Opinion ID: 2571607
Heading Depth: 2
Heading Rank: 1

Heading: Tests For Oppression

Text: RCW 23B.14.300 does not define the term oppressive, nor does the MBCA. The Court of Appeals first addressed the question of what constitutes oppressive conduct, in the context of RCW 23B.14.300, in Robblee v. Robblee, 68 Wash.App. 69, 841 P.2d 1289 (1992). Given the dearth of Washington case law on the subject, that court adopted two tests used by other jurisdictions to define oppressive conduct. The first, called the reasonable expectations test, defines oppression as a violation by the majority of the reasonable expectations of the minority. Robblee, 68 Wash.App. at 76, 841 P.2d 1289 (citing Gimpel v. Bolstein, 125 Misc.2d 45, 477 N.Y.S.2d 1014 (N.Y.Sup.Ct. 1984)). `Reasonable expectations' are those spoken and unspoken understandings on which the founders of a venture rely when commencing the venture. Robblee, 68 Wash.App. at 76, 841 P.2d 1289. Application of the reasonable expectations test is most appropriate in situations where the complaining shareholder was one of the original participants in the ventureone who would have committed capital and resources. See Gimpel, 125 Misc.2d at 51, 477 N.Y.S.2d 1014. The second test describes oppression as: burdensome, harsh and wrongful conduct; a lack of probity and fair dealing in the affairs of a company to the prejudice of some of its members; or a visible departure from the standards of fair dealing, and a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely. Id. (quoting Gimpel, 125 Misc.2d at 50-51, 477 N.Y.S.2d 1014). These two tests are not mutually exclusive and one or both may be used in the same case, depending on the facts. Gimpel, 125 Misc.2d at 51, 477 N.Y.S.2d 1014. Oregon's Supreme Court has noted that oppressive conduct by majority shareholders is closely related to the fiduciary duty of good faith and fair dealing owed by them to the minority shareholders. Baker v. Commercial Body Builders, 264 Or. 614, 629, 507 P.2d 387 (1973).