Steven Malitz - Shareholder Litigation Victories

  • Expelled Rogue Shareholder for Breach of Duties. Malitz defended a home health care business in a suit by a shareholder alleging waste and seeking corporate documents. In a companion suit, the shareholder’s wife—who was a consultant and landlord of the company—sued for rent and compensation. In defending both suits, even in an absence of corporate documents, Malitz demonstrated the shareholder and his wife breached their fiduciary duties by failing to work and devote time and attention to the company, by diverting patients to a competitor, and by making unauthorized expenditures. In beating down the shareholder’s demand for an exorbitant sum for his shares, Malitz showed their valuation was unreasonable. A settlement followed where the company repurchased the shares for a minimal sum, the shareholder and his wife were barred from the company, and both suits were dismissed and all claims were released.
  • Expelled Sole Shareholder, and Kept Company Office, Employees, and Assets. Malitz represented four officers of a real estate and mortgage brokerage company in a dispute with the purported sole shareholder over their stake in the company, and their ability to separate and compete. Although the officers were promised shares, the corporate documentation was lacking. Further, the officers were prevented from providing real estate and mortgage brokerage services elsewhere due to onerous restrictive covenants contained in one-sided employment agreements. As a result, the officers were working tirelessly to cultivate a business for nearly no payment or stake, and feared their departure and competition would result in suit. Malitz and his team executed a plan by which the officers shed the sole shareholder and:
    • lawfully separated from the business;
    • terminated liability from third parties and from the state for acts and transactions done in the name of the business;
    • obtained a novation of the lease through extended negotiations with the landlord and maintained the coveted office suite;
    • preserved the employees and assets of the business; and
    • continued in the practice of their profession without the sole shareholder.
  • Gained Access to Stolen Business and Forced Closing on Stock Purchase. Malitz represented a prominent entrepreneur and political figure in highly contested chancery litigation against the buyer of his business that failed to pay for and close on his purchase of the business but nonetheless unilaterally took control of it. The client—through prior counsel—contracted to sell his office building and the business within it. After closing on the purchase of the building, the buyer took control of the business but failed to pay for it, and barred the seller from physical, computer, and financial access to the business. Issues involving the stock purchase, transfer of the business license, and credits for alleged defects in the building further complicated this disastrous transaction, which was now being litigated in multiple courts. Malitz then entered the cases, made demand on the buyer to immediately close on his purchase of the business, and sought an emergency injunction preventing the buyer from denying the seller access to his business pending a court-supervised closing. Realizing he could no longer stave off closing, buyer agreed to close on the purchase of the business. In a compact period, Malitz amended the suit to cure drafting errors, ambiguities, and mechanics in the stock purchase agreement and business license transfer issues, and obtained an injunction allowing seller immediate access to the business, and substantial money damages for the stock purchase and interest pending the closing. Once the buyer closed, Malitz and his team then revised the stock sale documents to accurately reflect the agreement of the parties, counseled on and documented the complex tax ramifications and realities of a stock sale pending for two years where the buyer—to the seller’s exclusion—enjoyed the benefits of the business, and then obtained a court order requiring the recalcitrant buyer to appear in court and attend the closing in the judge’s chambers.
  • Successfully Defended Suit Against Partner for Recovery of Business Assets.  Malitz defended the surviving partner in multi-venue litigation brought by the spouse of the deceased partner for recovery of partnership assets. Malitz’ client and his partner started a consulting business on a handshake and successfully operated their business for many years. Upon the partner’s death, his spouse sued Malitz’ client in both state and federal courts to recover the business name, intellectual property, passwords, marketing and teaching materials, client list, bank accounts, and other partnership assets, contending Malitz’ client was not a partner but was merely an independent contractor. Despite tax filings showing Malitz’ client received IRS forms 1099 (instead of K-1s) each year, the business name was registered to the deceased partner, only, and for recent years revenues flowed through a corporation solely owned by the deceased partner, Malitz nonetheless had the federal injunction dissolved against his client and negotiated a deal where his client paid no money to the spouse; the client list was open to solicitation by either party; the coveted teaching materials could be used by either party; the marketing materials could be used by either party; and both parties could operate independent consulting businesses.
  • Successfully Defended Suit by Shareholder Against Investor for Restaurant Assets. Malitz’ client invested in an existing restaurant chain owned and operated by another, and then built additional restaurants with the operator, as partners. Despite an oral agreement that the client would be a shareholder and a director in the existing restaurants, the written loan agreements and corporate documents (drafted by prior counsel) did not give such rights. When the operator refused to account as to restaurant proceeds and then secretly moved the bank accounts, Malitz and his team barred the operator from the restaurants, and then uncovered rampant mismanagement and theft of restaurant assets by the operator. Bitter litigation ensued resulting in Malitz’ client assuming ownership and control of nearly all the restaurants in chain, together with the valuable restaurant name and intellectual property.