Monday, December 28, 2015

Your Ways Are Not Our Ways

Your Ways Are Not Our Ways

“Your ways are not our ways” are words said by Dracula in the movie Bram Stoker’s Dracula; Transylvania and Victorian London being rather dissimilar.  They apply as well today when assessing the law of other states; different states can have entirely different, but each equally legitimate, rules.  This principle applies when assessing a recent decision out of New York and considering if the same result would happen in Kentucky.

Peter Mahler, in his excellent New York Business Divorce blog, recently reviewed a New York decision on minority shareholder oppression, Matter of Digeser v. Flach, 2015 NY Slip Op 51609(U), a case in which the heirs of the founders of a pair of companies had a falling out.  The minority shareholder found his management position and employment in the corporations terminated, and brought suit seeking judicial dissolution on the basis of oppression.  Flach, the majority shareholder, also terminated the employment of Digeser’s sons and engaged in a variety of other actions that Digeser asserted were oppressive.  Ultimately both the trial court and the court of appeals would determine that oppression had taken place, allowing the action for judicial dissolution of the corporations to proceed. Peter excellent review of the case, through which the decision itself can be assessed, is available AT THIS LINK.

But is this good law in Kentucky?  Probably not.  The New York law governing corporations includes, at § 1104-a(1), “oppression” as a basis for seeking judicial dissolution.  Kentucky, at KRS § 271B.14-300(2)(b) does not include oppression as a basis for dissolution.  In fact, when this provision was drafted, the MBCA included “oppression” as a basis for dissolution; that term was removed from the final Kentucky act.  While no Kentucky court has yet addressed the matter, it would seem that whether or not particular conduct is “oppressive” as to the rights of a minority shareholder is a pointless determination; even in the face of oppression there is no statutory basis for judicial dissolution.

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