oppression claims

Oppression Plaintiff Obtains Injunctive Relief

Recent New York Decision Grants Injunction Pending Litigation of Oppression Claims

In a recently issued opinion in Feinberg v. Silverberg, 2011 NY Slip Op 32299 (Nassau Co. 2011), Nassau County Supreme Court granted injunctive relief preventing Defendant from continuing oppressive acts. The case strongly supports the proposition that when an oppressed shareholder stands to lose his stake in control and management of a corporation, money damages are not sufficient compensation and an injunction provides greater equity as relief.

L&E is a closely held corporation founded by Feinberg, Plaintiff, and Silverberg, Defendant, who are both 50% shareholders. Feinberg is the President and Treasurer; Silverberg is the Vice President and Secretary. Victor Hecht, another named Defendant, is the Chief Financial Officer of L&E, and Brian Barney is an employee with responsibilities involving the business of L&E in Asia.

Avoiding Shareholder Oppression Claims

The Threat:

Being a defendant in a shareholder oppression case can pose a significant threat to a closed corporation and its majority shareholders. Not only can the majority or the corporation be forced to buy out the shares of the minority at what the court determines to be “fair value,” the litigation itself can be a significant distraction and drain on company finances and managerial resources.

“Fair value” often involves an appraisal process, expert reports and expert testimony at a trial – and great uncertainty as to what the court will ultimately decide.  “Fair value” is a technical legal terms that is a legislative and judicial creation; it is not the same as “fair market value” and it can often be substantially different from what the minority’s shares can fetch in the open market or the amount of financing a company can obtain to buy these shares.