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Conway v. DialAmerica Marketing, Inc.

BER-C-116-08 (N.J. Super. Ch. Div. 2008) (Unpublished)

CORPORATIONS; JURISDICTION — Even though a corporation may have been formed in a different state, if qualitatively, New Jersey has the most significant relationship to the underlying facts in a dispute between shareholders and has the most significant contacts with the corporation, a minority shareholder may plead a cause of action under New Jersey law.

A minority shareholder sued a privately-held corporation and its majority shareholder. He alleged breach of fiduciary duty, fraud, and corporate waste under New Jersey law. Even though the corporation was incorporated in Delaware, its principal place of business was in New Jersey and it had other substantial contacts with the state. Its directors were all New Jersey residents, for ten years its board meetings regularly took place in New Jersey, and it maintained critical books and records in New Jersey. The corporation defended by pleading that New Jersey law and the New Jersey forum should not apply to the lawsuit.

The lower court first noted that the New Jersey courts use a flexible “government-interest” standard, which holds that the state with the greater interest in resolving the particular raised issue should have its law applied. It further noted that New Jersey courts have applied domestic law to companies incorporated in foreign states, and that the New Jersey Business Corporations Act applies to foreign corporations. The Court also recognized that where a corporation has close contacts with a foreign state, a party may seek relief short of full corporate dissolution from the foreign state. It noted that both New Jersey and Delaware impose fiduciary duties on majority stockholders to protect the interests of minority stockholders, but qualitatively New Jersey had the most significant relationship to the underlying facts and to the parties, and had the most significant contacts with the corporation. Therefore, the Court permitted the minority shareholder to plead a cause of action under New Jersey law.

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