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Matter of Kemp & Beatley, Inc.
Court of Appeals of New York
473 N.E.2d 1173 (N.Y. 1984)
Dissin and Gardstein (plaintiffs) worked for Kemp & Beatley, Inc. (KBI) (defendant) for a combined 77 years. They were minority shareholders in the corporation, and each received “extra compensation” each year in the form of distributions of KBI’s earnings. The compensation amounted to de facto dividends and was based on the amount of stock each owned. In 1979, Dissin resigned, and in 1980, Gardstein was terminated. Around the same time that the plaintiffs separated from KBI, the corporation changed its policy with regard to extra compensation, basing such compensation on services rendered to KBI after several years of it being based on stock ownership. The plaintiffs believed they were being frozen out of the corporation’s earnings and brought suit in the New York Supreme Court, seeking dissolution of KBI. KBI offered no alternative to dissolution in the event the court found in the plaintiffs’ favor. The trial court did find in favor of the plaintiffs and ordered dissolution. The appellate court affirmed. KBI appealed.
Rule of Law
Holding and Reasoning (Cooke, C.J.)
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