## Facts

- Two individuals each owned 50% of a closely held service corporation and were its principal operators.
- The business remained profitable, but profits declined and the firm lost personnel, including key employees.
- Corporate governance broke down; the board could not function due to deadlock or an inability to achieve a quorum.
- One shareholder sought judicial dissolution and, according to the opposing shareholder, attempted to force a buyout on unfavorable terms.
- The petitioner’s evidence included a valuation placing corporate book value at roughly $300,000 (net of undetermined taxes), while the petitioner’s best offer for the other shareholder’s interest was about $60,000.
- The opposing shareholder alleged the petitioner used coercive and unlawful tactics to pressure acceptance of the low offer.

## Issues

1. Whether a court may order dissolution of a closely held corporation without an evidentiary hearing when material facts about deadlock, misconduct, and the parties’ conduct are disputed.
2. Whether alleged lowball buyout efforts and coercive conduct by the petitioner bear on the equitable propriety of dissolution as a remedy.

## Decision

- The Appellate Division reversed the order granting dissolution.
- The court held dissolution should not be granted summarily on conflicting affidavits where material facts are contested.
- The case was remanded for further proceedings, including a hearing, to develop the factual record and determine appropriate relief.

## Legal Principles

- Judicial dissolution is a drastic remedy and generally should not be ordered on motion papers alone when key facts are disputed.
- When dissolution is sought in a close corporation, the court may examine the petitioner’s good faith and equitable conduct, including whether dissolution is being used to pressure an unfair buyout.
- Credibility-dependent disputes—such as alleged deadlock mechanics, alleged misconduct, and claimed coercion—typically require testimony and cross-examination rather than resolution by affidavits.

## Conclusion

The court required an evidentiary hearing before terminating a profitable closely held corporation where allegations of deadlock and deterioration were intertwined with disputed claims that the dissolution petition was being used to coerce an unfair buyout.


Weiss v. Gordon, 32 A.D.2d 279, 301 N.Y.S.2d 839 (N.Y. App. Div. 1st Dep’t 1969)