Rough Times May Breed Shareholder Oppression

Rough Times May Breed Shareholder Oppression - 4/1/2009

Home

Index of Filings

News and Press Releases

Filings

Decisions

Settlements

Litigation Activity Indices

Top Ten List

Annual/Quarterly Updates

Clearinghouse Research

Articles & Papers

Search

Related Sites

About Us

Local Rules

Sponsors

Register

_______________
Copyright © 2001
Stanford Law School

2009 News and Press Releases

SEARCH

News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

Rough Times May Breed Shareholder Oppression
Jacqueline Bell

Law 360. April 1, 2009
_________________________________________________________________________

EXCERPT: In an economic downturn, public companies aren’t the only ones to face an increased risk of legal challenges from shareholders. Attorneys who specialize in so-called shareholder oppression suits say times of financial stress become fertile ground for shareholder disputes in private corporations. When minority shareholders in closely-held corporations feel they are being treated unfairly, legal action is often one of the only avenues open to them. Shareholders in public companies can easily sell their stake in the company, but private company shareholders don’t have that option. “In the public context, if a minority shareholder, is unhappy, he simply sells his shares,” said Erica Harris, partner at Susman Godfrey LLP. “In a closely-held company, the minority shareholder has no control and no ability to liquidate the asset at a fair market price and walk away.” And when the economy takes a turn for the worse, minority shareholders can easily find themselves in a battle stemming from a company's dwindling profits. “In terms of creating the conditions for oppression, there’s no doubt that the downturn contributes to that,” said Wallace Hilke, attorney at Lindquist & Vennum PLLP and chair of the firm’s shareholder disputes group. “A lot of seeds are sown for later litigation.” Eric Fryar, a Texas-based attorney who also blogs on the topic of shareholder oppression, said that while he has not yet noted a significant uptick in cases filed in the wake of the economic crisis, he has seen a marked increase in queries from minority shareholders. Two financial states typically generate shareholder oppression disputes, according to Fryar. In a boom-time economy, when a company is doing well, a majority shareholder may decide to push for a bigger piece of the pie. And in an economic downturn, when the size of the pie is shrinking, the majority shareholder “is tempted to use his power to keep his piece of the pie from shrinking so quickly,” Fryar said.

Back to News page | Back to Archived News 2009 page | Back to Top

