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Venturini v. Steve’s Steakhouse, Inc.

2006 WL 445059 (N.J. Super. Ch. Div. 2006) (Unpublished)

CORPORATIONS; SHAREHOLDERS; OPPRESSION—Shareholders of a small corporation do not have an absolute right to employment and termination of a shareholder’s part-time laborer’s job, being inadequately performed, is not shareholder oppression.

A husband and wife opened a family owned restaurant in the 1930s. Two children, a brother and sister of the original owners, were involved in the restaurant from the beginning and eventually took over operations in the 1980s. The restaurant was structured as a corporation with each sibling owning 50%. There was no formal agreement concerning the operation of the restaurant in the event of death. Additionally, the siblings had purchased a house on property adjoining the restaurant. After the brother’s death, his two sons acquired his stock and the sister (their aunt) retained her half of the stock. The brother’s surviving wife acquired his half interest in the neighboring house. His sister continued to own the rest. Both siblings had involved their children in the restaurant to varying degrees. Prior to his death, the brother paid his sons a weekly sum from the corporation, regardless of the amount of their work. After the brother’s death, the sister continued this practice.

While working at the restaurant, the sister’s son earned a college degree in hotel and restaurant management. After the brother’s death, both of his sons, on separate occasions, physically and verbally threatened their aunt and their cousin (one threat involving a gun). The sister fired her brother’s sons.

The brother’s sons, claiming shareholder oppression, sought to buy-out the sister’s stock in the corporation and her interest in the house. She sought the same from her nephews. The Court found that the brother’s two sons had only minimally participated in the operation of the business. They performed some maintenance work, but only upon request. Neither volunteered to take on any responsibility, nor demonstrated any initiative. To the contrary, the Court found that the sister’s son was involved in the operation of the restaurant from an early age, having progressed from busboy, to waiter, to back-office manager responsible for food purchases, menu design, payroll, and all accounting matters. Considering the verbal and physical threats by the brother’s sons, together with their sporadic and unreliable work performance, the Court held that the sister was justified in firing them. It also held that shareholders do not have an absolute right to employment and that termination of a part-time laborer’s job, being performed inadequately, is not shareholder oppression. The Court also found that neither of the brother’s sons had any relevant restaurant experience, and further found that their extremely generous valuation of the restaurant (made during purported negotiations to buy the sister’s 50% stock) to be a thinly veiled attempt to get the sister to raise her asking price for their own stock. Since all parties were seeking the same remedy, the Court found in favor of the sister, allowing her to buy out her nephews at a price set by the Court.

As to the adjoining residential property, the Court reasoned that the property had more value to the restaurant than to the brother’s deceased wife. Thus, it ordered that the surviving sister could buy out her brother’s surviving wife’s interest to gain complete and total ownership of the residential property.

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