent indispensable party which had to be joined in the
suit. The court also found that the company was not antagonistic
to the suit; therefore, it had to be joined as a plaintiff which
destroyed diversity jurisdiction. In determining antagonism, the
court pointed to the fact that plaintiff was at least an equal
shareholder in the company, there was a factual dispute in the
pleadings as to whether plaintiff was majority shareholder or
plus the controlling officer of the company. Given these facts,
the court concluded the company was not antagonistic to the suit.
At first blush, applying Liddy to the facts of this case it
would seem that Jack-Rich, Inc. is antagonistic to Plaintiff
Evelyn's suit. Defendant Del is the majority shareholder and the
controlling officer. The Eleventh Circuit used these two factors
in Liddy to determine antagonism. Liddy, however, is
distinguishable from this case. Although the opinion is not
clear, it appeared that in Liddy the shareholders of the
company had never elected a board of directors. Instead, the
articles of incorporation designated the two shareholders
officers and they alone ran the company. The shareholders, by
deciding not to elect a board of directors, retained their direct
control of the company. Therefore, for purposes of the suit, the
company was split half and half. The final straw in the court's
determination seemed to be the fact that one year after plaintiff
filed the suit in question, he caused the corporation to file an
action in Florida state court seeking recovery of corporate
assets from a third party. The Eleventh Circuit stated "[w]e
believe it is blatantly inconsistent for Liddy to urge us now to
align the corporation against him in federal court simply to
preserve jurisdiction." Liddy, 707 F.2d at 1225.
In the case at bar, although Defendant Del Nejmanowski is the
majority shareholder, Jack-Rich, Inc. has made the decision to
elect a board of directors to run the company. By doing this, the
shareholders have implicitly consented to having the board of
directors, and not themselves, make decisions for Jack-Rich, Inc.
Furthermore, the board of directors has previously shown that it
is ready, willing, and able to remove a corporate officer with
whom they are unhappy. As was the case in Liddy, it would be
inconsistent for this Court, based on the past activities of the
board of directors, to now align the corporation against the
majority of the board of directors simply to create jurisdiction.
Therefore, as of January 14, 1994 Plaintiff Evelyn Nejmanowski
has the necessary support in the company to remove any corporate
official who opposes this lawsuit. Accordingly, the company
should not be deemed antagonistic to this suit. Since the company
is not antagonistic to the suit, it must be realigned as a
Plaintiff which results in destroying diversity jurisdiction.
This ruling has the additional benefit of encouraging the
Plaintiff here as a director to exercise all power available to
her in order to achieve her goals before filing suit. If this
Court were to find that there is jurisdiction in this case, it
would be rewarding a party that did not exercise all of their
available options simply because exercising those options would
preclude jurisdiction in federal court.
Ergo, Defendant's motion to dismiss plaintiff's complaint for
lack of jurisdiction is ALLOWED.
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