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1 Wayne St. U.J. Bus. L. 1 (2018)

handle is hein.journals/wsujbl1 and id is 1 raw text is: LITIGATION BETWEEN SHAREHOLDERS IN CLOSELY- HELD CORPORATIONS: PROTECTING MINORITY SHAREHOLDERS FROM ABUSE AT THE HANDS OF MAJORITY OWNERS Gerard V. Mantese and Ian M. Williamson * This article examines case law from Michigan and across the country that has considered shareholder oppression claims (including claims based on fiduciary obligations between shareholders in closely-held corporations) and distills from these cases common fact patterns that courts have found to either constitute, or state claims for, oppressive conduct. I. Introduction When opinions about business management and policy diverge, owners of minority shareholding interests in closely-held corporations who are not part of a control group often find themselves at the mercy of controlling shareholders. If mere disagreements become heated disputes (or if self-interest wins out over the combined interests of all shareholders), controlling shareholders sometimes exercise their power over corporate affairs to marginalize or freeze out minority owners. Under such circumstances, when the minority owner has been a victim of abuse and overreaching by those in control, shareholder oppression claims can be important tools for owners of minority (non-controlling) interests.1,2 * Mr. Mantese is the senior partner at Mantese Honigman, P.C., a firm with extensive experience litigating shareholder oppression and related business disputes in Michigan and across the country. Mr. Williamson is also a partner at Mantese Honigman, and has litigated disputes among owners of closely held businesses with Mr. Mantese for the past 14 years. ' The controlling shareholder (or shareholder group) typically owns more than 50% of the stock in a corporation. However, some states recognize that the heart of oppression is the unfair exercise of control, which is not always limited to situations in which one individual or group owns the majority of stock or exercises superior voting power. Thus, even where corporate owners are equal shareholders, the controlling shareholder may be liable for oppression. See Kirila v. Kirila Contrs., Inc., No. 2015- T-0108, 2016 WL 4426409, ¶ 31, 148 Ohio St. 3d 1444, 72 N.E.3d 657 (Ohio Ct. App. Aug. 22, 2016) (The critical question is not whether one shareholder is a minority and the other a majority, but rather whether one owner so dominated the corporation that he or she can be said to have been in control to the exclusion of the other. (citation omitted)); see also Harris v. Carter, 582 A.2d 222, 234 (Del. Ch. 1990) (providing an example in Delaware where shareholders who own majority interests or exercise control over a company's business affairs owe the same fiduciary duties as a corporate director to other shareholders). 2 This article is intended as an overview of oppression actions across the country, though it is not a survey of every state's oppression laws. As such, it discusses cases that are unpublished and cases 1

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