Oppressed Shareholders Don’t Always Get the Relief They May Deserve

Oppressed Shareholders Don’t Always Get the Relief They May Deserve


In Bontempo v. Lare, 2015 WL 4658901 (2015), published on August 6, 2015, the Maryland Court of Appeals affirmed that the "reasonable expectations test," previously articulated by the Maryland Court of Special Appeals in Edenbaum v. Schwarcz–Osztreicherne, 165 Md.App. 233 (2005), should be applied to assess whether a minority shareholder has been oppressed. However, the Court cast doubt as to whether certain potentially valuable remedies would necessarily be available to an oppressed shareholder.

Bontempo involved claims made by a 45 percent shareholder of a Maryland corporation. Despite his sizeable stock ownership, Mr. Bontempo was an at-will employee of the corporation. His employment had been terminated by the president of the corporation, who, together with his spouse, owned 55 percent of the corporation’s stock.

Following the line of reasoning previously expressed by the Maryland Court of Special Appeals, the Court of Appeals explained:

"[A] minority shareholder who reasonably expects that ownership in the corporation would entitle him to a job, a share of corporate earnings and a place in corporate management would be ‘oppressed’ … when the majority seeks to defeat those expectations and there exists no effective means of salvaging the investment."

Concluding that Mr. Bontempo had those expectations and that those expectations had been defeated, the Court of Appeals determined that he had been wronged as a result of his firing.

However, notwithstanding this, the Court declined to award salary-related damages to Mr. Bontempo. It found that he was neither entitled to be re-employed by the company nor awarded back pay or future pay in view of the fact that he was merely an at-will employee. It said that reinstatement or monetary damages is a discretionary equitable remedy, which the Circuit Court had elected not to impose, rather than a substantive legal right.

Significantly, in a clearly articulated dissent, Judges Harrell and Adkins viewed the Circuit Court’s failure to award damages for loss of employment to be an error of law rather than a matter within its discretion. The dissent stated that at-will employment does not necessarily erase a shareholder’s reasonable expectations that he or she will be employed absent a "for cause" basis to terminate him or her. The dissent stated that when a court makes a finding of oppressive conduct, the proper course of action for the court in formulating appropriate equitable relief is to correct the wrong found to have occurred. The dissent believed that this had not occurred in Mr. Bontempo’s case because the Circuit Court had failed to impose any employment-related relief.

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