Ingle v. Glamore Motor Sales, Inc.
73 N.Y.2d 183 (1989)
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Rule of Law:
A minority shareholder's status in a close corporation does not grant special protection from at-will employment termination, and majority shareholders do not breach their fiduciary duty by firing the minority shareholder-employee to exercise a contractually agreed-upon stock repurchase option that is triggered by termination for any reason.
Facts:
- In 1964, Ingle was hired as a sales manager for Glamore Motor Sales, Inc., a corporation solely owned by James Glamore, with no express agreement on the duration or conditions of his employment.
- In 1966, Ingle purchased 22 shares of the corporation from Glamore under a shareholders' agreement.
- This agreement included a provision that if Ingle ceased to be an employee of the corporation 'for any reason,' Glamore would have the right to repurchase all of Ingle's stock.
- Ingle later purchased more shares, bringing his total ownership to 40 shares.
- In 1982, the corporation issued additional shares to Glamore and his two sons, and all four shareholders, including Ingle, entered into a new shareholders' agreement.
- This new agreement contained an identical stock repurchase provision, triggered if any stockholder 'shall cease to be an employee of the Corporation for any reason.'
- On May 9, 1983, at a special board of directors meeting, Ingle was voted out of his corporate posts and fired from his employment as operating manager.
- On June 1, 1983, Glamore formally exercised the repurchase option, paying Ingle $96,000 for his 40 shares as stipulated in the agreement.
Procedural Posture:
- Plaintiff Ingle initiated two separate actions against Glamore Motor Sales, Inc. and the individual Glamore family members, alleging breach of fiduciary duty and breach of contract.
- The trial court dismissed all of Ingle's causes of action.
- Ingle, as appellant, appealed the dismissal to the Appellate Division, which affirmed the trial court's decision.
- Ingle then appealed to the Court of Appeals of New York, the state's highest court.
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Issue:
Does a fiduciary duty owed by majority shareholders to a minority shareholder in a close corporation prevent the majority from terminating the minority shareholder's at-will employment in order to trigger a provision in a shareholders' agreement allowing the repurchase of the minority's shares upon termination of employment for any reason?
Opinions:
Majority - Bellacosa, J.
No. A minority shareholder in a close corporation who is an at-will employee acquires no right against being discharged simply by virtue of their shareholder status, even when a shareholders' agreement allows for the repurchase of shares upon termination for any reason. The court reasoned that the duties owed to Ingle as a shareholder are distinct from any duties owed to him as an employee. As he had no employment contract for a definite term, he was an at-will employee subject to termination at any time under long-standing New York law. The court held that an implied obligation of good faith and fair dealing does not attach to at-will employment relationships. The shareholders' agreement, which expressly contemplated termination 'for any reason,' reinforced rather than limited the at-will nature of his employment. The divestiture of his shares was a contractually agreed-upon consequence of his termination, not the other way around.
Dissenting - Hancock, Jr., J.
Yes. The majority mischaracterizes the case as a simple employment dispute when it is fundamentally about the oppressive squeeze-out of a minority shareholder in a close corporation. The dissent argued that shareholders in a close corporation are akin to partners and owe each other a high fiduciary duty of loyalty and good faith. Terminating Ingle's employment solely to trigger the stock buy-back provision and eliminate him as a co-owner was a breach of that fiduciary duty. The employment at-will rule is inapplicable and unfair in this context, as a minority shareholder-employee is not truly free to quit due to their substantial investment, and the majority's action amounts to an abuse of corporate power for personal gain. The termination was merely a pretext to effectuate an unlawful squeeze-out.
Analysis:
This decision reinforces a strict separation between corporate law and employment law in New York. It clarifies that fiduciary duties owed to a shareholder do not create employment rights, effectively insulating majority shareholders from claims of bad faith termination when an employee is at-will. The ruling places the burden on minority shareholder-employees in close corporations to negotiate and secure explicit contractual protections for their employment if they want to avoid at-will termination. By refusing to infer job security from shareholder status, the court prioritized the predictability of at-will employment doctrine over the equitable protections often afforded to minority shareholders in close corporations.
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