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Georgiadis v. Georgiadis

A-4018-08T1 (N. J. Super. App. Div. 2010) (Unpublished)

CORPORATIONS; SHAREHOLDERS; DEADLOCK — Where a court institutes a receivership as a remedy for deadlock or in a case of shareholder oppression, and that remedy permits one of the shareholders to buy the entire corporation, that shareholder may lose the right to buy the corporation if it allows the permitted time period to pass and this is true even if the untimely acting shareholder offers to match a later purchase offer from an unrelated third party.

Two brothers owned a diner and the property on which it was located. At one time, they co-managed the diner, but when one of the brothers left in 1990 to operate a diner in Connecticut, the other brother ran the New Jersey diner exclusively. The Connecticut diner was sold in 1999 and the brother owning that diner sought to return to the New Jersey diner, but his request to return to work was rebuffed. Six years later, he sued, alleging that he was an oppressed minority shareholder and that he and his brother (who had remained in New Jersey) were irreconcilably deadlocked. He sought to have their corporation dissolved, its assets sold, and the proceeds distributed between him and his brother. The lower court concluded that the two brothers were equal shareholders and that, in fact, the out-of-management brother was an oppressed minority shareholder. The lower court gave the brother who had been running the diner 90 days to buy out his brother’s shares. The Court decided that if such a buyout did not happen within the 90 days, the corporation was to be dissolved and a receiver was to be appointed to sell the corporation’s assets and distribute the proceeds. After unsuccessful appeals, the lower court dissolved the corporation and appointed a receiver. About a year later, the receiver received a purchase offer from a third party and the brother who had continued to run the diner throughout all of this time (pursuant to a court order) then sought to buyout his “oppressed” brother-shareholder. Even though the oppressed brother would have received the same amount as if the third party sale went through, the receiver refused to allow the brother who had been operating the diner to step in front of the third party offerer. That brother sought to block the lower court’s approval of the receiver’s decision to sell the diner, but the lower court ordered that the diner be sold to the third party. The brother seeking to stay in the diner appealed, but the Appellate Division supported the lower court’s decision. In doing so, the Court pointed out that the lower court had “fashioned an equitable remedy by permitting the [brother who had been running the diner] to purchase [his brother’s] interest in the corporation. [That brother] did not avail himself of that opportunity.” Essentially, the Court would not permit relitigation of the matter that had already been resolved and would not give the brother who had been running the diner throughout this entire period a second opportunity to purchase the diner.


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