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When Piazza filed a lawsuit seeking judicial dissolution of the company based on oppression, Gioia Jr. responded that the action triggered Piazza’s obligation to sell his shares under the shareholders’ agreement.[1]  Indeed, the shareholders’ agreement provided that a judicial dissolution proceeding would be deemed a voluntary offer to sell and trigger buyout rights.  The court said, however, that such provision is not controlling “when the sale is the result of claimed majority oppression or other wrongdoing—in effect, a forced buyout.”  Under New York Business Corporations Law, there are two types of judicial dissolution proceedings—one under Section 1104 where there is corporate deadlock and another under Section 1104-a “to provide a remedy to minority shareholders who have suffered abuse at the hands of the majority and lacked a means for salvaging the value of their investment.”  For a shareholder agreement to trigger buyout rights, as Gioia Jr.… Read the rest

In Piazza v. Gioia,[1] Piazza and Gioia Sr. founded Kings County Waterproofing Corp. (KCWC) in 1979 and held 40% and 60% of the shares, respectively.  Gioia Sr.’s son also worked for the company eventually became a 1/3 owner, along with his father and Piazza.  Their shareholders’ agreement contained stock transfer restrictions and buyout provisions, which, among other things, gave the non-selling shareholder an option to purchase the selling shareholder’s shares at “the last stipulated price preceding the date of the notice to sell the shares.”  In 1996, Gioia Sr.… Read the rest

We write frequently about minority shareholder rights.  Really frequently.  We previously talked about Ritchie v. Rupe, a Texas Supreme Court case that made it harder for minority shareholders to bring lawsuits based on oppressive conduct by majority shareholders (see here).  We also discussed Bontempo v. Lare (available here), a Maryland case on remedies for shareholder oppression, which, in addition to dissolution, recognized equitable remedies, and Sneed v. Webre (available here), another Texas case, which held that the business judgment rule does not prevent minority shareholders of a closely held corporation from bringing a lawsuit on behalf of the corporation over the board’s objection. … Read the rest