Further, Georgia law expressly dictates that "[m]isjoinder of parties is not ground for dismissal of an action," but rather "[p]arties may be dropped or added by order of the court on motion of any party or of its own initiative." OCGA § 9-11-21 ; see Kilburn v. Young , 244 Ga. App. 743, 746 (1), 536 S.E.2d 769 (2000) (applying the joinder provisions of the Civil Practice Act to a shareholder derivative action). In accordance with this statutory and case law, the trial court clearly had the authority to allow the realignment of CREO as a party plaintiff.
Knaack v. Henley Park Homeowners Assn., 365 Ga. App. 375, 379 (1), 877 S.E.2d 821 (2022); see also OCGA § 14-3-740 (defining a "derivative proceeding" to include "a civil suit in the right of a domestic corporation"). In a derivative suit the corporation is the real party in interest, Kilburn v. Young, 244 Ga. App. 743, 744 (1), 536 S.E.2d 769 (2000), and any damages recovered are paid to the corporation. Rollins v. LOR, Inc., 345 Ga. App. 832, 852 (4), 815 S.E.2d 169 (2018).
Because such an action seeks to redress a wrong sustained by the corporation rather than the individual plaintiff, "[i]t has long been recognized ... that the corporation is a proper and indispensable party." Kilburn v. Young , 244 Ga. App. 743, 744 (1), 536 S.E.2d 769 (2000) (citation and punctuation omitted). In contrast, in a direct shareholder action, the shareholder sues on her own behalf for injuries done to her in her individual capacity by corporate fiduciaries, and any damages recovered go to the shareholder rather than the corporation.
Once joined and present before the court, the corporation is then realigned, if necessary, according to its real interests. Kilburn v. Young, 244 Ga.App. 743, 745(1), 536 S.E.2d 769 (2000), quoting Liddy v. Urbanek, 707 F.2d 1222, 1224 (11th Cir.1983). (a) “Where a shareholder alleges devaluation of shares due to corporate mismanagement,” the action must be brought as a shareholder derivative action.
(Punctuation and footnote omitted.) Kilburn v. Young, 244 Ga. App. 743, 744 (1) ( 536 SE2d 769) (2000). In contrast, in a direct shareholder action, the shareholder sues on his own behalf for injuries done to him in his individual capacity by corporate fiduciaries, and any damages recovered go to the shareholder rather than the corporation.
Accordingly, the trial court correctly dismissed plaintiffs' new complaint. See Kilburn v. Young, 244 Ga. App. 743, 746-747 ( 536 S.E.2d 769) (2000). See Charter Med.-Fayette County v. Health Planning Agency, 181 Ga. App. 184, 186(5) ( 351 S.E.2d 547) (1986) (trial court's ruling that appellant had not exhausted administrative remedies was not a holding that court lacked jurisdiction, but that appellant was not entitled to relief).
The trial court dismissed the Derivative Action for Kilburn's failure to make KYAMC a party, but this court reversed on the basis that Kilburn should have been permitted to add KYAMC as an indispensable party. See further Kilburn v. Young, 244 Ga. App. 743 ( 536 S.E.2d 769) (2000). Young testified that he was "outraged" that Kilburn had sued him in the Dismissed Action. By that time, KYAMC had "essentially closed," and he no longer felt threatened by Kilburn. He then filed the instant action against Kilburn, alleging that Kilburn, as KYAMC's majority shareholder, had breached fiduciary duties he owed to him, as a minority shareholder, by, among other things: (1) requiring KYAMC to pay certain of Galen Kilburn Company's expenses, including an amount due on the lease on the Galleria space; (2) misallocating proceeds from the CPI settlement; and (3) filing the Dismissed Action without having any authority to do so.
The Court finds that because Plaintiff has not alleged a "special injury" sufficient to confer standing to proceed in a direct action against the Defendants and because the closely held corporation exception does not apply, Plaintiff's assigned claims can proceed only as a derivative action; therefore, GOPAL and NSP are the real parties in interest. See Kilburn v. Young, 536 S.E.2d 769, 771-72 (Ga. Ct. App. 2000) ("Because the right of action for corporation wrongs is in the corporation, the plaintiff shareholder in a derivative suit is at best a nominal plaintiff, and the corporation is the real party in interest."). B. But For the Assignment, Plaintiff Could Not Have Brought These Claims in Federal Court
As expressed by the Supreme Court of Delaware, See, Schoon v. Smith, 953 A.2d 196 (Del.2008); Larsen v. Island Developers, Ltd., 769 So.2d 1071 (Fla.App.2000); Kilburn v. Young, 244 Ga.App. 743, 536 S.E.2d 769 (2000); Caprer v. Nussbaum, 36 A.D.3d 176, 825 N.Y.S.2d 55 (2006); Polikoff v. Adam, 67 Ohio St.3d 100, 616 N.E.2d 213 (1993).[t]o prevent a “failure of justice,” courts of equity granted equitable standingto stockholders to sue on behalf of the corporation “for managerial abuse in economic units which by their nature deprived some participants of an effective voice in their administration.”
To be sure, this action began as a shareholder derivative suit, in which the shareholders are "nominal plaintiff[s] representing the corporation," which is the "real party in interest." Barrett v. Southern Connecticut Gas Co., 172 Conn. 362, 370, 374 A.2d 1051, 1055 (1977) (emphasis added); see also Kilburn v. Young, 244 Ga. App. 743, 744, 536 S.E.2d 769, 771 (2000). However, this action is no longer a shareholder derivative suit.