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Many Discovery Tools Exist To Find Emails To Prove Shareholder Oppression

Posted on January 26th, 2017 | Author: David C. Roberts, Esq.

I have noted many times on this blog that emails often prove shareholder oppression cases.  It can be fairly easy for majority shareholders who are careful, and seek legal advise beforehand, to mask their true intent when attempting to “freeze out” a minority shareholder.  For example, when the majority shareholders set their salary and bonus at a rate the minority shareholder thinks is outrageously high (ensuring there is no money to distribute to shareholders at the end of the year), they could do so firmly believing that they are paying themselves a fair salary.  Or, there could be an email between the two majority shareholders explaining that they want to make sure there is “nothing left to distribute” to that pesky minority shareholder.

In either case – with or without the email – the salary of the majority shareholders is the same.  It either is, or is not, above market.  However, where there is “smoking gun” evidence of actual intent to be unfair (oppressive) to the minority shareholders, the court will be significantly more likely to find shareholder oppression and grant a remedy, such as a forced buyout.

Unfortunately, these emails are not always so easy to get.  If the email is on the company server, and a shareholder files an action for a “business divorce,” the emails may be retrieved in discovery.  Of course, the defendants could withhold evidence, but the attorneys usually – but not always – can prevent that from happening.  If an IT person is retrieving the company emails, the attorney should know if a true search is going on, or if the majority shareholder defendants are interfering in the production.  But what if the majority shareholders were smart enough to use a personal email account, which will be much easier for them to control?

Many people are not aware of the fact that you cannot simply subpoena Google and retrieve a person’s personal emails.  There is actually a federal statute protecting internet providers from such requests.  (Otherwise, they would be doing nothing but subpoena compliance.)  And courts are often reluctant to order someone to produce his or her personal email account to the other side in a business divorce litigation.  So, are you left with no alternative but to hope that your sworn enemy engages in a good faith search for his personal emails, and produces all that he finds?

There is an alternative.  A court may order a person to provide her password to a neutral, third party, computer consultant, who can then do an agreed-upon keyword search, downloading the relevant emails only.  Then, the defendant can change her password.  This allows for a minimal amount of intrusion, and maintains the defendant’s privacy interest, but it also allows potentially relevant information to be obtained.  The issue of who will be forced to pay for this will likely depend on the circumstances.  The more it appears that personal emails that do exist have not been produced, the more likely the court will order the defendant to either pay, or at least pay a portion.  If it is something the plaintiff minority shareholder seeks “just to be sure,” he may have to pay for it, with the right to ask that the cost be shifted depending upon what is found.

This approach could, of course, be used in any litigation, but it may be especially useful in a shareholder dispute lawsuit.  Many times majority shareholders realize that their conversations about how to keep money out of the pockets of the minority shareholders are problematic, and should be kept “offline” so that they are not discovered on the company’s email system.  Perhaps this is because the shareholder relationship is seen as more personal than the actual day-to-day business of the operations.  The fact remains, if evidence exists somewhere to support a claim of minority shareholder oppression, an attorney experienced in this field should be able to find it.  And use it.