The End of the Appellate Road for Lund

In Litigation Process, Minnesota Appellate Decisions, Trusts by Joseph PullLeave a Comment

My previous discussion of the Minnesota Court of Appeals’s opinion in the Lund litigation (here, here, and here) noted that on February 12, 2019, the Lund defendants filed a petition asking the Minnesota Supreme Court to review the decision of the Court of Appeals. On March 27, 2019, the Supreme Court declined to do so. Accordingly, the Court of Appeals’s opinion will remain the final word on the issues it addresses, at least as far as Lund goes.  Only time will tell whether, and how, the appellate courts will develop or modify Lund‘s answers concerning the questions Lund addressed about shareholder oppression, the reasonable expectations of shareholders in closely-held businesses, business fair value, and claims against trustees.

Claims Against Trustees: Lund Again

In Litigation Process, Minnesota Appellate Decisions, Trusts by Joseph PullLeave a Comment

In December 2014, Kim Lund, one of four siblings who shared beneficial ownership of Minnesota’s Lund grocery empire, filed a lawsuit against her brother Tres Lund (the CEO of the business entities), the entities themselves, two directors, and a co-trustee of one of Kim’s trusts. In the action Kim sought to divest her Lund business entity interests, and the court decided it would order a buyout. After a trial in February 2017, the district judge entered an order valuing Kim’s business interests and resolving Kim’s request for the removal of certain trustees from her trusts. The district judge’s decision was appealed. On January 14, 2019, the Minnesota Court of Appeals decided the appeal.[1] The Lund appellate opinion touches numerous issues of interest in Minnesota minority shareholder and trust litigation. This post considers the appellate fate of Kim’s claims against the trustees of her trusts. *    *     *     *     * Along with her shareholder oppression claims, Kim also asked the Hennepin County court to grant her relief concerning co-trustees who managed trusts that owned Kim’s beneficial shares of the Lund business entities. Kim alleged two co-trustees, attorney Stanley Rein and her brother Tres Lund, had breached their fiduciary duties, and she wanted the court to remove Tres and Rein as trustees. No harm, no foul. The trial court rejected Kim’s claims against Tres and Rein for breach of fiduciary duty. The Court of Appeals, without even discussing the wrongdoing that Kim alleged, agreed. Kim had failed to challenge the trial court’s determination that she offered no evidence of damages, and damages are an essential element of a breach of fiduciary duty claim.[2] Without showing damages, a plaintiff cannot prevail on a breach of fiduciary duty claim, no matter what bad acts the defendant did or did not …

Determination of Business Fair Value, Modeled by Lund

In Business Valuation, Minnesota Appellate Decisions, Trusts by Joseph Pull1 Comment

In December 2014, Kim Lund, one of four siblings who shared beneficial ownership of Minnesota’s Lund grocery empire, filed a lawsuit against her brother Tres Lund (the CEO of the business entities), the entities themselves, two directors, and a co-trustee of one of Kim’s trusts. In the action Kim sought to divest her Lund business entity interests, and the court decided it would order a buyout. After a trial in February 2017, the district judge entered an order valuing Kim’s business interests and resolving Kim’s request for the removal of certain trustees from her trusts. The district judge’s decision was appealed. On January 14, 2019, the Minnesota Court of Appeals decided the appeal.[1] The Lund appellate opinion touches numerous issues of interest in Minnesota minority shareholder and trust litigation. This post considers the process of assessing the fair value of a business entity, as illustrated by Lund. *     *     *     *     *

Empty Assurances as Shareholder Oppression

In Minnesota Appellate Decisions, Shareholder Agreements, Shareholder disputes, Trusts by Joseph Pull1 Comment

In December 2014, Kim Lund, one of four siblings who shared beneficial ownership of Minnesota’s Lund grocery empire, filed a lawsuit against her brother Tres Lund (the CEO of the business entities), the entities themselves, two directors, and a co-trustee of one of Kim’s trusts. In the action Kim sought to divest her Lund business entity interests, and the court decided it would order a buyout. After a trial in February 2017, the district judge entered an order valuing Kim’s business interests and resolving Kim’s request for the removal of certain trustees from her trusts. The district judge’s decision was appealed. On January 14, 2019, the Minnesota Court of Appeals decided the appeal.[1] The Lund appellate opinion touches numerous issues of interest in Minnesota minority shareholder and trust litigation. This post considers Lund’s contribution to the definition of oppression through denial of a shareholder’s reasonable expectations. *     *     *     *     *

A Little Contract, a Little Latin, a Little Property

In Legal Interpretation, Minnesota Appellate Decisions, Property by Joseph PullLeave a Comment

(Unenforceable Terms, Expressio Unius, and the Right of Redemption) Minnesota courts enforce contracts.  Someone who signs an agreement cannot later escape it by saying he never read it,[1] and or that it is harsh.[2] A little hyperbolically, Minnesota courts occasionally explain that contracts must be enforced or else “chaos would prevail in our business relations.”[3] And yet. In certain circumstances, a Minnesota court will refuse to enforce the plain terms of a contract. One example of particular importance to borrowers and lenders is the statutory right of redemption of foreclosed property. The Minnesota Court of Appeals has decided this right cannot be waived. If the borrower signs an agreement waiving it, the waiver is not enforceable.[4]

Loophole Prevented: Selling a Business During a Divorce

In Marital Dissolution, Minnesota Appellate Decisions, Supreme Court by Joseph PullLeave a Comment

