Title: Edward U. Notz v. Everett Smith Group, Ltd.
Citation: 2009 WI 30
Docket Number: 2006AP003156
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: April 29, 2009

2009 WI 30 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2006AP3156 
COMPLETE TITLE: 
 
 
Edward U. Notz, 
          Plaintiff-Appellant-Cross-Respondent-
Petitioner, 
     v. 
Everett Smith Group, Ltd., Thomas J. Hauske, 
Jr., Randall M. Perry, Anders Segerdahl, Steven 
J. Hartung and Albert Trostel & Sons Company, 
          Defendants-Respondents-Cross-
Appellants-Cross Petitioners. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2008 WI App 84 
Reported at:  312 Wis. 2d 636, 754 N.W.2d 235 
(Ct. App. 2008-published) 
 
 
OPINION FILED: 
April 29, 2009   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
January 6, 2009   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
John Franke   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
ROGGENSACK, J., concurs (opinion filed). 
GABLEMAN, J., joins concurrence.   
 
CONCUR & DISSENT: 
BRADLEY, J., concurs in part/dissents in part 
(opinion filed). 
ABRAHAMSON, C.J., joins concurrence/dissent. 
 
DISSENTED: 
        
 
NOT PARTICIPATING: ZIEGLER, J., did not participate.   
 
 
 
ATTORNEYS: 
 
For 
the 
plaintiff-appellant-cross-respondent-petitioner 
there were briefs by Robert H. Friebert, Matthew W. O’Neill, and 
Friebert, Finerty & St. John, S.C., Milwaukee, and oral argument 
by Matthew W. O’Neill. 
 
For 
the 
defendants-respondents-cross-appellants-cross 
petitioners there were briefs by Thomas L. Shriner, Jr., G. 
Michael Halfenger, and Rebecca Wickhem House, and Foley & 
Lardner LLP, Milwaukee, and oral argument by Thomas L. Shriner, 
Jr. 
 
 
 
2009 WI 30
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2006AP3156  
(L.C. No. 
2006CV3068) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Edward U. Notz, 
 
 
Plaintiff-Appellant-Cross-Respondent- 
 
Petitioner, 
 
     v. 
 
Everett Smith Group, Ltd., Thomas J. Hauske, 
Jr., Randall M. Perry, Anders Segerdahl, Steven 
J. Hartung and Albert Trostel & Sons Company, 
 
 
Defendants-Respondents-Cross- 
 
Appellants-Cross-Petitioners. 
 
FILED 
 
APR 29, 2009 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed in 
part, reversed in part, and remanded. 
 
¶1 
N. PATRICK CROOKS, J.   This review of a published 
court of appeals decision1 involves three questions that arise in 
the context of a minority shareholder's lawsuit against the 
majority shareholder:  (1) whether the allegations in the 
complaint state a direct claim by the minority shareholder for 
breach of fiduciary duty; (2) whether an allegation that the 
                                                 
1 Notz v. Everett Smith Group, Ltd., 2008 WI App 84, 312 
Wis. 2d 636, 754 N.W.2d 235. 
No. 
2006AP3156   
 
2 
 
majority shareholder benefited from due diligence——paid for by 
the corporation for the shareholder's own purposes without 
reimbursement to the corporation——supports a direct claim by the 
minority shareholder for breach of fiduciary duty; and (3) 
whether a pending direct claim by the minority shareholder for 
judicial dissolution (based on oppressive conduct) survives a 
cash-out merger that eliminates the petitioner's status as a 
shareholder. 
¶2 
The 
court 
of 
appeals 
held 
that 
the 
minority 
shareholder's complaint failed to state a direct claim for 
breach of fiduciary duty because the primary harm alleged was to 
the corporation, not to the shareholder.  However, the court of 
appeals held that one allegation——that expenditures for due 
diligence for a potential acquisition of another company 
ultimately benefited only the majority shareholder2——would, if 
true, constitute a "dividend-like" payment to the majority 
shareholder and thus support a direct claim.  The judicial 
dissolution claim3 the circuit court had allowed to go forward 
                                                 
