Olmsted & Associates, Inc. Oregon Court

Plaintiff/appellant in this case is Dan Hayes while defendants are Arthur Olmstead, David Arbanas, and Olmstead & Associates, Inc. (O&A). Dan Hayes, a former employee, officer, director, and current shareholder of O&A was dismissed from employment a year before he was set to retire and defendants, Olmstead and Arbanas as directors and officers of O&A, offered to buy his shares but he rejected such proposal. He then brought suit for alleged minority shareholder oppression.

The parties were able to enter into a settlement agreement wherein O&A would purchase plaintiff’s shares in the company for a price to be determined by the trial court. The trial court, in its decision, found that defendants did engage in oppressive conduct against the plaintiff. It, however, set the value of the plaintiff’s shares at $67 per shares based on a previous redemption made by the company for the shares of a departing employee. Plaintiff now appeals the valuation of his shares made by the trial court. ISSUE:

Plaintiff presents this issue on appeal: whether or not, as a remedy for defendants’ oppressive conduct, O&A should be required to purchase his stock at its "fair and reasonable value," which, in his view, is the value of his proportionate interest in the corporation as a going concern. Plaintiff asserts that the court should answer the question in the affirmative. Defendants, however, question the determination of the trial court that they engaged in oppressive conduct against the defendant and assert that, even if they did, such should not affect the valuation of plaintiff’s shares and that it should be reasonable under the circumstances.

DECISION: The court held that, first, the defendants did engage in oppressive conduct against the plaintiff. According to it, breach of fiduciary duty by those who control a closely held corporation normally constitutes oppression. Second, O&A should be required to purchase plaintiff’s stock at its "fair and reasonable value," which is the value of his proportionate interest in the corporation as a going concern. Valuation of shares in the context of minority shareholder oppression must be determined in light of the oppression. The decision is remanded for entry of modified judgment.a