Maryland: Oppression of Minority Stockholder and Director Duties
August 30, 2026
Disputes between stockholders of a privately held, family-owned corporation can result in oppression of the minority stockholder who is a family member and can test the duties of the directors of the corporation who are family members. In one of the most consequential Maryland corporate law cases in several years, the Supreme Court of Maryland addressed these issues in Eastland Food Corp. v. Mekhaya, 486 Md. 1, 301 A.3d 308 (2023) (opinion by Justice Gould and Chief Justice Fader). The case had initially been dismissed at the Circuit Court level and made its way on appeal to the Supreme Court of Maryland. The case was returned to the Circuit Court for continuation of litigation, and in early 2026, after a four day bench trial, the Circuit Court decided that Plaintiff Edward Mekhaya (“Edward”) had been oppressed as a minority stockholder and that the director’s statutory standard of conduct (or business judgement rule) had been violated by the family directors.
Law Office of Vasilios Peros, PC teamed up with other Maryland law firms to represent Edward in this matter at the trial level and on appeal.
This case involves (i) Edward, a 28% stockholder and former director and employee (“Edward”), (ii) Edward’s mother and brother, both directors and employees of the corporation, along with one other director, and (iii) the corporation. After about fifteen years with the corporation, Edward was given less and less duties with the corporation. In 2018, Edward was terminated from his employment, and as an officer and from his management role with the corporation. The corporation ceased paying bonuses to Edward that had been paid to all stockholder-employees in lieu of dividends. Edward brought claims of oppression of the minority stockholder, among other claims.
As to the minority stockholder oppression, the Court credited Edward’s allegation and the reasonable references drawn therefrom, and concluded that Edward stated a cause of action for minority oppression. Edward claimed that, years ago, at the request of his father, who was then President of the corporation, Edward left his prior employment in his engineering career to join the corporation. The corporation’s practice was to pay out the corporation’s profits in the form of bonuses rather than dividends. The Court found that Edward pled sufficient facts to support a reasonable expectation of continued employment, managerial involvement, managerial input as a director, and his share of the distributable profits in accordance with his ownership percentage. The Court held that the acts of the directors in terminating Edward while the corporation was alleged to be paying excessive compensation to other family member director/employees and withholding dividends and bonuses from Edward, if proven, were oppressive under Section 3-413(b)(2) of the Maryland Code Corporations & Associations Article. That statute provides a basis for a stockholder to petition for dissolution, and a court may impose appropriate equitable relief short of dissolution.
As to the duties of directors, the Court recognized Section 2-405.1 of the Maryland Code Corporations & Associations Article (the director’s statutory standard of conduct and also generally known as the business judgement rule) as the “sole source” of the duties of a director of a Maryland corporation to both the corporation and its stockholders. Section 2-405.1(c) of the Maryland Code Corporations & Associations Article states that: “a director of a corporation shall act: (1) in good faith; (2) in a manner the director reasonably believes to be in the best interests of the corporation; and (3) with the care that an ordinarily prudent person in a like position would use under similar circumstances. The Court explained that the 2016 amendments provided stockholders with a right to file a direct claim against directors for a failure to comply with the statutory standard of conduct where the stockholder can establish an injury that is personal to the stockholder.
The case returned to the Circuit Court for continuation of litigation. In early 2026, the Circuit Court decided that Edward had been oppressed as a minority stockholder and that the director’s statutory standard of conduct had been violated by the family directors.
1 Vasilios Peros is founder and principal of Law Office of Vasilios Peros, P.C. His practice is focused primarily on business, technology and intellectual property law. He has been recognized as one of Greater Baltimore’s top attorneys, including SmartCEO’s 2016 Centers of Influence, 2015 CPA + ESQs, 2014 Power Players, and Legal Elite in 2011, 2010 and 2009. He can be reached at (410) 274-2053 and VPeros@PerosLaw.com.
2 This article is provided for informational purposes only and should not be construed as a legal opinion or legal advice. The reader should not rely on this article in making business, legal or other decisions on any matter without first consulting an attorney regarding any such decision or undertaking.