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PLAINTIFF MINORITY SHAREHOLDER ALLOWED TO REPLEAD DIRECT CLAIMS UNDER CAYMAN ISLANDS LAW AGAINST THE CORPORATION STEMMING FROM DISPROPORTIONATE PAYMENT OF DIVIDENDS AND BREACH OF FIDUCIARY DUTY BETWEEN DIRECTORS AND PLAINTIFF.

The First Department, in a full-fledged opinion by Justice Andrias, over a two-justice dissenting opinion, determined two causes of action which improperly alleged both direct and derivative claims by a shareholder against the corporation were properly dismissed but could be repled to make direct claims under Cayman Islands law. The dissent argued leave to replead was not warranted by the facts alleged:

Plaintiff should be given an opportunity to replead to remedy the pleading deficiencies … . Although a challenge to a decision to pay dividends would generally be derivative, plaintiff asserts, inter alia, that his claim is direct because the disproportionate payment of dividends is discriminatory and directly harmed him as a minority shareholder. Thus, rather than corporate mismanagement, plaintiff asserts unequal treatment in the form of an intentional, premeditated plan to pay the Investors huge windfall dividends while freezing out minority shareholders in order to induce them to sell their shares to the Investors at a steep discount. * * *

… [P]laintiff should [also] be given leave to replead to separate his direct claim of being induced by the Directors to part with his common shares … for less than their true value from his derivative claim alleging harm to the company … , and to set forth facts to establish the special circumstances necessary under Cayman Islands law to create a fiduciary duty between the Directors and plaintiff as a minority shareholder. Davis v Scottish Re Group Ltd., 2016 NY Slip Op 01756, 1st Dept 3-10-16

CORPORATION LAW (SHAREHOLDER’S DIRECT CLAIMS STEMMING FROM DISPROPORTIONATE PAYMENT OF DIVIDENDS AND BREACH OF FIDUCIARY DUTY BETWEEN SHAREHOLDER AND DIRECTORS)/DIVIDENDS (DIRECT CLAIM AGAINST CORPORATION STEMMING FROM DISPROPORTIONATE PAYMENT OF DIVIDENDS)/FIDUCIARY DUTY (CORPORATION LAW, DUTY OWED SHAREHOLDER BY DIRECTORS AS BASIS FOR DIRECT CLAIM)

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