Ritchie v. Rupe

Texas Court of Appeals, Dallas · 2011 · Corporations

339 S.W.3d 275 (2011)

Updated August 1, 2026

Corporationsminority oppressionclosely held corporationminority shareholderoppressionbuyoutfair market valuemarketability discount

Facts

Ann Rupe, as trustee of Buddy's Trust, owned 18% of the voting stock of a closely held corporation, RIC, and there were no contractual or bylaw restrictions on selling that stock to third parties. After unsuccessful efforts to have RIC buy the stock, Ann hired George Stasen to market it to outside buyers. RIC's president, Ritchie, told Ann and Stasen that neither he nor any RIC officer or director would meet with prospective purchasers or participate in the proposed sale, and the evidence showed investors in a closely held corporation would not invest without meeting management. Stasen testified that this refusal made the stock impossible to sell and prevented any sale to third parties.

Issue

Whether directors or those in control of a closely held corporation act oppressively by refusing to meet with, or allow management to meet with, prospective purchasers of a minority shareholder's unrestricted stock, thereby preventing the shareholder from marketing the stock. If so, whether a court may order the corporation to buy out the stock as an equitable remedy, and at what valuation standard.

Rule

Texas law permits equitable relief for shareholder oppression beyond receivership, including, in an appropriate case, ordering a buyout of an oppressed minority shareholder's stock. Shareholder oppression may exist when controlling persons substantially defeat a minority shareholder's objectively reasonable and central expectations, or engage in burdensome, harsh, wrongful conduct or a visible departure from standards of fair dealing and fair play. A holder of unrestricted stock in a closely held corporation has a general reasonable expectation of being able to market and sell that stock, and corporate actors may not unreasonably frustrate that expectation. When a buyout is ordered to remedy interference with a willing sale, the proper measure is fair market value, including appropriate discounts for lack of marketability and minority status.

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Maple Crest Aggregates, a closely held corporation based in Tulsa, has no shareholder agreement or bylaw restricting transfers. Dana Iqbal owns 16% of the voting shares and hires a broker to find outside buyers, but the board instructs all officers to refuse any meetings with prospective purchasers even though buyers in this industry ordinarily require management interviews before investing.

If Dana sues for shareholder oppression, what is the strongest argument that the board acted oppressively?

Explanation. The majority recognized a general reasonable expectation that a holder of unrestricted stock may market and sell it. In a closely held corporation, where reasonable due diligence may require access to management, a flat refusal to meet with prospective buyers can substantially defeat that expectation and also depart from fair dealing. The court did not hold that every refusal to assist a sale is oppressive, nor did it require fraud or waste.