Matter of Kemp & Beatley, Inc.
New York Court of Appeals
64 N.Y.2d 63, 484 N.Y.S.2d 799, 473 N.E.2d 1173 (1984)
- Written by John Caddell, JD
Facts
Dissin and Gardstein (plaintiffs) held a combined 20.33 percent of the stock of Kemp & Beatley, Inc. (defendant), a New York close corporation. Both were long-time employees of Kemp & Beatley and held significant management positions. During their employment they and the other shareholders received either dividends or extra compensation in proportion to their stock holdings each year. Dissin resigned in 1979, and Gardstein was terminated in 1980. After Dissin and Gardstein left, the company began to make its annual distributions on the basis of service rendered to the corporation, rather than stock ownership. As a result, Dissin and Gardstein no longer received annual distributions. Dissin and Gardstein petitioned the court for dissolution of the company, arguing that the controlling shareholders had frozen them out via fraudulent and oppressive conduct. The trial court ordered the company dissolved unless the controlling shareholders bought out the plaintiffs. The appellate court affirmed. Kemp & Beatley appealed to the New York Court of Appeals.
Rule of Law
Issue
Holding and Reasoning (Cooke, C.J.)
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