Filling in the Gaps: Shareholder Oppression After Ritchie v Rupe, Part 1

On June 20, 2014, the Texas Supreme Court’s decision in Ritchie v. Rupe initiated a seismic shift in Texas law governing the protection of minority shareholders in closely-held corporations and limited liability companies. After almost thirty years of steady appellate court development of a judicial remedy for oppressive conduct against minority shareholders, recognizing the trial court’s power to force an oppressive controlling shareholder to purchase the oppressed minority shareholder’s stock for a fair value, the Texas Supreme Court suddenly announced that no common law cause of action for oppression existed and that Texas courts had no power to order a buy-out under the statutory remedy for oppression. This article provides an insight into how effective Texas law governs the relationship between shareholders and corporations in light of the Ritchie v. Rupe decision. The author aims to evaluate the extent that the law has left a “gap” in the protection to individual minority shareholder interest after Ritchie, and explore how the court should interpret existing legal rights, corporate duties and remedies to fill in these gaps.