Jan 27, 2016
Does Texas recognize a common law cause of action for minority shareholder oppression?
The Texas Supreme Court recently decided that Texas does not recognize a common-law cause of action for “shareholder oppression.” Richie v. Rupe, 443 S.W.3d 856, 891 (Tex. 2014). The Court reasoned that since the Texas Legislature has crafted a statutory scheme governing domestic corporations in the Texas Business and Organization Code there are no compelling grounds to impose a cause of action upon the statutory framework. Id.
The Texas Business and Organization Code provides that the only remedy for shareholder oppression is the appointment of a rehabilitative receiver. Richie v. Rupe, 443 S.W.3d at 877; see also Tex. Bus. Orgs. Code § 11.404. This remedy for “oppressive” actions is limited yet sufficient according to the Texas Supreme Court. Richie, 443 S.W.3d at 891.