## Facts

- Elmer Balvik (30%) and Thomas Sylvester (70%) operated an electrical-contracting partnership in which both had equal management rights despite unequal capital contributions.
- In 1984, at Sylvester’s urging, the business incorporated as Weldon Corporation, issuing stock 70/30 and adopting bylaws providing one vote per share.
- The board consisted of Sylvester and his wife and Balvik and his wife; Sylvester became president and Balvik vice-president; contemplated buy-sell arrangements were never executed.
- In 1985, the owners disputed financial and management policies, including whether profits should be reinvested or distributed.
- Balvik stopped working for the corporation after Sylvester removed him from job duties and/or terminated his employment; Balvik thereafter received no salary or other compensation.
- At the next shareholders’ meeting, Sylvester used his voting control to amend bylaws to reduce the number of directors and remove Balvik from the board.
- Balvik was left with no management role and no return on his investment, while the business continued operating as a going concern.

## Issues

1. Whether Sylvester’s combined actions (ending Balvik’s employment, removing him from the board, and cutting off compensation) constituted “oppressive” conduct toward a minority shareholder in a closely held corporation.
2. If oppression existed, whether ordering judicial dissolution was an abuse of discretion when a less destructive equitable remedy was available.

## Decision

- The Supreme Court of North Dakota affirmed the finding that Sylvester’s conduct was oppressive to Balvik as a minority shareholder.
- The court reversed the dissolution order, holding dissolution was an extreme remedy inappropriate under the circumstances.
- The case was remanded for the district court to fashion an alternative equitable remedy, including a compelled purchase of Balvik’s shares at fair value by Sylvester or the corporation.

## Legal Principles

- In closely held corporations, “oppression” is evaluated by whether controlling shareholders’ conduct substantially defeats the minority’s reasonable expectations that were central to joining the venture (often including employment, participation in management, and an economic return).
- A “freeze-out” can be shown by the combined effect of actions that strip the minority of employment, governance participation, and any meaningful financial return, leaving the minority investor effectively locked into an illiquid position.
- Whether termination from employment was for cause may be secondary where the overall conduct operates to exclude the minority owner from expected participation and return.
- Judicial dissolution is a drastic remedy that should be used sparingly; courts may prefer tailored equitable relief that avoids destroying a viable, ongoing business.
- A fair-value compulsory buyout may be an appropriate remedy for shareholder oppression in a close corporation when dissolution would be unnecessarily destructive.

## Conclusion

The court held that the majority shareholder’s actions amounted to oppression by freezing the minority shareholder out of management, employment, and economic benefits, but it rejected dissolution as too harsh and directed the trial court to order a fair-value buyout or other equitable relief.


Balvik v. Sylvester, 411 N.W.2d 383 (N.D. 1987)