The Supreme Court Stops Corporate Bullying
A landmark Washington State Supreme Court ruling protects minority shareholders from being forced out by predatory syndicates.
The story, cleaned up
A cleaned-up reading of the newspaper page: spelling and layout repaired, one story lifted off a crowded page. It follows the original closely but it is not a transcription. The original page is below; read it if a detail matters.
The supreme court has ordered an injunction against the sale of stock of the Spokane Falls Gaslight company to an eastern syndicate that sought to purchase and control the corporation. In an opinion filed, the court condemns the transaction, referring to it as a 'practice which is frequently indulged in for the purpose of what is described in a vulgar phrase as freezing out small stockholders in compliance with the letter instead of the spirit of the statute—a pernicious practice which courts of equity cannot too promptly condemn.' The injunction was sought by Charles Theis, who owned eight shares of stock. After the syndicate acquired two-thirds of the stock, they attempted to force a dissolution of the company to buy out the remaining minority shares at market value. The Supreme Court held that if a corporation was doing a successful business, minority stockholders should not be ejected simply because the majority wants to reap all the profits. The court declared that equity will not aid in fraud even when presented in the form of law.
“They might be termed experimental dupes, who are subject to the necessity of contributing to the losses but denied the privilege of sharing the profits.”
This 1904 ruling against the 'freezing out' of minority shareholders echoes modern corporate governance debates and the power imbalances between individual investors and institutional syndicates. It highlights a perennial civic tension in Washington: the protection of the small stakeholder against the efficiency-driven appetites of large, often distant, financial interests.
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