Brief Fact Summary. Appellee, Patricia Coppock, brought the initial action against Appellants, Alaska Plastics, Inc. et al., after the directors they refused to give her an equitable amount for her shares in the company.
Synopsis of Rule of Law. Absent a statutory right of appraisal, a shareholder is not entitled to an equitable remedy wherein the corporation purchases their shares when the shareholder has issues regarding the director’s allocation of company resources.
Plaintiffs failed to offer proof that Defendants actions were unreasonable in that they would not have been taken by an ordinarily prudent man in the management of his own affairs of like magnitude and importance.View Full Point of Law
Issue. The issue is whether Appellee is entitled to equitable relief by forcing Appellants to purchase her shares at a price determined by the lower court.
Held. The court held that there was no remedy available that Appellee could use to force the close corporation to purchase her shares. The court listed four ways where this can happen but none applied to Appellee: 1) provision in a by-law (not present here); 2) petition for involuntary dissolution of corporation (the directors’ conduct was not so extreme as to warrant this remedy); 3) change in corporate structure such as a merger (Appellee approved the merger in this case); and 4) statutory right of appraisal (not recognized by state law). Appellee may have a claim for relief, but it should be through other means, such as forcing a dividend payment that compares to the benefits the other shareholders receive.
Discussion. The court notes that typically the best relief that could be granted to a disgruntled shareholder is to receive fair value for the shares and end their participation in a close corporation. However, the court wants to limit this remedy to extreme cases, or at least judicially recognized cases.