RICHARD B. TEITELMAN, Judge.
Daniel Nickell appeals a judgment dismissing Counts I through III of his second amended petition against Michael F. Shanahan Sr., Michael F. Shanahan Jr., David Mattern, Thomas J. Guilfoil, Kenneth E. Lewi, Crosbie E. Saint, Earl W. Wims, Gary C. Gerhardt, Gerald A. Potthoff, Steven L. Landmann and Mark S. Newman ("Respondents").
The underlying suit seeks recovery of alleged damages resulting from the merger between Engineered Support Systems Inc. ("ESSI") and DRS Technologies Inc. ("DRS"). ESSI merged with DRS in January 2006. All of the Respondents were officers or directors of ESSI, except Newman, who was the chief executive officer
Nickell's petition alleged that he and a purported class of ESSI shareholders were injured because Respondents improperly diverted financial benefits to themselves by backdating stock options, thereby decreasing the value of ESSI for shareholders.
The petition alleges four counts. In Count I, Nickell alleged that the ESSI officers and directors breached their fiduciary duties by accepting improper personal benefits and failing to act in the best interests of ESSI shareholders to obtain the highest price for ESSI shares. In Count II, Nickell alleges that Newman aided and abetted the ESSI directors and officers in breaching their fiduciary duties by knowingly assisting them with the merger even though he had knowledge of the backdated stock options and false statements. In Count III, Nickell alleges a claim of unjust enrichment against some of the ESSI directors and officers because Nickell and the class members received less for their ESSI stock as a result of payments received by the directors and officers in exchange for their wrongful conduct. Finally, Count IV alleges a claim of negligent misrepresentation against all Respondents.
Respondents filed motions to dismiss. The trial court dismissed Counts I and III on grounds that the petition pleaded shareholder derivative claims and failed to allege facts giving Nickell standing to sue the ESSI directors and officers individually.
The trial court's grant of a motion to dismiss is subject to de novo review. City of Lake Saint Louis v. City of O'Fallon, 324 S.W.3d 756, 759 (Mo. banc 2010). This Court assumes that all of the
"A derivative action is a suit by the corporation conducted by the shareholders as the corporation's representative. The shareholder is only a nominal plaintiff, and the corporation is the real party in interest." Goldstein v. Studley, 452 S.W.2d 75, 78 (Mo.1970)(citing, Saigh ex rel. Anheuser-Busch, Inc. v. Busch, 396 S.W.2d 9, 16 (Mo.App.1965)); Fletcher, CYCLOPEDIA OF THE LAW OF CORPORATIONS, Vol. 13, s 5939; 19 Am.Jur.2d Corporations 528, p. 64. Derivative actions are aimed at vindicating injuries "to the corporation — to the shareholders collectively — and not the shareholders individually." Centerre Bank of Kansas City, Nat. Ass'n v. Angle 976 S.W.2d 608, 613 (Mo.App.1998)(quoting Dawson v. Dawson, 645 S.W.2d 120, 125 (Mo.App.1982)).
Missouri courts hold that shareholders normally must bring a derivative action to file suit against an officer or director. Centerre Bank, 976 S.W.2d at 613. A derivative action is generally required even when, as here, the plaintiff alleges that the directors or officers of a corporation have breached their fiduciary duty, resulting in injury to the shareholders. The action is derivative, rather than direct, because the fiduciary duty of a director or officer of a corporation "is generally held to be between the directors and the shareholders as a whole." Id.; citing Dawson v. Dawson, 645 S.W.2d 120, 125 (Mo.App.1982). In other words, fiduciary duty obliges corporate officers and directors to act in the best interests of all shareholders on a collective basis. "Shareholders cannot in their own right and for their own personal use and benefit maintain an action for the recovery of corporate funds or property improperly diverted or appropriated by the corporation's officers and directors." Id.; see also Place v. P.M. Place Stores Co., 950 S.W.2d 862, 865 (Mo. App.1996). In that case, the "injury is to the corporation — to the shareholders collectively — and not the shareholders individually." Id.
Although the general rule is that shareholder actions against corporate officers and directors are derivative in nature, direct, individual shareholder claims are available to redress individual wrongs. "Individual actions are permitted, and provide the logical remedy, if the injury is to the shareholders themselves directly, and not to the corporation." Centerre Bank, 976 S.W.2d at 614. For example, shareholders have been allowed to bring an individual action for claims alleging that they were personally denied the right to inspect corporate books and records. Dawson, 645 S.W.2d at 125-26. Similarly, claims by shareholders asserting that they were removed from their positions as controlling shareholders have been found to be actions that must be maintained individually. Place, 950 S.W.2d at 865-66. A common theme in these cases is that individual actions were permitted so that individual shareholders or discrete groups of shareholders could redress injuries unique to them rather than to the corporation as a whole. See Gray v. Bicknell, 86 F.3d 1472, 1487 (8th Cir.1996)(applying Missouri law and holding that "the key element of being able to sue a corporation directly is individual
Nickell asserts that this Court's opinion in Gieselmann v. Stegeman, 443 S.W.2d 127 (Mo.1969), directly supports his argument that the claims in this case are individual rather than derivative. In Gieselmann, the plaintiffs and defendants were shareholders in a closely held corporation. The plaintiffs alleged the defendants denied the plaintiffs' statutory right to inspect corporate records; fraudulently divested their shares; and issued themselves additional shares to become majority shareholders. Id. at 130-131.
The Gieselmann court determined that the plaintiffs' alleged an individual claim rather than a derivative claim. Id. at 131. The court recognized the general rule that an action based on acts relating to the capital stock as an entirety is a corporate cause of action and cannot be sued for by a shareholder merely as an individual. Id. at 131-132. In other words, an action that affects all shareholders is generally derivative in nature. In contrast, shareholders may maintain an action on an individual basis against corporate officers and directors in order to redress wrongs that amount to a direct fraud on the shareholder. Id. at 131.
Nickell argues that his second amended petition is similar to Gieselmann because he alleges individual harm due to the alleged decrease in value of ESSI shares caused by Respondents' actions. Nickell notes that Gieselmann was premised in part on the fact that corporate shares are the individual property of the shareholder. Nickell employs this premise to argue that allegations of decreased share value are, by definition, an individual injury that is the proper subject of an individual action. While it is true that the Gieselmann court stated that it was "not necessary for the [shareholder] to sue in behalf of the corporation" for redress of harm to his stock that affected him directly and individually, id. at 131, there are at least two reasons why Nickell's reliance on Gieselmann is misplaced.
First, Gieselmann is distinguishable because it involved the fraudulent divestment of shares held by a discrete group of shareholders in a closely held corporation. Unlike the plaintiff in Gieselmann, Nickell was not deprived of a statutory right to inspect corporate records, was not divested of his shares, and his shares were not transferred to other shareholders to deprive him of status as a majority shareholder. Instead, Nickell alleges that ESSI shareholders sustained decreased share value due to Respondents' actions. Gieselmann specifically recognized the general rule that an action based on acts relating to the capital stock as an entirety is a derivative action rather than an individual action. Id. at 131. Here, Nickell's allegation that all ESSI shareholders lost share value amounts to "an action based on acts relating to the capital stock as an entirety" that is derivative in nature.
Second, while Gieselmann recognized corporate shares are individual rather than
The circuit court did not err in dismissing Counts I through III of Nickell's second amended petition. The judgment is affirmed.
RUSSELL, C.J., FISCHER, STITH, DRAPER and WILSON, JJ., and LUBER, Sp.J., concur. BRECKENRIDGE, J., not participating.