Non-Shareowner Standing to Sue in Corporate Elections

In Haah v. Kim, 2009 DJDAR 9071 (June 22, 2009), two individuals who entered into agreements to acquire shares were able to bring action seeking to invalidate an election of directors under California Corporations Code Section Section 709. The Court of Appeal took a broad interpretation of the term “shareholders.”

California’s statute applies to foreign corporations when the election or appointment of a director occurs in California. (Court of Appeal Holds that a Non-Shareholder has Standing to Challenge the Election of Corporate Directors, Allen Matkins Leck Gamble Mallory & Natsis LLP)

Although some may consider this a stretch, it seems reasonable, since the plaintiffs should be able to show they suffered injury in fact based on their contracts.