A Bridge Too Far In Shareholder Oppression ?
A 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 Gail Kaplan for the Dissolution of Dart Mechanical Corp., Index No. 14-62654 (Sup. Ct. N.Y. Suffolk County (Oct. 8, 2014).
The New 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 derived.
In this 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.
At 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.
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