2 The majority shareholder ultimately acquired the company 
for itself. 
3 Wisconsin Stat. § 180.1430(2)(b)(2005-06): 
The circuit court . . . may dissolve a corporation in 
a proceeding: 
 
 . . . . 
(2) By a shareholder, if any of the following is 
established: 
 
 . . . . 
No. 
2006AP3156   
 
3 
 
encountered an unforeseen barrier at the court of appeals:  
while the appeal was pending, a forced merger eliminated the 
petitioner's status as a shareholder.  A motion filed by the 
majority shareholder brought this to the court of appeals' 
attention.  Ultimately, the court of appeals remanded with 
directions to enter an order to dismiss that claim on the 
grounds that the post-claim merger had stripped the petitioner 
of standing to pursue that claim. 
¶3 
Both the minority and majority shareholders involved 
sought review by this court of the rulings adverse to them.  The 
minority shareholder, Edward Notz (Notz), appealed the court of 
appeals' decisions that first, he failed to state a direct claim 
for breach of fiduciary duty, and second, he had lost standing 
on the judicial dissolution claim due to the merger.  The 
majority shareholder, Everett Smith Group, Ltd. (the Smith 
Group), cross-appealed the court of appeals' decision that the 
direct claim based on the allegations about due diligence costs 
could proceed. 
¶4 
For the reasons set forth herein, we affirm in part, 
reverse in part, and remand for further proceedings.  We agree 
with the court of appeals that the claims of harm alleged——the 
loss of a corporate opportunity and the sale of a subsidiary 
                                                                                                                                                             
(b) That the directors or those in control of the 
corporation have acted, are acting or will act in a 
manner that is illegal, oppressive or fraudulent. 
All subsequent references to the Wisconsin Statutes are to 
the 2005-06 version unless otherwise indicated. 
No. 
2006AP3156   
 
4 
 
with high growth potential——caused harm primarily to the 
corporation, and thus we affirm the dismissal of Notz's direct 
claim of breach of fiduciary duty as to those allegations.  On 
the cross-appealed issue, we also agree with the court of 
appeals that the majority shareholder's appropriation of the due 
diligence paid for by the corporation resulted in a constructive 
dividend to the majority shareholder because it received a 
benefit at the expense of the minority shareholders.  Thus we 
affirm the court of appeals' decision permitting that claim to 
proceed and remand to the circuit court for further proceedings. 
¶5 
Where we disagree with the court of appeals is on the 
question of Notz's standing to pursue his judicial dissolution 
claim.  Wisconsin Stat. § 180.1106(1)(d) is straightforward in 
its requirement that a pending claim "may be continued as if the 
merger did not occur."  Notz's judicial dissolution claim, 
initiated prior to the merger, alleged harm to that shareholder, 
not to the corporation.  Because the statute precludes a merger 
from operating to strip such a claimant of the right to pursue a 
pending action, such as his direct action here, and because we 
find persuasive support for that position, we reverse the court 
of appeals' decision on that issue.  We therefore remand that 
claim to the circuit court for further proceedings consistent 
with this opinion. 
I. BACKGROUND 
¶6 
The company at the center of this dispute, Albert 
Trostel & Sons (ATS), evolved and grew from its beginning as one 
of the tanneries that made Milwaukee a powerhouse in the leather 
No. 
2006AP3156   
 
5 
 
industry in the late 1800s.  The story of the company's growth 
includes names familiar to anyone with a passing knowledge of 
Wisconsin history:  one of Albert Trostel's sons married into 
the Uihlein family, a major player in another of Milwaukee's 
then-thriving industries——the brewing of beer.  Over the years, 
ATS acquired subsidiaries and branched out into production of 
rubber and plastics.  Through a series of transactions, control 
of the company shifted from Trostel's descendants to Everett 
Smith, who was hired by ATS in 1938 and later became president 
of the company.  Smith formed what would eventually become the 
Smith Group.  At the time this action was commenced, ATS was 
owned 88.9 percent by the Smith Group, 5.5 percent by Notz, and 
5.6 percent by other Trostel descendants who are not parties to 
this proceeding.4  
¶7 
By 2003, ATS's board of directors was comprised 
entirely of members who were also officers and/or directors of 
the Smith Group.  The Smith Group began making offers to 
purchase the shares of ATS's minority shareholders.  Notz 
rejected the offers.  
¶8 
At the same time, ATS turned its attention to the 
potential for growth in plastics.  As part of this new strategy, 
its 
subsidiary, 
Trostel 
Specialty 
Elastomers 
Group, 
Inc. 
(Trostel SEG), in June 2003 acquired an Iowa custom injection 
                                                 
