The Iowa Court of Appeals addressed Oppression, Breach of Fiduciary Duty, Freeze Out, and Judicial Dissolution in Jochimsen v. Wapsi Hunting Club, Inc., 803 N.W.2d 672 (Iowa Ct. App. 2011) (CLICK HERE FOR THE OPINION).
As described below, among other issues, the Jochimsen opinion confirms that Iowa courts consider the reasonable expectations doctrine when determining whether oppression is or has occurred. For more reading on oppression click here.
In Jochimsen, the Plaintiff, Paul Jochimsen, a member in an Iowa corporation, alleged four members of the Wapsi Hunting Club, Inc. (the Defendant) engaged in oppressive conduct:
Club member Paul Jochimsen asserts the four members acted oppressively when they amended the corporation’s governing documents, admitted new member James Williams, and declined to adopt several of Jochimsen’s proposals.
Jochimsen, 803 N.W.2d 672, * 1. Based upon the allegations, Jochimsen requested the court dissolve the corporation or grant alternative equitable relief, including canceling Williams’s membership.
The trial court entered judgment in favor of Defendants and Jochimsen appealed.
On appeal, the Iowa Court of Appeals analyzed several intra-corporate dispute issues; including, factors that an Iowa court will evaluate when determining whether oppression is, or has occurred. Based upon the claims in Jochimsen, the court analyzed the following factors to determine whether Jochimsen was oppressed: (1) Whether the Defendants’ challenged actions “ran contrary to their fiduciary duties;” (2) Whether the Plaintiff was denied his “reasonable expectations;” and (3) Whether the Defendants’ challenged actions “imposed upon [Jochimsen] burdensome, harsh, and wrongful conduct.” Id. at * 1
Reviewing the case de novo, the Iowa Court of Appeals affirmed the trial court’s findings. Specifically, that Jochimsen failed to prove “the majority committed oppressive acts.” Id. at *3. A review of the opinion, which can be found here, explains how and why the facts and allegations fail to amount to oppression.
The Iowa Court of Appeals also addressed whether a corporate freeze-out occurred. The court stated: “[a] freeze-out occurs when controlling members deny a minority member his or her rightful interest in the corporation.” Based upon the facts in Jochimsen, the court found that Jochimsen was not “‘completely frozen out’ of the membership process.” Id. at * 7. The court further concluded that Jochimsen “cannot be frozen out of benefits to which he is not entitled.” Id. As such, he was not entitled to relief.
For individuals holding an interest in an Iowa business and/or those who are curious about that status of proving corporate oppression in Iowa, the opinion contains helpful insight and citations to other relevant authority.
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