Court Opinion

ID: 8294799
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:00:55.676094+00
Date Added: 2024-06-11T16:43:59.695296
License: Public Domain

Justice PLEICONES.
I respectfully dissent. In my view, no oppressive conduct toward a minority shareholder has occurred in this case, and the possibility of future oppression is too remote to justify an equitable remedy.
Pursuant to S.C.Code Ann. § 33 — 14—300(2)(ii) (2006), dissolution of a corporation is appropriate when a court determines that “the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, fraudulent, oppressive, or unfairly prejudicial ... to any shareholder.” In applying this statute, courts must exercise caution in finding conduct to be oppressive. Kiriakides v. Atlas Food Systems & Services, Inc., 343 S.C. 587, 597-98, 541 S.E.2d 257, 263 (2001) (quoting official comment that “[t]he court should be cautious in the application of these grounds so as to limit them to genuine abuse____”). Although the statute permits dissolution when those in control will act in an oppressive manner, such a finding must be made as cautiously as a finding of past oppression. Thus, I would limit the application of the statute to instances in which the probability of future abuse is a near certainty. That is, a showing of imminent harm must be made. In my view, the evidence in this case fails to establish that oppression has occurred or is imminent.
I agree with the majority that a court-mandated buyout may be appropriate when a minority shareholder “faces a trapped investment and an indefinite exclusion [from] participation in business returns.” Kiriakides at 604, 541 S.E.2d at 267 (citation omitted; emphasis added). In my view, however, the evidence does not demonstrate that Ballard has been or is in imminent danger of being excluded from returns, despite his exclusion from management.
Engaging in a power struggle for control of a corporation is permissible if acceptable tactics are employed in the struggle. Id. at 598, 541 S.E.2d at 263. By the same token, transferring management of a venture from one shareholder to another is not oppressive if based on a valid business reason. See also Cooke v. Fresh Exp. Foods Corp., Inc., 169 Or.App. 101, 110, 7 P.3d 717, 722 (Or.App.2000) (“Courts give significant deference to the majority’s judgment in the business decisions that *601it makes, at least if the decisions appear to be genuine business decisions.”). In this case, although Appellants were disgruntled with Ballard and removed him as manager of the project, it is undisputed that the project remains in the developmental stage. The likelihood is small that any investor will see a return on investment in the near future. Ballard does not argue that Appellants are seeking to liquidate the corporation’s assets or transfer them to other entities. Thus, I do not understand how the majority finds evidence of oppression in the fact that Ballard is unlikely to see a return on his investment in the near future.
The majority also finds that the stock authorization was intended as a means for Roberson to avoid his contractual obligation to provide long-term financing. I do not agree that Roberson’s obligation to obtain long-term financing was a commitment to provide all capital needed by the corporation, and it is axiomatic that a corporation may authorize and issue stock for the purpose of raising additional capital. Moreover, in my view the Agreement in this case did not prohibit such action but rather established what the initial stock distribution would be among the various investors.
I also do not find significant the board’s failure to amend the articles of incorporation when it authorized the additional shares. This action did not violate the articles, which specified the number of issued shares rather than the number of authorized shares. Moreover, in my view the absence of a specific amendment to the articles of incorporation is no more than a technicality when the same votes that authorized the shares would also have amended the articles.
The majority reasons that Appellants’ intent was to gain greater control over allocation of returns on the parties’ joint investment. However, as the majority shareholders, Appellants already had full control of the corporation and its distribution of profits and benefits. Thus, the question is not whether the majority shareholders were seeking control but whether they would have abused or did abuse that control. See Kiriakides, supra.
I also do not find it significant that the majority shareholders failed to communicate information to Ballard since, by the time it could be fairly said they should have communicated *602financial information to him, Ballard had filed suit against them. Nor would I imply that a minority shareholder is entitled to be apprised of every detail of a firm’s operations, even in a closely held corporation. In my view, Ballard has not shown that he was deprived of information he needed to protect his interests as a shareholder. See Masinter v. WEBCO Co., 164 W.Va. 241, 256-57, 262 S.E.2d 433, 443 (W.Va.1980) (“The fact that [the minority shareholder] received diminished financial information after his removal as a director and officer may reflect nothing more than the practical recognition that an officer-director needs more financial information, in order to intelligently exercise his responsibilities, than does a shareholder. On the other hand, upon a fuller factual development, the withholding of information may be linked to the ‘freeze-out’ in that it may have denied him relevant information.”).
Likewise, I do not find evidence of oppression in the fact that one of the Appellants planned to employ several family members at the marina. Not only would the planned marina require the services of several employees, but Ballard does not contend that he wished to be employed or have his own family members employed in the operation. Thus, there is no reason to conclude that Appellants intended to deprive Ballard of a benefit he expected. On the contrary, the evidence in the record indicates that Ballard intended to participate only in the development of the project and subsequent returns on investment. Thus, any plans by Appellants to employ family members would be entirely appropriate in the absence of excessive compensation to them.
In sum, although evidence in this case may point to the possibility of oppressive intent by Appellants, it is far from conclusive in establishing that such an eventuality would have become a reality. In my view, this evidence falls well short of the standard articulated in Kiriakides. Thus, I respectfully dissent.
TOAL, C.J., concurs.