The Eighth District Does Not Expand the Ohio Supreme Court’s Seminal Holding for Minority-Shareholder Lawsuits

Just two months ago, Ohio’s Eighth District re-affirmed the Ohio Supreme Court’s “narrow” holding in Crosby v. Beam related to direct actions by minority shareholders of a close corporation against majority shareholders. That decision, Reld v. Eldanaf, 2025–Ohio–276 (8th), also acknowledges that a minority shareholder suit cannot exist:

• when the close corporation is owned by two equal shareholders;
• the defendants are not the majority shareholders; or
• the entity involved is not a close corporation.

The Eighth District finds the Supreme Court’s “narrow” holding in “Crosby has consistently been applied to its specific holding that ‘claims of a breach of fiduciary duty alleged by minority shareholders against shareholders who control a majority of shares in a close corporation,’ who ‘use their control to deprive minority shareholders of the benefits of their investment, may be brought as individual or direct actions and are not subject to the provisions of Civil Rule 23.1.’” (emphasis in original)

In Reld, a minority shareholder alleged claims of self-dealing against the corporation and another shareholder. The appellate court affirmed the trial court’s summary-judgment decision. After discussing the rationale of Crosby that found that any derivative remedy that returns the recovery to the wrongdoers who are running the company “is not an effective remedy,” it found that claims advanced by a minority shareholder against another minority shareholder do not meet the Crosby exceptions. The court also refused to “extend Crosby to include claims of a minority shareholder against another minority shareholder, especially one who lacks control of the corporate operations.”

Thus, the only avenue for the minority shareholder in this case is Civil Rule 23.1’s requirement of a verified complaint alleging particular efforts to obtain the desired relief stymied by the controlling shareholders.

If you have any questions about this ruling, please contact Beau D. Hollowell or any member of the Frantz Ward Litigation practice group.