Puerto Rico Supreme Court: Former Exec Cannot Sue Individual Board Members for Breach of Employment Contract

The National Law Forum

A former employee cannot sue individual members of a corporation’s board of directors for breach of an employment contract and negligence in execution of fiduciary duties, where: 1) the individual board members are not parties to the employment contract; and 2) the employee and his relatives are not shareholders with standing to sue board members for alleged breach of fiduciary duty, the Puerto Rico Supreme Court has held. Randolfo Rivera San Feliz et al v. Junta de Directores de Firstbank Corporate et al., 2015 TSPR 61, 196 DPR ___ (2015).

Plaintiff Randolfo Rivera was a former executive of a banking entity in Puerto Rico. The terms of his employment were established in a contract with the bank. The contract provided that any decision regarding the contract, including termination of employment, had to be approved by at least two-thirds of all the members of the bank’s board of directors…

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Recent Delaware Law and Closely Held Business Disputes

#shareholder #oppression #litigation

Jeshua Lauka's Business and Real Estate Law Blog

I just read in the ABAJournal article that Delaware passed a law favorable to shareholders in litigation.

“A law banning corporate bylaws that impose a hefty price on investors who file unsuccessful shareholder derivative suits has been signed by Delaware’s governor.”

The Delaware legislature apparently recognizes  the challenges that minority shareholders can face in closely held businesses.

In my practice, one fundamental challenge that I have seen is this:

In a closely held company it is very easy for one group of owner[s] to freeze out another owner.

I guess the first question is, “freeze out from what*?”

                         Control – Decision-making

                         Disclosures of Company Business

                         Profits in the Company

                         Employment in the Company.

What should a business owner/operator do to protect himself/herself?

Well, you have two readily apparent choices – address the issue before the business is formed, or address it once the problem arises.

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