October 11, 2017
NEWARK, NJ — “A client of ours came to us this year with a major problem, and he had no idea what, if anything, he could do about it,” began Eric Kanefsky, Senior Partner at CK.
Over a decade ago, his client had left the New Jersey company he had co-founded. At that point, he owned more shares than almost any other shareholder. Accordingly, he had substantial rights and privileges.
It turns out, this didn’t seem to matter.
“Though he maintained ownership of his shares, his former company covertly worked to divest him of his corresponding rights and privileges,” explained Sam Cornish, a partner who works on the case with Eric and their associate, Marty Gandleman. “They began a scheme to dilute his equity stake in the company, and failed to notify him of corporate changes that altered his rights as a shareholder. He was left with substantially less than that with which he had started, and there had been no corporate measures taken to protect him.”
The client had come to the right place. Eric, Sam, and Marty are part of CK’s deep bench of former Federal and State prosecutors. They are seasoned trial attorneys. They regularly take on complex civil cases.
They could see that this was not fait accompli.
It was unfair and unjust that new senior management was systematically taking steps to dilute the client’s ownership interests. Fortunately, there were legal means of stopping them.
Eric, Sam, and Marty devised a game plan, and that game plan has been spot-on.
“We filed a Complaint in Superior Court of Hudson County, New Jersey, attesting that our client’s former employer had failed to comply with notice and disclosure requirements under the governing Delaware law. We asserted that their corporate actions were not lawful and that they breached their duties of disclosure and fiduciary duties, among other issues,” explained Marty.
The former co-workers of the client were not pleased.
They moved to dismiss the client’s Complaint, endeavoring to say it failed to state a claim. They tried to argue that the client’s grievances were too old to be legally relevant. They attempted to attack the jurisdiction of the New Jersey court on the grounds that the company was incorporated in Delaware.
They were grasping at straws, and the Court knew it.
The Court summarily rejected the Motion to Dismiss.
“You can’t completely disclaim the corporate rights of a significant shareholder who, for years, was ignored and whose shares were diluted,” explained Eric. “Further, in an unauthorized corporate action case, if the company is located in New Jersey, and primarily operates in New Jersey, and if most of the parties live and work in New Jersey … you can’t demand that the only forum for the case is Delaware.”
Visit CK’s website to learn more about the strengths of the attorneys working on this case.