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January 26, 1994


The opinion of the court was delivered by: Richard Mills, District Judge:


A hearing was conducted on Plaintiff's Complaint for Derivative Shareholder's Action and Petition for Preliminary Injunction, for Appointment of a Temporary Receiver, and Defendant Nejmanowski's motion to Dismiss Plaintiff's Complaint.

I. Background

Plaintiff Evelyn Nejmanowski and Defendant Del Nejmanowski are the sole shareholders of Jack-Rich Inc., an Illinois business with its principal place of business in Illinois. Del owns 51% of the outstanding shares of Jack-Rich, Inc. while Evelyn owns the remaining 49%. Although Plaintiff and Defendant are married, they have not lived together for approximately ten years. Currently, Evelyn is a resident of Texas and Del is a resident of Illinois.

Evelyn brought this shareholder's derivative action against Del and Jack-Rich, Inc. claiming that Del had engaged in several wrongful or illegal acts which were harmful to Evelyn's minority interest in Jack-Rich, Inc. Evelyn requested an emergency hearing for the issuance of a Preliminary Injunction and the appointment of a Temporary Receiver.

Del filed a motion to dismiss claiming as one ground for dismissal lack of subject matter jurisdiction. Del argued that Defendant Jack-Rich, Inc. should be realigned as a Plaintiff, since it was the real party in interest, which would destroy complete diversity of citizenship.

II. Legal Standard

In ruling on a motion to dismiss, the Court "must accept the well pleaded allegations of the complaint as true. In addition, the Court must view these allegations in the light most favorable to the Plaintiff." Gomez v. Ill. State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). The applicable rules do not necessitate a detailed outline of the claim's basis. Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir. 1985), cert. denied, 475 U.S. 1047, 106 S.Ct. 1265, 89 L.Ed.2d 574 (1986). Still, a "complaint must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985). Applying the above standards, the Court now turns to the case at bar.

III. Analysis

In a shareholder derivative suit, the corporation is always initially named as a defendant as it is an indispensable party to the litigation. Liddy v. Urbanek, 707 F.2d 1222 (11th Cir. 1983). The named plaintiff, however, is only the nominal plaintiff. The corporation is the real party in interest. Once joined and present before the court, the corporation is then realigned, if necessary, according to its real interests. Id. Thus, in most cases the corporation will be realigned as a plaintiff. In the case at bar, if the corporation is realigned as a plaintiff there is no diversity of parties and, therefore, no subject matter jurisdiction in this Court.

There is an exception to the rule. If the corporate management is "antagonistic" to the plaintiff shareholder, the corporation remains a defendant. Smith v. Sperling, 354 U.S. 91, 77 S.Ct. 1112, 1 L.Ed.2d 1205 (1957). Therefore, if the management of the corporation is actively aligned against the plaintiff and his lawsuit, then the shareholder and the corporation are actually on opposing sides of the controversy and the corporation is properly named as a defendant. Young v. Colgate-Palmolive Co., 790 F.2d 567, 568 (7th Cir. 1986). "This is a practical not a mechanical determination and is resolved by the pleadings and the nature of the dispute." Sperling, 354 U.S. at 97, 77 S.Ct. at 1116. In the case at bar, therefore, the central question in determining jurisdiction is, as of January 14, 1994, is the corporation "antagonistic" to this lawsuit?

At this point, some additional facts must be outlined. The Board of Directors of Jack-Rich, Inc. is comprised of Del, Evelyn, and Jackie Brandenburg-Rees, their daughter. The officers of Jack-Rich, Inc. are Del Nejmanowski President, Evelyn Nejmanowski Vice-President, and Jackie Brandenburg-Rees Secretary-Treasurer.

Evelyn Nejmanowski and Jackie Brandenburg-Rees are both in favor of this lawsuit. Del is opposed. As a result of this alignment, the majority stockholder and controlling officer of the corporation opposes the lawsuit, while two out of the three directors of the corporation favor the lawsuit.

This Court could not locate any case law that specifically defines the term "management" as it is used in deciding if "the management of the corporation" is antagonistic to a shareholder derivative suit. The cases located merely state that the "management" of the company must be antagonistic to the suit. See Sperling, 354 U.S. at 97, 77 S.Ct. at 1116, Young, 790 F.2d at 568, Liddy, 707 F.2d at 1224. Management can be defined as either the directors of the company, the officers of the company, or theoretically the controlling shareholder. It ...

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