Lee C. Ritchie, et al. v. Ann Caldwell Rupe, as Trustee for the Dallas Gordon Rupe, III 1995 Family Trust

Summary

The Supreme Court of Texas held that the directors’ refusal to meet with prospective purchasers of a minority shareholder’s stock was not oppressive conduct under the Texas receivership statute. The Court further held that the statute did not authorize a court-ordered buyout of the minority shareholder’s interests and declined to recognize a common-law cause of action for minority shareholder oppression. The Court reversed the court of appeals’ judgment and remanded for consideration of the shareholder’s breach-of-fiduciary-duty claim.

Holdings

1. Directors or managers engage in oppressive actions under former article 7.05 and section 11.404 when they abuse their authority over the corporation with intent to harm one or more shareholders, act inconsistently with the honest exercise of business judgment, and thereby create a serious risk of harm to the corporation.
2. The directors' refusal to meet with Rupe's prospective purchasers was not oppressive conduct under the receivership statute.
3. Former article 7.05 authorizes only appointment of a rehabilitative receiver for oppressive actions; it does not independently authorize a court-ordered buyout of a minority shareholder's shares.
4. Texas does not recognize a new common-law cause of action for minority shareholder oppression in closely held corporations.

Questions Presented

1. What does the term "oppressive" mean under former article 7.05 of the Texas Business Corporations Act and section 11.404 of the Texas Business Organizations Code?
2. Did the directors' refusal to meet with prospective purchasers constitute oppressive conduct under the receivership statute?
3. Does former article 7.05 authorize a court-ordered buyout of a minority shareholder's shares?
4. Should Texas recognize a common-law cause of action for minority shareholder oppression in a closely held corporation?

Disposition

reversed_and_remanded