In Herring Bancorp, Inc. v. Mikkelsen, a corporation acquired a majority of the outstanding shares of preferred stock by “repurchasing” those shares in accordance with the articles of incorporation, including the shares owned by a trustee. No. 07-15-00327-CV2017 Tex. App. LEXIS 5131 (Tex. App.—Amarillo June 2, 2017, no pet. history). This was against the wishes of the trustee, a minority shareholder. The trustee filed claims for oppression of a minority shareholder in a closely-held corporation and breach of fiduciary duty.
The court of appeals held that oppression of a minority shareholder was not a viable claim. The court of appeals noted that in Ritchie opinion, the Texas Supreme Court specifically refused to recognize a common-law cause of action for minority shareholder oppression in closely-held corporations and concluded that section 11.404 of the Texas Business Organizations Code authorizes the only remedy for oppressive conduct by those in control of a corporation—appointment of a rehabilitative receiver. Id. (citing Ritchie v. Rupe, 443 S.W.3d 856, 866 (Tex. 2014)). “Because Appellee’s oppression of a minority shareholder in a closely-held corporation is not a viable cause of action,” the court reversed that finding. Id.
The court then turned to the breach of fiduciary duty claim. The court held that there was no formal fiduciary duty between a majority and minority shareholder in a closely-held corporation:
The Texas Supreme Court has never recognized a formal fiduciary duty between a majority and minority shareholder in a closely-held corporation. One’s status as a co-shareholder in a closely-held corporation alone does not automatically create a fiduciary relationship between co-shareholders. “A co-shareholder in a closely held corporation does not as a matter of law owe a fiduciary duty to his co-shareholder.” Even in the context of disproportionate ownership interests, the vast majority of intermediate appellate courts of this State have declined to recognize a broad formal fiduciary relationship between majority and minority shareholders that applies as a matter of law to every transaction between them.
Id. The court therefore reversed a breach of fiduciary duty finding in this case as well.