## Facts

- Joyce Johnson, a minority shareholder of Steel, Inc., sued the corporation and its directors/officers, including Stanley Johnson (CEO) and other directors.
- The amended complaint sought (1) judicial dissolution under NRS 78.650 based on alleged director/officer misconduct and (3) derivative relief on behalf of the corporation for alleged mismanagement and self-dealing.
- The derivative allegations included that Stanley Johnson received more than $650,000 beyond the authorized compensation formula and that other directors knew of and acquiesced in the overpayment.
- Johnson also alleged misappropriation of corporate funds and use of corporate assets by a separate company privately owned/operated by the defendant directors/officers without appropriate compensation to Steel, Inc.
- During the case, Johnson moved for appointment of a receiver pendente lite and submitted a supplemental affidavit detailing alleged misuse of corporate funds and assets.
- The district court denied the receivership request, granted summary judgment against Johnson on the dissolution claim, and dismissed the derivative claim for failure to make demand on the board; the second count was not challenged on appeal.

## Issues

1. Whether summary judgment was proper on the dissolution claim when an affidavit raised factual disputes about misappropriation and self-dealing, and whether denial of a receiver pendente lite could preclude those allegations.
2. Whether dismissal of the derivative claim for failure to make pre-suit demand was proper, or whether demand was excused as futile because the alleged wrongdoers controlled the corporation’s board.

## Decision

- The Nevada Supreme Court reversed summary judgment on the dissolution claim and reversed dismissal of the derivative claim.
- The court held that the supplemental affidavit raised genuine issues of material fact concerning alleged misconduct material to dissolution under NRS 78.650.
- The court held that an order denying appointment of a receiver pendente lite is ancillary and not a final merits determination; it cannot support res judicata to bar adjudication of the dissolution allegations.
- The court held that pre-suit demand was excused as futile because the directors and controlling shareholders alleged to have committed or approved the wrongdoing were the same persons who would decide whether the corporation should sue.
- The case was remanded for further proceedings.

## Legal Principles

- Summary judgment is appropriate only when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law; the nonmovant receives the benefit of all reasonable inferences.
- In considering summary judgment, affidavits raising material factual disputes about corporate misappropriation and self-dealing preclude judgment as a matter of law on a dissolution claim.
- Appointment or denial of a receiver pendente lite is an ancillary measure to preserve assets pending litigation and determines no substantive rights; it is not a final judgment on the merits and does not have claim-preclusive effect.
- In shareholder derivative actions, demand on the board is generally required but is excused when demand would be futile, including where the board is controlled by individuals accused of the challenged misconduct or conflicts make independent decision-making unlikely.

## Conclusion

The court required trial-level adjudication of alleged corporate misconduct by reversing summary judgment on dissolution and reinstating the derivative claim, holding that interlocutory receivership rulings do not bar the merits and that demand is excused where alleged wrongdoers control the board.


Johnson v. Steel, Inc., 678 P.2d 676 (Nev. 1984)