Texas Supreme Court Nixes Minority Shareholder Oppression Claims

June 20, 2014
Texas Supreme Court

After more than 50 years of silence on shareholder oppression claims, the Texas Supreme Court issued a 54 page opinion rejecting such claims except to the extent they seek the limited statutory remedy of a rehabilitative receivership. In Ritchie v. Rupe, the Court expressly rejected the existence of a non-statutory, court-created claim for oppression in which shareholders claiming to be oppressed can force the corporation to buy the shareholder’s stock. This decision aligns Texas with Delaware, which does not recognize shareholder oppression claims. The decision also makes it more difficult for a minority shareholder seeking the statutory remedy of a rehabilitative receivership to establish that the majority shareholders have committed oppression. Shareholder oppression claims have been increasing in recent years, and Texas attorneys and closely-held corporations have been closely monitoring this case. The decision is a clear victory for closely-held corporations and their controlling shareholders.  Robert B. Gilbreath, a partner in the law firm Hawkins Parnell Thackston & Young LLP represented the defendants in Ritchie v. Rupe, briefing and arguing the case in the Texas Supreme Court.

 

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