## Facts

- Corbo Jewelers, Inc. was a closely held corporation that grew into a chain of jewelry stores.
- By the relevant period, ownership was split evenly: Gerald Bonavita owned 50% and Alan Corbo (the corporation’s president) owned 50%.
- Multiple Corbo family members worked for the corporation; through salaries and fringe benefits, the family received substantial annual compensation.
- Bonavita became less active as he aged and sought to retire; he had no comparable family employment in the business.
- Bonavita requested significant dividends, citing the corporation’s strong financial condition; the requests were denied, and defendants indicated no meaningful dividend would be approved.
- Bonavita also sought a buyout of his shares; defendants refused to cause the corporation to purchase his interest.
- Bonavita filed an action under N.J.S.A. 14A:12-7 alleging corporate deadlock and shareholder oppression; before trial he died, and his widow/executrix continued the action.
- A provisional director was appointed as interim relief during the dispute.
- Defendants argued dividend decisions were protected by the business judgment rule and were based on sound business reasons, not personal hostility.

## Issues

1. Whether refusal to declare meaningful dividends or provide any buyout, while providing substantial compensation and benefits to the Corbo faction, constituted shareholder oppression under N.J.S.A. 14A:12-7(1)(c) and equitable principles governing close corporations.
2. Whether the business judgment rule insulated the no-dividend policy from judicial intervention where the effect was to confer substantial benefits on one 50% owner faction and no practical return on the other.
3. What remedy was appropriate, including whether equity permitted ordering a corporate buyout of the oppressed shareholder’s interest as an alternative to dissolution.

## Decision

- The court found defendants’ conduct oppressive under N.J.S.A. 14A:12-7 and the court’s equitable authority.
- The court held the business judgment rule did not bar relief where corporate policies operated to allocate economic benefits to one shareholder faction and deny any benefit to the other in a close corporation.
- The court ordered the corporation to buy out the Bonavita shares as the only feasible remedy that would provide value to the oppressed interest without destroying a profitable business.

## Legal Principles

- In a closely held corporation, oppression may be established when those in control frustrate the other shareholder’s reasonable expectations of receiving a fair share of corporate economic returns (through compensation, dividends, or an exit at fair value).
- A no-dividend policy coupled with compensation practices that channel corporate value to one owner group can constitute a freeze-out even absent proof of personal animus.
- The business judgment rule does not automatically protect dividend and compensation decisions when their practical effect is to deny another shareholder any meaningful return or exit.
- N.J.S.A. 14A:12-7 authorizes flexible equitable remedies for oppression; courts may order relief short of dissolution, including a compelled buyout, when necessary to cure the oppressive condition.

## Conclusion

The court treated the combined refusal to pay meaningful dividends or permit an exit, alongside compensation practices benefiting only the Corbo faction, as oppressive conduct in a close corporation and ordered a corporate buyout to provide the Bonavita interest fair value without dissolving the enterprise.


Bonavita v. Corbo, 300 N.J. Super. 179, 692 A.2d 119 (Ch. Div. 1996)