[Shareholder Oppression] New Texas Shareholder Oppression Opinion

[Eric Fryar]

United States District Court Judge Barbara M.G. Lynn issued a brief, unpublished opinion addressing Texas shareholder oppression law in Bulacher v. Enowa, L.L.C., Slip Copy, 2010 WL 1135958 (N.D.Tex., March 23, 2010). A minority shareholder in sued for oppression and other claims. The case was filed in state court. The defendants removed the case to federal court and moved to dismiss the shareholder oppression claim, apparently for failure to state a claim for which relief may be granted. The denied the motion on the following grounds:

"Bulacher contends that the Defendants engaged in oppressive conduct by launching a concerted effort to dilute and deprive Bulacher of the value of his 17% interest in the company. Specifically, Bulacher alleges that the Defendants used prepaid consultant fees to artificially lower the company's income performance, and thereby reduce Bulacher's quarterly income-based bonuses, before his termination; that his termination was intended to, among other things, prohibit his access to critical financial and/or business information related to the company; that the Defendants attempted to induce Bulacher to sign an agreement allowing Enowa to repurchase his 17% interest in the company at a price that was a mere fraction of its true market value; and that the Defendants paid excessive bonuses and/or distributions to themselves after his termination. Texas courts take a broad view of the application of oppressive conduct to a closely-held corporation such as Enowa. In this context, the facts alleged by Bulacher are sufficient to state a claim for shareholder oppression under Texas law."

For a more in depth analysis of Texas shareholder oppression doctrine, visit the resources maintained by Fryar Law Firm.

Eric Fryar

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Posted By Eric Fryar to Shareholder Oppression at 3/30/2010 03:34:00 PM