A minority shareholder filed suit against two officers of the company claiming that they had breached their fiduciary duty by paying themselves excessive salaries. The trial court granted summary judgment to the directors (a ruling that there are no issues of fact to be decided and so that party must prevail), and the shareholder appealed. The Court of Appeals cited1 the general rule that a shareholder seeking to recover misappropriated corporate funds may only bring a “derivative suit” (a suit brought by a shareholder on the corporation’s behalf, so that any recovery goes to the corporation, not the individual shareholder bringing the suit).

Here, the shareholder had filed a direct action against the officers. One exception to the general rule, however, is that a direct action may be brought when there are no other shareholders involved. Though the minority shareholder argued that suits from other shareholders were unlikely, the court found that he failed to prove that assertion, and thus the rule prohibiting direct actions applied in this case.