## Facts

- A closely held family farm corporation was formed in 1966 to hold and operate farmland contributed by two brothers.
- Corporate bylaws restricted share transfers and required a selling shareholder to first offer shares to the corporation or other shareholders.
- A 1984 bylaw amendment set the buyout price, absent agreement, at book value as determined by the board for internal use; the stated book value was $686 per share and was not updated despite substantial corporate growth and farmland appreciation.
- Stock later became concentrated among family members; Jack Baur held a minority interest, while Bob Baur held a majority interest and served as an officer and director.
- The corporation paid no dividends and reinvested profits under majority control.
- For more than twenty years, Jack sought to sell or redeem his shares to obtain a return, but the corporation’s offers were tied to the outdated book-value measure, which Jack claimed was far below fair value.
- Jack sued the corporation and the majority shareholder alleging oppressive conduct and breach of duties, seeking judicial dissolution or an order requiring payment of the fair value of his shares.

## Issues

1. What “oppressive” conduct means under Iowa’s judicial dissolution statute for closely held corporations.
2. Whether evidence of no dividends plus insistence on an outdated, board-controlled book-value buyout price that prevents a fair exit can constitute oppression.
3. Whether the district court erred by dismissing the case at the close of the minority shareholder’s evidence in a bench trial.

## Decision

- The Iowa Supreme Court reversed the district court’s dismissal and remanded for further proceedings.
- The court held that “oppressive” conduct is not limited to illegal or fraudulent acts and includes conduct that substantially defeats a minority shareholder’s reasonable expectations in a closely held corporation.
- The court concluded that Jack’s evidence, if credited, could support a finding that majority conduct operated as a squeeze-out by denying any meaningful return or fair-value exit, and therefore should not have been dismissed as a matter of law.
- The court did not order dissolution or a buyout; it held only that the claim could proceed under the clarified oppression standard.

## Legal Principles

- Under Iowa Code § 490.1430(2)(b), “oppressive” is an independent statutory ground for relief and is broader than “illegal” or “fraudulent.”
- In closely held corporations, oppression includes majority conduct that substantially defeats the reasonable expectations of minority shareholders formed when they acquired their interest.
- Reasonable expectations in a close corporation may include receiving a return through dividends, employment, or the ability to liquidate the investment at a fair value within a reasonable time.
- Majority control over dividends, transfer restrictions, and buyout pricing can, in combination, support an oppression claim when it effectively locks a minority shareholder into a nonmarketable investment without a fair means of exit.

## Conclusion

The court adopted a reasonable-expectations framework for minority shareholder oppression in closely held corporations and held that evidence of a long-term denial of dividends coupled with a refusal to allow a fair-value exit could constitute oppression, requiring reversal of the mid-trial dismissal and remand for further fact-finding.


Baur v. Baur Farms, Inc., 832 N.W.2d 663 (Iowa 2013)