Corporations Code section 1800

2 posts

Shareholder Disputes: Finding a Lawyer

Are you searching for an experienced San Diego lawyer to represent you in a shareholder dispute? If you are looking for an attorney who fights for his clients and knows how to win shareholder disputes, you came to the right place. Shareholder disputes often arise when the relationship between co-owners breaks down, and the parties are faced with the prospect of a “business divorce.” Shareholder disputes often arise alongside other corporate issues, including:

Most of these disputes can be resolved quickly without filing lawsuits. However, a small percentage of shareholder disputes cannot be settled and these must be resolved by litigation. In these cases, you want an experienced attorney who knows the law and will not shy away from taking your case to trial. Unlike other firms, I do not pass my clients off to associates or younger attorneys. My clients deal directly with me.

If you need a San Diego lawyer for your shareholder dispute, call me at 858-747-0862 or email me for a free consultation.

The Point of No Return in the Section 2000 Buy-Out Process

Corporations Code section 2000, subdivision (c) provides a right to purchase the plaintiff’s shares as an alternative to litigating an involuntary dissolution lawsuit. “Under those circumstances, the purchasing shareholders may avoid the dissolution of the corporation and the appointment of any receiver by buying the plaintiff’s shares. Nothing in section 2000, subdivision (a) provides for a buyout independent of a pending involuntary dissolution suit.” (Kennedy v. Kennedy (2015) 235 Cal.App.4th 1474, 1481.) In short, a party’s right under section 2000 depends entirely on the existence of a cause of action for involuntary dissolution.

Thus, a plaintiff can dismiss the dissolution lawsuit before the section 2000 process begins and avoid the buy-out option. But what if the plaintiff dismisses the suit after the court orders a buy-out following a section 2000 hearing? 

In Ontiveros v. Constable, (2018) 27 Cal. App. 5th 259, an aggrieved minority shareholder filed an action for involuntary dissolution under Corporations Code section 1800. The majority shareholders filed a motion under Section 2000 to buy-out Ontiveros’ shares and stay the action pending the appraisal process. The trial court granted the motion. Ontiveros then dismissed her case and filed a motion to terminate the appraisal and buy-out of her shares. Finding that she had the right to dismiss her case, the trial court granted the motion and terminated the buy-out. The appellate court reversed, finding that once the trial court granted the majority shareholder’s motion to invoke the buy-out option, the minority shareholder could not avoid a buy-out by dismissing her dissolution action.

[W]e determine that the special proceeding under section 2000, once initiated, “supplants” the cause of action for involuntary dissolution. At that point, the parties give up their right to litigate the involuntary dissolution action subject to the special proceeding outlined in section 2000. As such, a plaintiff, like Ontiveros, can no longer dismiss the involuntary dissolution claim under Code of Civil Procedure section 581, subdivision (e). As the superior court relied upon that code section as a mechanism to lift the stay and terminate the section 2000 special proceeding, it misapplied the law, and therefore, abused its discretion.

In short, once the section 2000 motion is granted, the buy-out process begins and the dissolution action may no longer be dismissed.