THE STATE OF NEW HAMPSHIRE

SUPREME COURT

 

In Case No. 2004-0340, Roland Durham v. Gary Durham & a., the court on April 20, 2005, issued the following order:

Appellee's motion to strike is granted.

Appellee's motion for reconsideration pursuant to Rule 22 is denied.

On the appellant's motion to modify or correct, the court rules as follows. The slip opinion dated February 24, 2005, is modified in three places.

First, the slip opinion is modified by deleting the words "the only" from the fifth sentence of the second paragraph of the opinion, so that said paragraph, as modified, shall state:

The plaintiff’s petition alleged the following facts. The plaintiff and the three defendants, Gary Durham, Martha Styer and Peter Durham, are the sole shareholders of Sunset Ranch Camp, Inc., a New Hampshire corporation. The plaintiff owns 4,000 shares of the corporation’s stock and each defendant owns 2,000 shares. The corporation owns and operates the Sunset Ranch Camp in Orford. The plaintiff and the defendants are directors of the corporation. The defendants are also officers of the corporation. The plaintiff served as president from July 1996 through July 2000, when he was voted out as president and defendant Gary Durham was elected.

Second, the slip opinion is modified by adding a new sentence to the second paragraph on page 4 of the opinion, so that said paragraph, as modified, shall state:

The plaintiff urges us to expand a minority shareholder’s ability to bring a direct suit against other members of a close corporation. The corporation here is typical of other close corporations in that the shareholders are few in number, know each other, and actively serve in the management of the business as officers or directors. See Landstrom v. Shaver, 561 N.W.2d 1, 13 n.15 (S.D. 1997). Because the corporation’s shares are not publicly traded, the plaintiff as a minority shareholder does not have the opportunity to extricate himself from the corporation by selling his shares on the open market. See Thomas, 301 S.E.2d at 51. In addition, construing all reasonable inferences drawn from the well-pleaded facts below in the plaintiff's favor, we conclude for purposes of this analysis that the corporation's board of directors is not disinterested. In these circumstances, the formalities of the derivative proceeding may be impractical and unnecessary because the corporation does not have a disinterested board of directors and a multiplicity of suits is unlikely. See 2 F. O’Neal & R. Thompson, O’Neal and Thompson’s Close Corporations and LLCs: Law and Practice § 9:22, at 9-138 to 9-140 (3d ed. rev. 2004).

Third, the slip opinion is modified by adding the words "it appears that" to the third sentence of the first paragraph on page 6 of the opinion, so that said paragraph, as modified, shall state:

On remand, the trial court may, in its discretion, allow the plaintiff to pursue his claims in a direct suit against the defendants, taking into account all of the above factors, including those suggested by the ALI, in making its determination. A direct action may be appropriate in this case because all of the corporation’s shareholders are before the court as either the plaintiff or defendants; thus, there is no risk that a direct suit would expose the corporation to a multiplicity of actions. Furthermore, it appears that the corporation does not have a disinterested board of directors that could evaluate whether a derivative proceeding is in the best interest of the corporation. See RSA 293-A:7.44. On the other hand, the trial court should consider, for example, whether any of the corporation’s creditors would be prejudiced by allowing the plaintiff to pursue a direct action against the defendants.

Reconsideration denied; opinion modified.

Broderick, C.J., and Nadeau, Dalianis, Duggan and Galway, JJ., concurred.

Eileen Fox,

Clerk