2022 IL App (1st) 201316
Ill. App. Ct.2022Background
- Plaintiff Maria Staisz, an Illinois physician, became a participating provider and RPPG shareholder in 1985 and signed a provider agreement in 1997; the agreement was amended in 1999 to permit termination without cause.
- RPPG (an IPA) acquired MSO Great Lakes, Inc. (MSOGL); several RPPG officers also served as MSOGL officers/directors.
- In January 2018 RPPG terminated Staisz’s provider agreement (effective May 1, 2018) and revoked her RPPG shareholder status effective immediately, offering to purchase her shares for $35 each.
- In May 2018 Staisz sued for shareholder oppression (805 ILCS 5/12.56) and breach of fiduciary duty, alleging MSOGL was run to divert funds and avoid dividends to RPPG shareholders and that her termination was retaliatory.
- Defendants moved to dismiss under section 2-619 for lack of standing; the circuit court dismissed the breach claim with prejudice and the shareholder-oppression claim with prejudice on the ground that a plaintiff must be a shareholder during the suit.
- The appellate court affirmed, holding Staisz lacked standing to pursue both counts (shareholder-oppression because she was not a shareholder when suit was filed; breach because the allegations were derivative and she did not remain a shareholder throughout the action).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a former shareholder may bring a 12.56 shareholder-oppression action | Staisz: statute does not explicitly require shareholder status at time suit is filed; relief should be available to one wronged while a shareholder | Defendants: 12.56 is an action "by a shareholder" and a "shareholder" is defined as a current holder of record; she was not a shareholder when she sued | Held: 12.56 requires the plaintiff be a shareholder when the action is commenced; Staisz lacked standing |
| Whether breach of fiduciary duty allegations gave Staisz an individual (vs. derivative) claim and thus standing | Staisz: termination of her agreement and revocation of stock were direct, personal injuries supporting an individual fiduciary-duty claim | Defendants: alleged injuries (lost dividends, diversion of funds to MSOGL compensation) are injuries to the corporation and common to all shareholders; claim is derivative and she did not remain a shareholder through the suit | Held: The breach claim is derivative (injury to RPPG); derivative plaintiffs must be shareholders at the time of the transaction and throughout the action; Staisz lacked standing; dismissal proper |
Key Cases Cited
- Village of Chatham v. County of Sangamon, 216 Ill. 2d 402 (2005) (standing requires injury to a legally cognizable interest)
- Zokoych v. Spalding, 36 Ill. App. 3d 654 (1976) (determine whether gravamen alleges injury to plaintiff or corporation)
- Sterling Radio Stations, Inc. v. Weinstine, 328 Ill. App. 3d 58 (appellate standard for assessing whether injury is to corporation or individual)
- Davis v. Dyson, 387 Ill. App. 3d 676 (same facts may give rise to both individual and derivative claims if plaintiff suffered unique injury)
- Sarno v. Thermen, 239 Ill. App. 3d 1034 (diminished share value is a byproduct of a wrong to the corporation)