From fake loans to $80,000 bonuses to certain shareholders in lieu of dividends to all, the defendants in Chomiak v. Kasian provided a variety of avenues for a successful shareholder oppression action. On August 3, 2017, the Appellate Division of the New York Supreme Court issued an opinion affirming the lower court's ruling for the plaintiffs, who were the defendants' relatives and co-shareholders.
The defendants owned 52% of the business at issue, Twin Bay Village, and the plaintiffs owned 48%. The plaintiffs' involvement in the business was limited, at least recently, and the defendants ran the business, which had been in the family since 1957.
In 2009, the defendants determined that the fair value of the corporation's shares was $1,139 and demanded that the plaintiff's sell their shares. The plaintiffs instead filed suit for shareholder oppression in the form of a breach of fiduciary duty and statutory action.
The New York court applied the reasonable expectations standard and found that the plaintiffs' reasonable expectations that the defendants would protect the interests of all shareholders had been frustrated. The Appellate Court affirmed.
The takeaway of Chomiak is, as in many shareholder or "partnership disputes", that when your business is organized as a corporation, you are not acting for yourself, but for the corporation and its shareholders. The fact that the controlling shareholders operate or manage the corporation does not diminish the rights of the minority shareholders.