Michael Sery; Matthew Sery; David Sery v. Federal Business Centers, Inc.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-4623
MICHAEL SERY; MATTHEW SERY; DAVID SERY,
Appellants
v.
FEDERAL BUSINESS CENTERS, INC.; PETER C. VISCEGLIA;
CHRISTINE KANTER; FRANK D. VISCEGLIA, JR.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 06-cv-01026)
District Judge: Honorable Stanley R. Chesler
Submitted Under Third Circuit LAR 34.1(a)
January 12, 2010
Before: SCIRICA, Chief Judge, BARRY and SMITH, Circuit Judges
(Opinion Filed: February 18, 2010)
OPINION
BARRY, Circuit Judge
This securities case, in which the shareholders of a family business find
themselves in a bitter dispute about money and power, revolves around the interpretation

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of a provision of the New Jersey Business Corporation Act, N.J.S.A. 14A:1-1 to 17-18
(the “Act”). The minority shareholder protection provision of the Act, found at N.J.S.A.
14A:12-7(1)(c) (the “Provision”), protects minority shareholders from mismanagement,
fraud, illegal conduct and abuse of authority of managers and directors of a corporation,
but the Provision only applies to corporations “having 25 or less shareholders.” The
family business in this case has either 34 or 19 shareholders, depending upon the
interpretation of the Provision.
Michael Sery and his brothers (together, the “Serys”) sued Federal Business
Centers, Inc. and others (together, “FBC”), seeking the Provision’s minority shareholder
protection. The District Court dismissed the case, holding that the Provision does not
apply to FBC because it has more than 25 shareholders. The issue is whether 15 trusts,
which each hold shares of FBC for the benefit of certain family members, who are also
shareholders in their own right, count as “shareholders” for purposes of the Provision.
The Court held that the plain meaning of the Act requires counting the trusts as
shareholders. The Court’s statutory interpretation and grant of summary judgment are
subject to plenary review. E.I. DuPont de Nemours and Co. v. United States, 508 F.3d
126, 131-32 (3d Cir. 2007). We will affirm.
The District Court’s well-reasoned opinion relies primarily on the principle of
statutory construction which holds that, when the statutory language is clear and
unambiguous, the legislature’s intent is best divined by reference to the plain meaning of

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The Serys point to a separate and factually unrelated statute–the Shareholder1
Protection Act, 14A:10A-1 to -6 (the “SPA”), which was enacted as an “addition to the
requirements” of the Act, N.J.S.A. 14A: 10A-1—arguing that the SPA “expressly
incorporates the concept of beneficial ownership into the definition of ‘shareholder,’”
(Sery Br. at 23), by providing a definition of “[i]nterested stockholder” which applies
only to “beneficial owners.” We may not speculate (and we have no reason to believe)
that the New Jersey legislature intended the terms “interested stockholder” and
“shareholder” to be synonymous.
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a statute. Register v. PNC Fin. Servs. Group, Inc., 477 F.3d 56, 67 (3d Cir. 2007). The
language of the Provision is clear and unambiguous, authorizing a cause of action on
proof that,
[i]n the case of a corporation having 25 or less shareholders, the directors or
those in control have acted fraudulently or illegally, mismanaged the
corporation, or abused their authority as officers or directors or have acted
oppressively or unfairly toward one or more minority shareholders in their
capacities as shareholders, directors, officers, or employees.
N.J.S.A. 14A:12-7(1)(c). The definitions provision of the Act explains that “unless the
context otherwise requires, the term . . . ‘Shareholder’ means one who is a holder of
record of shares in a corporation.” N.J.S.A. 14A:1-2.1.1
It is undisputed that there are 34 holders of record of shares in FBC. Thus, the
Provision, which applies only to corporations having 25 or fewer shareholders, does not
afford the Serys a remedy. The Serys argue, however, that FBC is “owned collectively
and exclusively by 19 members of [the] family,” (Serys Br. at 16), and that the Act should
be liberally construed so as to avoid double-counting certain family members, who own
shares directly and as beneficiaries of various trusts. The Serys contend that only the

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The Serys make reference to the 1968 Commissioner’s Comment, which explains2
that the Act should be liberally construed; however, the Serys omit an important part of
the comment, which clarifies that New Jersey corporate laws have been “characterized by
the New Jersey courts as being liberal corporation laws, offering a favorable corporate
climate.” See Comment, N.J.S.A. 14A:1-1. The Serys’ preferred interpretation is
inconsistent with this objective.
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beneficial owners (the 19 family members) should be counted for purposes of
determining whether the Provision applies. To accept that contention, however, would
fly in the face of the plain meaning of the Act, which defines “shareholder” only as the
holder of record without mentioning beneficial ownership, and nothing in the Provision
suggests that the Court should consider beneficial ownership when counting the number
of shareholders. Although the Serys’ are correct that the Act should be liberally
construed, N.J.S.A. 14A:1-1(2), we may not construe a statute in contravention of its2
plain meaning.
The Serys make much of the text introducing the Act’s definitions, which provides
that the definitions apply “unless the context otherwise requires” (the “Context Clause”).
N.J.S.A. 14A:1-2.1. Neither party provides an analysis of the legislative history of the
Act’s Context Clause, but FBC cites Ruefenacht v. O'Halloran, 737 F.2d 320 (3d Cir.
1984), for the proposition that the Context Clause does not permit us to rewrite a statutory
definition unless “a statutory definition appears in a context in which the definition
cannot sensibly be applied.” (FBC Br. at 15-16.) In Ruefenacht, we interpreted the
context clauses of two federal securities laws, rather than the Act. Nonetheless, in the

