Atlanta Business Attorney Blog

If you are involved in a business dispute in Atlanta, Georgia (Fulton County), you may be able to benefit from the county’s specially created business court. The Fulton County Business Court is unique to the county, and offers a forum for the speedy resolution of complex business cases. Though courts across the state have been hit with budget cuts that have greatly decreased the efficiency and resources available to the courts, the Fulton County Business Court has isolated funds that allow its continued operation.

In order to qualify for the Fulton County Business Court, Rule 1004 of the Business Case Division specifies that the case must be filed in the Fulton County Superior Court, involve a lawsuit where more than $1,000,000 must be in dispute. Rule 1004 specifies additional criteria that the lawsuit must have, including a claim Fulton County Business Court determines should allow it to take jurisdiction of the case, or a claim that falls under one of the following portions of the Official Code of Georgia:

• Georgia Securities Act of 1973;
• Uniform Commercial Code;
• Georgia Business Corporation Code;
• Uniform Partnership Act;
• Uniform Limited Partnership Act;
• Georgia Revised Limited Partnership Act; or
• Georgia Limited Liability Company Act.

Other types of cases may be heard by the Fulton County Business Court only with the express consent of all parties. For more information about the Fulton County Business Court, please visit their website.

In 1997, the Georgia Supreme Court ruled that a corporation appearing in Georgia court MUST be represented by an attorney. See Eckles d/b/a Atlanta Technology Group v. Atlanta Technology Group, Inc.; 267 Ga. 801 (1997). The Georgia Supreme Court’s reasoning is as follows:

A corporation is a "person." O.C.G.A. § 1-3-3 (14). Because it is a "person," a corporation certainly is entitled to receive due process and equal protection from this state. Caldwell v. Hosp. Auth. of Charlton County, 248 [***5] Ga. 887, 888 (1) (287 S.E.2d 15) (1982). Art. I, Sec. I, Par. XII of the Ga. Const. of 1983 also provides that "no person shall be deprived of the right to prosecute or defend, either in person or by an attorney, that person's own cause in any of the courts of this state." Accordingly, if a corporation were also a "person" with the capability of representing its "own cause," then that corporate entity could avail itself of this constitutional right to self-representation without regard to its own lack of a license to practice law. However, a corporation is an artificial, not a natural, person. As an artificial person, a corporation "can act, and does act, alone through agents. It deals with other [**25] corporations and with natural persons by its agents; it can deal with the world in no other way." Scofield Rolling Mill Co. v. State of Ga., 54 Ga. 635, 639 (1) (1875). For this reason, it has long been recognized by the courts of other jurisdictions that "[a] corporation ... can appear only by attorney, while a natural person may appear for himself." Osborn v. United States Bank, 22 U.S. 738, 830 (6 L. Ed. 204) (1824). Not only has this principle long been recognized, it [***6] has been almost universally accepted. See Anno., 8 ALR5th 653. Thus, notwithstanding that a corporation is a "person" for the purpose of receiving due process and equal protection from the state, it has been held that a corporation is not a "person" for the purpose of exercising a constitutional right to legal self-representation, since it cannot represent itself and can only be represented by its agents. See Ex parte Lamberth, 242 Ala. 165, 5 So. 2d 622 (Ala. 1942). As a very limited exception to this general rule, most states allow a layman to serve as a corporation's legal representative in proceedings before courts which are not of record. See Anno., 8 ALR5th 653, 689, § 5[a]; 9A Fletcher Cyc. Corp., § 4463.20. The rationale for recognizing this exception to the general rule is that those problems which are likely to arise when a layman serves as the legal [*804] representative for a corporation in a proceeding in a court of record are greatly minimized in the more informal setting of a proceeding in a court which is not of record. Oahu Plumbing &c. v. Kona Constr. 60 Haw. 372, 590 P.2d 570, 575 (Haw. 1979).

The Court went on to note that:

Having accepted the benefits of incorporation, a corporation must also accept the burdens, "including the need to hire counsel to sue or defend in court. [Cits.] Thus, the requirement that a corporation appear through an attorney in no way deprives it of due process. [Cit.]" Woodford Mfg. Co. v. A.O.Q., Inc., 772 P.2d 652, 654 (Colo. App. 1988).

People like to throw around the word “fraud” when they are threatening to file a business lawsuit in Georgia, but very few people understand what the word means in the legal sense. The most experienced attorneys will tell you that it is extremely difficult to prove a fraud claim because of the multiple elements that a party alleging fraud must prove. These elements of fraud, as stated in the case of Day v. Randolph, are:

1. A misrepresentation or falsehood is knowingly made. It is not enough that a person mistakenly says something that is incorrect – he must actually know that it is false and intentionally make a false statement.
2. The misrepresentation or falsehood is related to a material fact.
3. The purpose of the misrepresentation or falsehood was to deceive another and induce him to act.
4. The person did indeed act based on the misrepresentation or falsehood.
5. The person was damaged.

In a case of first impression, the Georgia Court of Appeals decided that Georgia employees who participate in their Georgia company’s ESOP can qualify for certain shareholder rights in their company even though they do not hold actual shares in the company. In this case, the former part-owner of Kelley Manufacturing Co.’s ("KMC") had retired and two employees within the KMC stepped up to become the new Chairman of the Board of Directors (“Chairman”) and Chief Executive Officer (“CEO”). Over the course of a few months, the former owner became dissatisfied at how the new Chairman and CEO were running the business. Using proxies from the other employees, he had the Chairman and CEO removed from office. While the employees were fired from their positions within the company, they still held onto their interests in the ESOP.

OCGA § 14-2-140 (27) defines "shareholder" as "the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation." OCGA § 14-2-1602 (g) also provides that, for "purposes of this Code section, ‘shareholder’ includes a beneficial owner whose shares are held in a voting trust or by a nominee on his behalf." In this case, the fired employees did not technically fall under these definitions, because 100 % of the shares of KMC are owned by the ESOP, which is the registered owner in corporate documents. There was no nominee or voting trust on file with KMC regarding these shares. The statement of account issued yearly to each ESOP participant, however, reflects that the account is measured in "shares" vested in that participant. Also, the ESOP participants were referred to as shareholders.

The Georgia Court of Appeals was persuaded by case law from other states around the country that have found that ESOP participants are the beneficial owners of shares in a company and entitled to exercise shareholders’ rights, including inspection of the corporate records.

BUSINESS LAW: Corporate Documents, Shareholder’s Rights; CIVIL PRACTICE: Standing; GOVERNMENT: Pre-emption; EMPLOYMENT: ERISA
Kelley Mfg. Co. v. Martin
A08A1891 (civil case)
February 20, 2009
Smith, Presiding Judge.
09 FCDR 631 (03/13/09)