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Injunctions in Shareholder Dispute Litigation

In my last posting, I started discussing the difficulty involved in simply “getting before the judge” so that he can “hear my story,” and the fact that it’s usually not that easy in a shareholder dispute litigation. This time, I want to elaborate on such requests, including real life examples in shareholder disputes of when a judge is likely to intervene early, and when she is not.

At the outset, although no one reading this is likely interested in all of the nuances, a simple primer on the standard for granting what courts refer to as “injunctive relief” is in order. Generally speaking, a court will not grant an injunction unless you are trying to prevent harm that is both imminent and which could not easily have a dollar value placed on it (“irreparable harm”).

(At this point, I must comment on something that has been plaguing me since law school. Many lawyers I know have never understood the concept of something that cannot be remedied by money damages. The classic example given in law school is land, which is unique. If you lose your land, no money could ever get you THAT land back. However, our court system puts a price tag on a lost arm, or even a lost life. So, when you try to explain the concept to a client, the quizzical looks are perfectly understandable. But I digress …)

In shareholder disputes, clients often are forced to seek the same relief in nearly every case. Access to the company’s books and records is often something a minority shareholder is denied, and is quite possibly the easiest thing to get a Court to order at the start of a case. Additionally, countless clients have asked to have their termination (as an employee) stopped by the Court. However, this is often an easy one for the Court, as money damages can almost always compensate one wrongfully terminated. As a result, few judges in New Jersey will intervene to stop a termination and order that a shareholder/employee may go back to work.

Even more common is the client who wants the Court to enjoin his business partner from stealing from the company. This is a tricky one, since the threshold of “irreparable harm” is likely met. After all, stealing could literally end a company’s existence, which most courts deem irreparable harm despite the fact that the business can be valued and have a dollar figure attached to it. However, you also have to prove that stealing is very likely occurring, which is often not terribly easy prior to taking discovery. Proving such an allegation will be extremely fact and case sensitive. However, I have yet to see the case where a clear-cut, open-and-shut case can be made on day one that stealing is occurring. Usually, your unscrupulous business partner does a better job than that of covering his tracks and hiding improper transactions. He will always have an excuse for all of his dealings, whether fabricated or not.

An experienced shareholder dispute litigator will know how to uncover what really has happened, and make the best possible presentation to the Court. However, getting the judge to act quickly is no easy task.