This blog, written by Thomas E. Rutledge, focuses primarily on business entity law in Kentucky. Postings on contract law, contractual and statutory construction, and the entity law of other jurisdictions appear as well. There may as well be some random discussions of classical, medieval and renaissance history.
Tuesday, October 21, 2014
A Bridge Too Far In Shareholder Oppression ?
Too Far In Shareholder Oppression ?
recent decision of a New York trial court discusses, but does not resolve, a
interesting “second-tier” allegation that a corporate shareholder has been
oppressed. In the Matter
of the Application of
for the Dissolution of
Index No. 14-62654 (Sup. Ct. N.Y. Suffolk County
(Oct. 8, 2014).
York Corporation Code provides for remedies, including dissolution, for
shareholders who have been “oppressed,” a term which includes that the
shareholders "reasonable expectations" as a shareholder have been
thwarted. As an aside, I have considered(and rejected) the notion of “reasonable expectations” in articles
including The Problem Is Not With the Answer But Rather With the Question (click on that title to access that article),
a piece that was reviewed by Peter Mahler, the dean of New York shareholder
oppression law, in his blog posting they can be accessed HERE.That said, one “reasonable expectation” that
is often asserted is a “right” to continued employment by the corporation,
salary and benefits being a means by which the economic fruits of ownership are
instance, Gail Kaplan owned one-third of the shares of Dart Mechanical Corp. She
sought its judicial dissolution on the basis that she was being oppressed in
that the corporation had terminated her husband's employment, she claiming that
it was through the salary and benefits he received as an employee that she
realized the benefit of being a shareholder in the corporation.
this juncture there is not been a ruling on the merits, but simply the denial
of an application for a receiver. That said, it is illustrative of the abuse of
the notion of "reasonable expectations" that the employment of a
non-shareholder could somehow be the basis for a claim for oppression.
My thanks to Peter Mahler for forwarding this