Sunday, February 24, 2013

McCallum v. Rosen's Diversified case brief

McCallum v. Rosen's Diversified case brief summary
153 F.3d 701

SYNOPSIS: Plaintiff minority shareholder appealed from the judgment of the United States District Court for the District of Minnesota, which held that the minority shareholder failed to present evidence showing that defendant closely held corporation acted unfairly prejudicial toward him. The district court dismissed the minority shareholder's request for a buy-out of his stock on a motion for summary judgment.

The minority shareholder alleged that the closely held corporation's controlling shareholders had acted unfairly prejudicial toward him because they:
(1) undermined his authority as CEO;
(2) excluded him from important company decisions;
(3) engaged in conduct directed at minimizing the value of the company;
(4) terminated his employment;
(5) offered to redeem his shares at an artificially low price;
(6) denied him access to company books, records, and financial information;
(7) engaged in self-dealing, usurped company opportunities, and commingled personal ventures with the affairs of the company.

-The court found that the district court erred in dismissing certain of the minority shareholder's allegations as failing to observe the derivative pleading requirements for shareholder proceedings. -The court determined that the minority shareholder was entitled to equitable relief based on the uncontroverted assertions that were not dismissed as derivative claims. The court found that the uncontested facts demonstrated that the minority shareholder's reasonable expectations were defeated.

Minn. Stat. § 302A.751 (amended 1994) provides for the buy-out of a minority shareholder's interest when the directors or those in control of the corporation have acted in a manner unfairly prejudicial toward one or more shareholders in their capacities as shareholders or directors or as officers or employees of a closely held corporation

OUTCOME: The court reversed the summary judgment, which held that the minority shareholder was not entitled to a buy-out of his stock. The court remanded with directions that the district court should determine the fair value of the minority shareholder's shares in accordance with the state statutes.

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