4 Notz, the plaintiff-petitioner, is a descendant of Albert 
Trostel; the defendants-cross-petitioners are three directors of 
ATS who were affiliated with the Smith Group, and the Smith 
Group itself, now controlled in part by descendants of Everett 
Smith. 
No. 
2006AP3156   
 
6 
 
molding company, and ATS contemplated other acquisitions as 
well.  
¶9 
What happened next is the basis of Notz's claims.  In 
June 2004 an opportunity presented itself for ATS to acquire the 
assets of Dickten & Masch, a competing plastics manufacturing 
business.  ATS conducted due diligence.  But in August 2004, the 
ATS board decided to pass on acquiring Dickten & Masch.  Shortly 
thereafter, the Smith Group, which had no other direct holdings 
in the plastics field, acquired Dickten & Masch.  Within months, 
the Smith Group's new Dickten & Masch affiliate purchased the 
assets of ATS's plastics subsidiary, Trostel SEG, from ATS.   
¶10 In response to the Smith Group's acquisition of both 
plastics companies, Notz commenced an action5 against the Smith 
Group and four of its directors on April 6, 2006.  The initial 
complaint was dismissed, and an amended complaint was filed 
                                                 
5 Notz had also sent a demand letter to ATS, pursuant to 
Wis. Stat. § 180.0742, stating, "the minority shareholders are 
required to make a written demand for ATS to take action with 
regard to these derivative claims.  This letter shall serve that 
purpose."  The letter demanded, among other things, that the 
purchase of Trostel SEG by Dickten & Masch be rescinded and 
independent directors be elected to ATS's board.  In response to 
Notz's letter and a similar letter from the other minority 
shareholders, on October 4, 2005, ATS elected three independent 
directors to ATS's board and created a special litigation 
committee to investigate the allegations in the demand letters.  
The 
special 
litigation 
committee 
consisted 
of 
the 
three 
independent directors.  The committee subsequently issued a 
report 
concluding 
there 
was 
"no 
intentional 
behavior 
or 
maliciousness on the part of [ATS] fiduciaries to disadvantage 
the minority shareholders" and making certain recommendations 
that are not relevant to the questions we are concerned with 
here.  No derivative claim was ever pursued by Notz; the dispute 
presented here centers on his direct claims. 
No. 
2006AP3156   
 
7 
 
September 29, 2006, alleging breach of fiduciary duty by the 
Smith Group and breach of fiduciary duty by the individual 
directors, and requesting judicial dissolution pursuant to Wis. 
Stat. § 180.1430(2)(b) on the grounds that the defendants had 
acted in a manner that was oppressive to Notz.6   
¶11 At a hearing held on November 22, 2006, the Milwaukee 
County Circuit Court, the Honorable John A. Franke presiding, 
found that the injuries alleged in the complaint were common to 
all shareholders, reasoning that any ancillary benefit the Smith 
Group received from the transaction did not create a direct 
injury.  The circuit court dismissed Notz's claims of breach of 
fiduciary duty.  However, it declined to dismiss the judicial 
dissolution claim based on allegedly oppressive conduct.  
¶12 The court of appeals granted the parties' petitions to 
appeal the circuit court's order.  While the appeal was pending, 
ATS 
initiated 
a 
cash-out 
merger 
under 
Wis. 
Stat. 
§§ 180.1101(2)(c) and 180.1103(3).  Despite Notz's opposition,7 
                                                 
