Texas Supreme Court Nixes Minority Shareholder Oppression Claims

Hawkins Parnell & Young won a landmark case in the Supreme Court of Texas that changed the landscape of shareholder oppression law in the State of Texas. 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. 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 aligned Texas with Delaware, which does not recognize shareholder oppression claims. The decision also made 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 had been increasing in recent years, and Texas attorneys and closely-held corporations closely monitored this case. The decision is a significant victory for closely-held corporations and their controlling shareholders. Robert Gilbreath represented the defendants in Ritchie v. Rupe, briefing and arguing the case in the Texas Supreme Court.