Answers to some commonly-asked questions we often encounter in the different types of business litigation cases we handle.
What rights does a minority shareholder have in a corporation?
The rights of a minority shareholder in a Florida corporation include the right to be kept at least minimally informed of its business operations. If the shareholder can show a legitimate purpose for obtaining additional information, the corporation can be compelled to turn over this information or risk paying a penalty for failing to do so. A minority shareholder does not have preemptive rights (the right to purchase additional shares in proportion to the current ownership) unless specified in the articles of incorporation or bylaws, which creates a risk of further dilution of ownership if the majority decides to issue additional stock, either to itself or to new investors. A minority shareholder does not have the right to insist upon a buyback of shares absent a provision in a shareholders’ agreement, which may also provide for death, disability, divorce, retirement, or termination of employee-shareholders. If a minority shareholder believes it is being singled out and uniquely harmed by the conduct of other shareholders (who often control the board of directors), the minority shareholder may be able to assert a breach of fiduciary duty claim directly against the other shareholders or board of directors. Otherwise, any action brought may have to be a derivative action brought on behalf of the corporation. For these reasons, it is advisable for a minority shareholder to have a shareholders’ agreement in place.
What can I do about a tenant who is not paying rent?
Florida has abolished self-help remedies. A landlord, whether of commercial or residential property, is not permitted to change the locks, turn off the utilities, or remove the tenant’s property from the leased premises. A landlord who does so risks a claim for breach of contract, conversion of property, and wrongful eviction, and could be exposed to a punitive damage award. Unless a tenant abandons or formally surrenders the premises, the only way to legally remove a tenant is by filing an action in court. Fortunately, when it comes to tenant removal, Florida has adopted a summary procedure that provides an expedited means of getting a tenant removed. Typically, a notice is required before suit is filed and a notice is often required after suit is filed giving the tenant notice of the obligation to deposit rent in the registry of the court while the action is pending. Failure to make the deposit waives all defenses of the tenant to possession, although the tenant will still be able to defend against damage claims. Failure to give the required notices in the proper form and to make sure that the tenant has been properly served can be devastating to a landlord’s case.
What can I do to stop a former employee who has taken information from using that information to compete with me?
Florida has adopted a variation of the Uniform Trade Secrets Act that has been adopted by 46 other states. If the information qualifies as a trade secret, you may be able to obtain an injunction to prevent use or dissemination of the trade secret, as well as damages for any harm caused by misappropriation. In order to qualify as a trade secret, the information must be unique, such as a formula or compilation of data, and have economic value. It must also be the subject of reasonable efforts to preserve its secrecy, which could include limiting access to the information to those with a need to know and keeping the information locked up when not in use. If either one of these elements is missing, the information will not qualify as a trade secret. In this circumstance, a signed noncompete agreement may be your only protection, unless you can show that the employee engaged in disloyal conduct before leaving, such as copying customer files or soliciting customers to leave with the employee.
However, an employer needs to recognize that a valid noncompetition agreement will not stop all competition. Except in the rare case of specialized training, an employer typically cannot prevent an employee from working for a competing business if the employee has not taken any customer or other confidential information and is not soliciting (or giving information to others so they can solicit) customers of the former employer.