SW Legal studies in Business

Employee/Shareholder Is More than Employee Who May Be Fired without Cause
Description Appeals court reinstated a suit brought by a 50 percent shareholder/employee of a close corporation who was fired by the other shareholder/employee of the company after refusing to sell her share in the company. There was adequate grounds for the claim of wrongful termination and defamation for the suit to proceed given the fiduciary obligations that existed.
Topic Business Organization
Key Words Close Corporation; Shareholder-Employee
C A S E   S U M M A R Y
Facts Sisters Morrison and Gugle opened a store together. The business was incorporated; each owned half of the stock. Gugle was president; Morrison was secretary-treasurer. Both were employees of the corporation. Trouble developed between the two; Gugle suspected Morrison of taking company money. Gugle sent Morrison a letter offering to buy her out of the business and gave her three days to decide. Morrison did not respond. Gugle fired her and denied her access to company property and records. Gugle asked the bank to move all company money to an account over which she would have sole control due to concern over missing money. Morrison sued Gugle for wrongful termination and defamation. The trial court directed a verdict for Gugle. Morrison appealed.
Decision Reversed in part. This is not a typical wrongful termination suit since Morrison was also a shareholder and director of the close corporation. In such a case there is a heightened fiduciary duty between the parties. Absent a legitimate business purpose, which was not clearly present, Gugle could not force Morrison from the company. They were equal shareholders, but Gugle dominated the corporation, including denying Morrison access to company records. Morrison contends that she was fired because she refused to give in to Gugle's buy-out offer. If so, that is wrongful termination and breach of fiduciary duty. Gugle admitted that the company books were a mess, such that she could not prove misappropriation of company funds and no evidence to show such theft was provided. Hence, at this point, there is a reasonable basis for Morrison's claim of defamation based on the assertion of theft of company money to proceed. There should not have been a directed verdict.
Citation Morrison v. Gugle, 2001 WL 360171 (Ct. App., Ohio, 2001)

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