Shareholder Oppression

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As I’ve stated in previous blog postings, business divorce or oppression cases usually end with one side buying the other out. Hence, valuation of the subject company is often one of the central issues in the case. Clearly, the coronavirus has negatively impacted a lot of closely held companies. Coronavirus has and will likely affect the valuation of the small businesses that are often ripe for disputes between the shareholders, partners, or members.
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Continue Reading Coronavirus is Likely to Affect Business Valuations in Business Divorce Litigation

Business break-up cases require a complex, interdisciplinary approach to solving problems associated with the fractured relationships between the owners of a closely held company. A business divorce attorney must have an in-depth knowledge of corporate, employment, contract, and business tort law. It is important when selecting an attorney to represent you or your company in a shareholder or member oppression case that you select someone who knows more than simply corporate divorce law.
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Continue Reading Business Divorce Cases Often Involve Complex Non-Corporate Issues

An Erie County, New York Supreme Court Justice recently held that the disrespectful and unfair dispropriate treatment of a female shareholder based upon her gender in a closely held corporation constituted oppression. In re Matter of Diane M. Straka, Index No. 807308-2017 (citing, Bus. Law. §1104(a)-(1).

In that case, the Plaintiff, Ms. Straka (a 25% shareholder in a closely held New York corporation) was able to prove at trial that she was subjected to disrespectful treatment based upon her gender. The other three shareholders were men. The Court found among other things, that:

  • When she first met one of the other shareholders, he asked Ms. Straka “…are you the one who makes the coffee;”
  • One of the shareholder’s posted a cartoon on his door that was deeming to women;
  • The Plaintiff stopped eating in the lunchroom because she was subjected to offensive comments; and,
  • One of the male shareholder asked if he could sit in her lap.

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Continue Reading Disrespectful & Unfairly Dispropriate Treatment of a Female Shareholder by Male Majority Shareholders in Closely Held Corporation Constituted Oppression

Pursuant to New Jersey corporate law, directors are trustees for the entire body of the owners. Directors owe loyalties to all shareholders. If they disregard the rights of the majority shareholders, minority shareholders, or the corporation itself they could be liable for a breach of fiduciary obligations or duties.
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Continue Reading Business Judgement Rule Inapplicable if Director is Engaged in Self-Dealing, Unconscionable, or Fraudulent Activities/Decisions

The termination of a shareholder’s employment may constitute oppression under N.J.S.A. 14A:12-7(b)(1)(c). That is because a person who holds a share in a closely held corporation often does so “for the assurance of employment in a closely-held corporation in the business.” Muellenberg v. Bilkon Corp., 143 N.J. 168, 180-181 (1996). That is because, a shareholder may have a “reasonable expectation” of continued employment. See, Brenner v. Berkowitz, 134 N.J. 488, 508 (1993).

When representing the minority, it is important to develop why the employee/shareholder had a reasonable expectation of continued employment. Of course, when representing the corporation or majority, counsel should present evidence that the employee/shareholder did not have a reasonable expectation of continued employment.…

Continue Reading Can the Termination of a Shareholder’s Employment be Oppression?

On March 17, 2015, the Appellate Division issued an important decision which provides guidance to New Jersey Trial Courts asked to judicially expel a member of a Limited Liability Company. IE Test, LLC v. Kenneth Carroll (App. Div. 2015)

N.J.S.A. 42:2B-24(b)(3) permits the expulsion of a member of a New Jersey Limited Liability Company under…

A 20% or greater shareholder in a closely held New York corporation may commence a special action for dissolution of the corporation on the grounds that those in control have either committed “illegal, fraudulent or oppressive actions toward the complaining shareholder” or have “looted, wasted or diverted for non-corporate purposes the corporation’s assets.”…
Continue Reading New York Court of Appeals Denies Applicability of Minority Discounts In Oppression Cases

In 1993, the New Jersey Supreme Court conferred great powers to Courts when adjudicating minority oppression claims. Brenner v. Berkowitz, 134 N.J. 488 (1993). Last year, the New Jersey Supreme Court conferred even greater equitable powers to Chancery Division Judges deciding inter-company disputes. Sipko v. Koger, Inc., 214 N.J. 364, 383-384 (2013).
Continue Reading New Jersey Supreme Court Confers Greater Equitable Powers to Chancery Court Judges When Adjudicating Intra-Company Disputes

On March 11, 2014, the Supreme Court of New York, New York County, denied a motion for summary judgment seeking to dismiss a Special Proceeding for Judicial Intervention seeking dissolution of three New York corporations premised upon violations of New York’s Minority Oppression Statute. Quazzo v. 9 Charlton Street Corp., 2014 N.Y. Misc. 1093; N.Y. Slip. Op. 30625 (U) (March 11, 2014).
Continue Reading New York County Supreme Court Justice Denied Majority Shareholders’ Motion to Dismiss Minority Oppression Claim