SEPT. 8, 2014 —  Powers Taylor just announced the settlement of a shareholder dispute that had arisen in a family-owned manufacturing business in Central Texas.  The dispute involved three different corporations that were all owned by members of the same family.  The two largest shareholders, who together controlled over 90% of the companies, had decided to terminate the employment of a minority shareholder. The terminated shareholder then brought a lawsuit alleging that the termination violated an unwritten agreement between the shareholders that gave him an expectation of continued employment.  The terminated shareholder also alleged that the majority shareholders had violated their fiduciary duties by failing to follow corporate procedures in the distribution of profits and by making disproportionate distributions to other minority shareholders.

Mark Taylor represented one of the shareholders in the majority block.  As part of a settlement reached early in the lawsuit, another family member purchased the plaintiff’s shares.  As part of this multi-party settlement, Powers Taylor’s client obtained a complete release from liability and secured other concessions that ensured that she would not lose control over the day-to-day operations of the company.

“I was thrilled that we could resolve this dispute before the parties incurred huge legal bills that might have crippled the company,” said Mr. Taylor.  “In these types of cases, emotions tend to run high, and it can be difficult to keep everyone focused on the big picture — allowing a profitable company to continue to grow.”

The lawsuit was one of the first shareholder disputes filed after the Texas Supreme Court decision in Ritchie v. Rupe. This ruling eliminated claims of minority shareholder oppression in Texas.  Under the new legal standards, the plaintiff could not have forced the purchase of his shares, but in our case all parties came to the conclusion that a buy-out was preferable to extended litigation.