The Oklahoma Bar Journal January 2023

disenfranchised minority share holder. 9 The draconian remedy of dissolution can certainly affect much more than simply the share holders, who were acting in bad faith or in violation of their fidu ciary duties. In pursuit of a less extreme remedy, Massachusetts developed a judicial remedy that may be a middle ground to the harsh statutory schemes of the majority of states. 10 In Wilkes v. Springside Nursing Home, Inc. , the Massachusetts Supreme Judicial Court was trying to determine whether a close corporation can fire one of four shareholders for the sole purpose of denying him income from the corporation. 11 The court deter mined the majority shareholders failed to advance a legitimate business reason for firing the shareholder and frustrated the minority stockholders’ purposes. 12 The fired shareholder, therefore, could recover from the other three shareholders the salary he would have received had he not been fired. 13 Under this scheme, a more moderate form of relief replaces the extreme measures enacted by statutory dissolution schemes. The Massachusetts court, rather than dissolving the corporation, provided a judicial remedy to the minority shareholder to recover damages due to the wrongful conduct or “oppression” by the majority shareholders. However, other jurisdictions have rejected the idea of both statu tory and judicial relief for minority shareholders in a freeze-out. The Delaware courts have affirmed that minority shareholders in close corporations have two protections available to them, which will not be distracted by judicial relief. 14 First, Delaware maintains a close corporation statute that contains certain protections to minority shareholders. 15 If a closely held

corporation wishes to be pro tected by the close corporation statute, it must incorporate under such statute or forfeit those protec tions. 16 Second, minority sharehold ers have the chance to contract for protections prior to purchasing shares in a close corporation. 17 The court declared, “The tools of good corporate practice are designed to give a purchasing minority stock holder the opportunity to bargain for protection before parting with consideration.” 18 Since the close corporation statute and contract law preempt the field in their respective areas, the court determined it would be inappropriate to fashion a special judicial remedy when plaintiffs fall outside the provided statutes. 19 The Supreme Court of Texas has followed Delaware’s lead and denied judicial relief outside of the close corporation statute and other statutory schemes that already exist in its law. 20 The Texas court further noted that other causes of action exist for minority sharehold ers, including breach of fiduciary duties, breach of contract, fraud, conversion, etc., which warrant a further judicial remedy for “share holder oppression” unnecessary. 21 WILL OKLAHOMA COURTS ACCEPT JUDICIAL RELIEF? To date, Oklahoma has no statutory grounds to seek involun tary dissolution of a corporation for shareholder oppression of minority shareholders. Oklahoma has also chosen not to implement a close corporation chapter in its corporation laws. Since Oklahoma has not dealt with the issue of shareholder oppression, at least within its body of reported case law, minority shareholders are provided essentially no protection or remedy for oppression outside of contractual schemes. Under such circumstances, is it likely Oklahoma will accept judicial

preferring instead to consider factors, as applied to each case in the context of the applicable jurisdictional law. As a result, the broad term can be used to cover a multitude of cases in which improper conduct occurred. In acknowledgment of this fact, the New Mexico Supreme Court has stated, “The absence of a rigidly defined standard for determin ing what constitutes oppressive behavior enables courts to deter mine, on a case-by-case basis, whether the acts complained of serve to frustrate the legitimate expectations of minority share holders, or whether the acts are of such severity as to warrant the requested relief.” 6 Although these broad, subjective and expansive definitions allow courts to conduct a case-by-case analysis of wrong ful behavior, they provide very little guidance as to what the court will likely include as oppressive conduct. Courts continue to refine their jurisprudence on the subject, but shareholder “oppression” will likely never be distinctly defined. PROTECTIONS AND REMEDIES PROVIDED IN OTHER STATES Oklahoma currently has no statutory protection for minority shareholders absent “misman agement, collusion, or fraud.” 7 However, 60% of states now pro vide some form of statutory relief for minority shareholders of closely held corporations in the form of a petition to the court for dissolution of the corporation on the grounds of “oppression” or similar conduct by the majority shareholders. 8 The states that have not enacted oppression into their corporation statutes seek out a remedy that may be less severe than dissolu tion. One ambitious state Supreme Court listed no less than 10 poten tially available remedies for the

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THE OKLAHOMA BAR JOURNAL