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Legal Memorandum: Existence of Oppressive Conduct

Issue: What must a party allege in order to set forth the existence of oppressive conduct?

Area of Law: Corporate & Securities
Keywords: Oppressive conduct; Shareholder's expectation
Jurisdiction: New Jersey
Cited Cases: 167 N.J. Super. 141; 400 A.2d 554; 692 A.2d 119; 634 A.2d 1019; 687 A.2d 268
Cited Statutes: None
Date: 09/01/2007

Corporate oppression has been defined as the frustration of a shareholder’s reasonable expectations.  Brenner v. Berkowitz, 134 N.J. 488, 506, 634 A.2d 1019 (1993).  See also Exadaktilos v. Cinnaminson Realty Co., 167 N.J. Super. 141, 150-52, 400 A.2d 554, 559-60 (Law Div. 1979) (discussing oppression as a visible departure from fair dealing standards, violation of fair play, and operation outside of the business judgment rule).

When the minority shareholders’ expectations are not reasonable, the court will dismiss a claim of oppression.  See Kelley v. Axelsson, 296 N.J. Super. 426, 430, 687 A.2d 268, 270-71 (App. Div. Jan. 7, 1997) (salaries paid to two corporate employees were not so unreasonably high as to be unfair and oppressive); Exadaktilos, 167 N.J. Super. 141, 400 A.2d 554 (the plaintiff’s discharge from the corporation was the result of his own unsatisfactory performance, such that his disappointment was not caused by frustration of reasonable expectations constituting oppression).  In contrast, when corporate oppression has been found, there have been allegations and evidence of corresponding abuse of corporate power.  See, e.g., Pedicini v. CEPS Constr. Co. (N.J. Super. Ct. App. Div. Dec. 13, 2005) (large corporate payments to two officers and an officer’s wife when the corporation was experiencing financial difficulties and failing to perform its contractual obligations constituted oppression); Bonavita v. Corbo, 300 N.J. Super. 179, 692 A.2d 119 (Ch. Div. 1996) (continued refusal to […]

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