Opinion
November 10, 1992
Appeal from the Supreme Court, New York County (Carmen Beauchamp Ciparick, J.).
This is a shareholder's derivative action, which alleges, inter alia, that the defendant directors breached fiduciary duties, diverted corporate opportunities, and violated shareholder agreements. At issue on appeal is whether plaintiff's motion for leave to amend the complaint to assert a ninth cause of action was properly denied. The proposed cause of action seeks rescission of defendant William B. Troy's contractual right, under the 1975 Shareholder Agreements, to control the management of defendant General Linen Supply Laundry Co., Inc. and affiliated defendants referred to as "the Peripherals", Cascade Linen Supply Corp. of N.J., The Household Linen Supply Company, and Suburban Cascade Linen Supply Co., Inc.
We have examined this record, and conclude that the proposed ninth cause of action establishes a prima facie claim for rescission of the 1975 Shareholder Agreements. The IAS Court properly held that, absent an express commitment by the directors, there is no obligation to "enhance" or "maximize" shareholder value (see, In re Union Carbide Corp. Consumer Prods. Bus. Sec. Litig., 666 F. Supp. 547, 553 [SD N Y 1987]). However, plaintiff's inartful drafting should not, on this motion for summary judgment, have been dispositive of the motion to amend (see, Hawkins v Genesee Place Corp., 139 A.D.2d 433, 434). CPLR 3025 (b) provides that leave to amend a complaint shall be freely given (Edenwald Contr. Co. v City of New York, 60 N.Y.2d 957) and, although the practice of allowing an amended pleading that clearly lacks merit is wasteful of judiciary resources (see, Wieder v Skala, 168 A.D.2d 355), where the merits are not fully tested, "the better practice is to allow amendment, with leave to a party so desiring to raise the substantive issue at a later date" (Vastola v Maer, 48 A.D.2d 561, 567-568, affd 39 N.Y.2d 1019).
Here, the proposed amendment is not, in fact, dependent upon an alleged duty to enhance shareholder value but, rather, asserts that the defendants collectively referred to as the "Troy group" repeatedly and materially breached essential and continuing obligations under the 1975 Shareholder Agreements by subordinating the best interests of the corporations to their own. Among the claims stated were that the Troy group diverted a valuable corporate opportunity; refused to permit valuation of the corporations by the minority directors or their experts; and voted down a resolution designed to permit the investigation and reporting to all shareholders of matters concerning the corporations.
We are in agreement with defendants-respondents, however, that plaintiff's failure to join all of the signatories to the 1975 Shareholder Agreements as necessary parties to the action precludes partial rescission (see, Tudor v Riposanu, 93 A.D.2d 718). While the proposed amendment could properly be denied on that ground, the circumstances presented render it appropriate to permit plaintiff leave to renew upon pleadings that include all necessary parties (Tanjong Shipping v Berke, 115 A.D.2d 401, 403; CPLR 1003).
Concur — Ellerin, J.P., Wallach, Ross, Kassal and Rubin, JJ.