Although, there are two lines of Pennsylvania cases which define shareholder oppression differently, it appears that the majority view is that Pennsylvania, like New Jersey and New York applies the “reasonable expectations” of the shareholder test. Del Borrello v. Del Borrello, 62 Pa. D. & C 417, 424-426 (2001). Nevertheless, at least one court has looked outside the case law on shareholder oppression and relied on a non-legal definition to define “oppression” as “unjust or cruel exercise of authority or power.” See, Leech v. Leech, 762 A.2d 718 (2000) (quoting, Meriam Webster’s Collegiate Dictionary (10th ed. 1996)).
The majority view or “reasonable expectations of the shareholder” test was first articulated in Gee v. Blue Stone Heights Hunting Club Inc., 604 A.2d 1141 (1992). The Blue Stone Heights Hunting Club (hereinafter the “Club”) was a non-profit corporation that consisted of cabin and adjoining 150 acre property in Lycoming County, Pennsylvania. The Club’s Articles of Incorporation provided that the purposes and objectives of the corporation include: hunting, fishing, spreading the ideals of sportsmanship among members, social enjoyment, outdoor activities, and the holding of the clubhouse for the members. The Articles of Incorporation prohibited members from reaping financial gain from club membership
The Plaintiffs were members of the club. Members of the club were shareholders. They decided to move out of Pennsylvania. Despite the stated purpose to “spread the ideals of sportsmanship amongst the members,” this litigation arose as a result of the club raising its monthly dues, charging late fees, and charging members $20.00, who were unable to host at least one meeting each year . Mr. Gee asserted that the club could not raise his dues $5.50 per month and apparently, failed to pay the higher amount. As a result of the same, his account was deficient and his membership was cancelled. Gee and his family members commenced litigation in Lycoming County, Pennsylvania Court of Common Pleas seeking the dissolution of the club on the grounds that the corporation failed to achieve its articulated objectives and that the members of the corporation engaged in illegal, fraudulent, and oppressive conduct. In that litigation, the Plaintiffs asserted that their investment in the club would be affected by the higher monthly dues.
At that time the Pennsylvania Court was asked to decide the case, there was little case law in the Commonwealth that defined “oppression.” The Gee Court adopted, New York’s “reasonable expectation of the shareholder” test. Nevertheless, when applying that test, the Gee Court reasoned that the additional charges and expulsion of Plaintiffs for not paying their account were not oppressive because: (1) there was no evidence of mismanagement, waste, or corporate deadlock; (2) the changes in the charges were applied to all shareholders and were not unreasonable; and (3) the Plaintiffs did not have a reasonable expectation of making money on their ownership interest because membership was limited and the Articles of Incorporation prohibited the shareholders from reaping financial gain from club membership.
Although, the Gee Court applied the more favorable to the Plaintiff test – reasonable expectations of the shareholder – the Court found that the Plaintiffs’ expectations were not reasonable and decided against them.