Stacking together two major life events – a divorce and the sale of a multi-million-dollar business – can be a recipe for major headaches and complex interacting consequences.  In the recent Minnesota Gill case, a business sale during a divorce revealed a potential loophole through which an owner-executive tried to avoid sharing assets with a soon-to-be ex-spouse – but the state supreme court blocked the maneuver. On October 24, 2018, the Minnesota Supreme Court issued a decision requiring an ex-husband to split the proceeds of an “earn-out” provision with his ex-wife, notwithstanding that the contract granting the earn-out was signed after the valuation date in the marital dissolution case. The earn-out was part of the purchase agreement for a valuable company. The case presented a question of the boundary between two fundamental principles of Minnesota marital dissolution law: All property acquired during the marriage is subject to division between the ex-spouses.[1] Property acquired by a spouse after the valuation date in the dissolution is not subject to division between the ex-spouses.[2]

One Month of Summer; Two Employment Contracts; Three Levels of Application

In Employment Contracts, Minnesota Appellate Decisions, Supreme Court by Joseph PullLeave a Comment

The Minnesota Supreme Court decided two unrelated disputes about the enforcement of employment contracts within the space of thirty days this summer. Both decisions allowed the employee to elude, at least temporarily, the plain language of a contractual obligation. An employee who failed to timely return his employer’s property after leaving the company was allowed to seek a contractual payment of funds from the company, even though his employment agreement stated that failure to timely return the property allowed the employer to cancel the payment. Capistrant v. Lifetouch Nat. Sch. Studios, Inc., no. A16-1829 (July 25, 2018). An employee who left his employer to work for a competitor avoided an injunction against him continuing to work for the competitor, even though his employment contract stated that the employer was entitled to an injunction if he left the company work for a competitor. St. Jude Med., Inc. v. Carter, no. A16-2015 (June 27, 2018). This pair of decisions is educational on at least three levels. In general terms, the pair highlights the quandary of attempting to apply contractual obligations to the real world. As legal doctrine, the pair expressly resolves some basic questions of Minnesota contract law. Finally, the pair emphasize that an employer must show actual, not speculative, damage caused by the employee if the employer wishes to enforce a harsh term of the agreement against the employee.

Elements of Fraud: The I-Stole-from-Her-But-Lied-to-Him Defense

In Claims, Fraud, Legal Interpretation, Supreme Court by Joseph PullLeave a Comment

An elementary principle of litigation is keeping an eye on the elements. A federal appellate court decided in August that the federal mail and wire fraud statutes allow a defendant to be convicted for engaging in a “scheme to defraud” even if the defendant’s deceptive statements were made to different people than the victims who actually lost their money.[1] The defendant had argued that the conduct he was accused of engaging in – lying to banks and credit card processors about unauthorized credit card charges, and using unauthorized credit card charges to obtain money from customers – was not wire fraud because he lied to different people than he stole from. The court’s decision to reject the I-stole-from-her-but-lied-to-him defense may seem obvious, but it’s a little more complicated than it looks. The reason requires an understanding of the legal principle of “elements.”

Paying for the privilege of suit: When a company can pay the costs of defending claims against a minority shareholder and officer

In Minnesota Appellate Decisions, Shareholder disputes by Briol & BensonLeave a Comment

The Minnesota Court of Appeals, in an unpublished decision, recently confirmed that a corporate officer is entitled to indemnification for her attorneys’ fees in defending allegations of corporate misconduct for her personal benefit. The underlying message: if you sue your business partner for taking money from the company, she may nevertheless get her legal fees paid by the company. The parties in Dodge v. Stack were the two co-owners of a mental health clinic, each of whom received income from the company based in part on their respective provision of clinical services. Ultimately, they had a dispute about how the income should be allocated, and that dispute ended up in court. The details of who was to get paid what in that dispute will have no impact outside the confines of the suit itself. But other potential litigants should pay attention to what the Court of Appeals said about a corporation’s duty to indemnify its officers’ attorneys fees. The lower court in Dodge denied the victorious shareholder’s request for payment of her attorney’s fees. She had requested those fees under Minnesota’s corporate indemnification statute, Minn. Stat. section 302A.521, subd. 2(a), which provides that a corporation must indemnify a corporate officer or director who is made party to a proceeding by reason of her official capacity with the corporation. The lower court held that the victorious shareholder had incurred fees “on behalf of her as [an] individual and not in her capacity as an officer or shareholder of [the company].” This ruling appears reasonable, since the dispute was about the amount of personal benefits she took from the company. But not so fast, said the Court of Appeals. The higher court noted that everything she allegedly did wrong — from paying herself excessive funds, to failing to properly document expenditures, to managing the …

Mining “or” for Grammatical Immunity

In Legal Interpretation, Minnesota Appellate Decisions, Supreme Court by Joseph PullLeave a Comment

In a dispute over whether a defendant could claim immunity from being sued, the Minnesota Supreme Court recently relied upon a principle of grammar to determine the meaning of the word “or” in the applicable statute.[1]  The Court deployed the terms “conjunctively” and “disjunctively” to explain its decision, and the cases cited in the Court’s opinion show that legal disputes concerning the meaning of “or” arise with some frequency — which means “conjunctively” and “disjunctively” are apt to recur as well.[2] What, exactly, do these grammar terms mean?