Written by attorneys · grounded in primary & secondary sources — see below
2 senses
1
in corporate law
A form of majority or controlling shareholder conduct in a closely held corporation that substantially defeats the reasonable expectations of minority shareholders regarding honest management, fair participation, and return on investment. The expectations must be objectively reasonable under the circumstances and central to the minority's decision to invest. Such conduct often takes the form of freeze-out tactics that leave the minority with no ready market for shares.
2
in civil discovery
A category of harm or burden that a court may prevent by issuing a protective order when a party or person from whom discovery is sought demonstrates good cause. The rule authorizes relief from annoyance, embarrassment, oppression, or undue burden or expense after the movant certifies a good-faith effort to resolve the dispute informally.
Each sense below has its own examples, sources, and questions.
Sense 1
1
in corporate law
A form of majority or controlling shareholder conduct in a closely held corporation that substantially defeats the reasonable expectations of minority shareholders regarding honest management, fair participation, and return on investment. The expectations must be objectively reasonable under the circumstances and central to the minority's decision to invest. Such conduct often takes the form of freeze-out tactics that leave the minority with no ready market for shares.
Sources & Authorities· 3 sources
Select any source to read its text and confirm it supports the definition.
Casebooks
Hornbooks
Study Supplements
Examples4
Majority Freezes Out Minority Holder
Odessa Okada owns twenty percent of a closely held manufacturing firm. The majority shareholders stop paying dividends, exclude her from board meetings, and offer to buy her shares at a steep discount. Okada petitions for dissolution. The court finds oppressive conduct because the majority's actions defeat her reasonable expectation of fair participation and return on investment.
Donahue v. Rodd Electrotype of New England, Inc.328 N.E.2d 505, 512 (Mass. 1975)
Voting Agreement Used to Oppress
Omar Olson and two other shareholders in a close corporation enter a voting agreement that lets the majority control all director elections. The majority then diverts corporate opportunities to their own ventures and denies Olson financial information. Olson sues. The court treats the coordinated exclusion and self-dealing as oppressive conduct that defeats Olson's reasonable expectations as a minority investor.
Frequently Asked3
What must a minority shareholder prove to establish oppressive conduct in a close corporation?+
The shareholder must show that controlling shareholders engaged in conduct that substantially defeats objectively reasonable expectations held by the minority when investing, such as expectations of fair participation, honest management, or a return on capital. Courts examine what the majority knew or should have known about those expectations at the time of investment.
Supporting sources
Does oppressive conduct require proof of illegality or fraud?+
No. Oppressive conduct is an independent statutory ground for dissolution that focuses on defeat of reasonable expectations even when the majority's actions are not illegal or fraudulent. Illegality or fraud can support the same claim but is not required.
Sense 2
2
in civil discovery
A category of harm or burden that a court may prevent by issuing a protective order when a party or person from whom discovery is sought demonstrates good cause. The rule authorizes relief from annoyance, embarrassment, oppression, or undue burden or expense after the movant certifies a good-faith effort to resolve the dispute informally.
Sources & Authorities· 1 primary source
Select any source to read its text and confirm it supports the definition.
Federal Rules
Examples1
Broad Peer-Review Production Request
Valley Medical Center faces a malpractice suit and receives a request for ten years of oncology incident reports. The hospital moves for a protective order, certifying that it conferred with plaintiff's counsel about narrowing the scope and showing that compliance would impose crushing expense and reputational harm. The court grants limited relief because the discovery would cause oppression and undue burden.
Frequently Asked1
When may a party obtain a protective order on grounds of oppression in discovery?+
A party may obtain relief when it shows good cause that the requested discovery would cause oppression or undue burden or expense. The motion must be filed in the court where the action is pending and must include a certification that the movant conferred in good faith with the other side.
McQuade v. Stoneham263 N.Y. 323, 189 N.E. 234 (1934)
Squeeze-Out Through Share Repurchase
Oscar Ortiz holds a minority stake in a family-run close corporation. The majority redeems its own shares at a premium while refusing to redeem Ortiz's shares or pay dividends. Ortiz petitions for relief. The court finds the selective repurchase and denial of liquidity constitute oppressive conduct because they frustrate Ortiz's reasonable expectation of equal treatment.
Nixon v. Blackwell626 A.2d 1366
Asset Diversion and Exclusion
Odilia Okamura owns half the shares of a close corporation. The other half-owner transfers valuable contracts to a new entity he controls and blocks Okamura from corporate records. Okamura seeks dissolution. The court holds that the diversion of assets and denial of information amount to oppressive conduct that defeats her reasonable expectations of honest management.
Jones v. H. F. Ahmanson & Co.460 P.2d 464 (Cal. 1969)
What remedies are available once oppressive conduct is found in a close corporation?
+
Courts may order dissolution or may fashion lesser equitable relief such as a buyout of the minority's shares at fair value, appointment of a receiver, or an order compelling dividend payments or access to records.
Supporting sources
and concluded that the complaint alleged "nothing but a difference of opinion as to [the] value" of the converted shares. 187 A.2d at 80. Viewing the case in this light, the Court ruled…
Business Associations Corporations and LlcsClose corporations and special control devices · Resolutions of disputes and deadlocksUBEIntermediate