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The related provision in the Model Business Corporation Act Annotated §3
14.30(b)(2) (4th ed. 2008) (the “Model Act Provision”) has a threshold of 300
shareholders, and other requirements.
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absence of guidance about the New Jersey legislature’s intent in drafting the Context
Clause, Ruefenacht informs our conclusion that the Context Clause was not designed to
empower courts to expand the definition of shareholder. Moreover, the context here does
not “require” any alteration of the definition of shareholder.
The Serys also argue that we should overlook the plain language of the Provision,
based on the less-often-cited, but equally important, principle of statutory construction
which holds that when the literal application of statutory language would produce an
outcome demonstrably at odds with the statute's purpose or would result in an absurd
outcome, a court must look beyond the plain meaning of the statutory language. In re
Kaiser Aluminum Corp., 456 F.3d 328, 338 (3d Cir. 2006) (“A basic tenet of statutory
construction is that courts should interpret a law to avoid absurd or bizarre results.”);
United States v. Zats, 298 F.3d 182, 187 (3d Cir. 2002) (refusing to “read a text to
produce absurd results [that are] plainly inconsistent with the drafters’ intentions”).
The outcome of a plain language interpretation is neither demonstrably at odds
with the statute’s purpose nor absurd. The Act was designed, inter alia, “to give special
recognition to the legitimate needs of the close corporation,” N.J.S.A. 14A:1-1(3)(c), by
providing “limited bases for statutory relief,” Brenner v. Berkowitz, 634 A.2d 1019, 10273
(N.J. 1993). In enacting the Provision, “the Legislature demonstrated its intent to

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The Serys proffer other facts which are appealing, but are more appropriate for the4
legislature. For example, FBC appears to bear all the hallmarks of a closely-held
corporation, including, for one thing, that its board of directors has always consisted of
family members, and only family members (never more than nineteen people) have ever
had a beneficial interest in company stock. The Serys point to the Model Act Provision,
which employs a variety of characteristics to identify corporations to which a minority
oppression provision applies, but the New Jersey Provision at issue handles it differently,
and looks only to the number of holders of record of a corporation’s stock.
The Serys’ cite Berger v. Berger, 592 A.2d 321 (N.J. Super. Ct. Ch. Div. 1991),5
claiming that Berger holds that a beneficial owner can “be considered a ‘minority
shareholder’ for the purposes of Section 14A:12-7(1)(c).” Berger, which is not
controlling, is not nearly so broad, and, instead, holds that a beneficial owner has standing
to bring a dissolution suit under New Jersey law. Berger provides us with no authority to
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increase the protection to minority shareholders who are powerless within a [close]
corporation, as well as powerless to leave.” Id. Our decision does not frustrate, or even
concern that purpose. The issue before us is not the quality of the protections afforded by
the Provision but, rather, which corporations’ shareholders are entitled to those
protections. The Provision clearly applies only to companies with 25 or fewer holders of
record of shares of stock. FBC has more than 25 holders of record of shares of stock, and
so it does not implicate the protections of the Provision.
In the same vein, the Serys argue that FBC, having only 19 beneficial owners, is a
close corporation of the sort the legislature determined has special needs, and thus that its
shareholders require special protection. However, the text of the Provision does not4
cover “close corporations,” but only corporations “with 25 or less” holders of record of
shares of the corporation. N.J.S.A. 14A:12-7(1)(c). Thus, the Serys’ argument does not
demonstrate that the outcome here is at odds with the purpose of the legislation.5

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ignore the plain meaning of the Provision.
Relying on Dutton v. Wolpoff and Abramson, 5 F.3d 649, 653 (3d Cir. 1993), the6
Serys argue that “even when the plain meaning [does] not produce absurd results but
merely an unreasonable [result] plainly at variance with the policy of legislation as a
whole this Court has followed that purpose rather than the literal words.” (Sery Br. at 39-
40.) Here, the outcome is neither unreasonable nor plainly at variance with the policy of
the legislation, which is to protect minority shareholders of corporations with fewer than
25 shareholders.
The Serys offer a hypothetical scenario where the outcome of this case might be7
absurd: a corporation could abuse the Provision by creating superfluous trusts in order to
inflate the quantity of shareholders in a corporation and avoid application of the
Provision. There is no evidence that such is the case here. The Serys’ hypothetical
outcome may be absurd, but the real outcome is not.
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Finally, the Serys argue that it is absurd to refuse them “the opportunity to seek6
the protection provided to minority shareholders of close corporations . . . merely because
these three young men own their shares both individually and though trusts,” (Sery Br. at
40), but the record is devoid of evidence, such as copies of all the trust documents, which
might provide support for this argument. The real issue appears to lie not in the outcome7
of this case, but in the legislature’s preferred method of identifying the corporations
which fall within the ambit of the Provision. This matter of policy is for the New Jersey
legislature, not for us.
We will affirm the order of the District Court dismissing the Serys’ amended
complaint.

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