6 The amended complaint describes the oppressive conduct as 
"includ[ing], among other things, a concerted effort by the 
Smith Group and the Individual Defendants to oppress the 
Plaintiff and force him to sell his shares in ATS to the Smith 
Group for less than a fair value and to freeze Plaintiff out of 
the plastics business in retaliation for refusing to sell his 
shares at less than fair value."  
7 The other minority shareholders received cash for their 
shares.  Notz perfected his dissenter's rights to have a court 
determine the fair value of his shares.  That case is currently 
pending as a separate proceeding in the United States District 
Court for the Eastern District of Wisconsin.  See, infra, ¶37 
n.26. 
No. 
2006AP3156   
 
8 
 
the merger was approved and became effective May 17, 2007.8  As 
noted above, the court of appeals affirmed the circuit court's 
holding 
that 
the 
breach 
of 
fiduciary 
duty 
claim 
was 
appropriately a derivative, rather than direct, claim on the 
grounds that "stripp[ing] Albert Trostel & Sons of its most 
important assets and divert[ing] to the Smith Group Trostel's 
corporate opportunity to buy Dickten and Masch . . . [was] an 
injury to Trostel" because "all of the shareholders were 
affected equally[.]"  Notz v. Everett Smith Group, Ltd., 2008 WI 
App 84, ¶17, 312 Wis. 2d 636, 754 N.W.2d 235.  It carved out a 
portion of the claim, however, having to do with money spent for 
due diligence.  Given the Smith Group's ultimate acquisition of 
Dickten & Masch, ATS's expenditures for due diligence ultimately 
benefited only that majority shareholder, the court of appeals 
reasoned, and thus constituted a constructive dividend.  Id., 
¶18.  As to the judicial dissolution claim, which had survived 
in the circuit court, the court of appeals found that an 
intervening event, the cash-out merger, had stripped the 
petitioner of standing to pursue the judicial dissolution claim 
                                                 
8 There are some procedural peculiarities in this case in 
that the record contains no documentation related to the merger 
because the record was already complete before it happened.  The 
court of appeals accepted briefing on the merger's effect on 
Notz's judicial dissolution claim and clearly based its ruling 
on standing on the materials presented in those briefs; it did 
not permit the parties to supplement the record.  The result was 
that the parties cited in their briefs here materials considered 
by the court of appeals that were never made part of the record.  
We therefore rely as well on the materials submitted to the 
court of appeals. 
No. 
2006AP3156   
 
9 
 
because he was no longer a shareholder.  Id., ¶26.  Therefore, 
the court of appeals remanded with an order to dismiss that 
claim for lack of standing.  Id. 
¶13 A petition and a cross-petition for review followed, 
and this court granted review. 
II. STANDARD OF REVIEW 
¶14 Whether a complaint by a minority shareholder has 
alleged facts that will support direct claims for breach of 
fiduciary duty presents questions of law reviewed de novo.  See 
Borne v. Gonstead Advanced Techniques, Inc., 2003 WI App 135, 
¶10, 266 Wis. 2d 253, 667 N.W.2d 709. 
No. 
2006AP3156   
 
10 
 
¶15 At the motion to dismiss stage,9 the court must accept 
all 
facts 
alleged 
as 
true 
and 
construe 
"all 
reasonable 
inferences that may be drawn from those facts in favor of 
stating a claim."  Peterson v. Volkswagen of Am., Inc., 2004 WI 
App 76, ¶2, 272 Wis. 2d 676, 679 N.W.2d 840.  A claim will be 
dismissed only if "it appears quite certain that no relief can 
be granted under any set of facts the plaintiffs might prove in 
support of their allegations."  Id.   
¶16 The application of a statute to undisputed facts is 
reviewed de novo.  DOR v. Menasha, 2008 WI 88, ¶44, 311 Wis. 2d 
579, 754 N.W.2d 95. 
                                                 
9 We recognize that material related to the merger was 
presented to the court of appeals in connection with motions 
made to that court and pursuant to an October 4, 2007, order, 
which stated,  
Although the court will not permit supplementation of 
the 
appellate 
record, the court recognizes that 
addressing 
the 
mootness 
issue 
may 
require 
consideration 
of materials not in the appellate 
record, since the materials were likely produced after 
the appeal was filed.  Consequently, the court will 
allow the parties to refer in their briefs and 
appendices 
to 
materials submitted in the motion 
practice before this court that relate to the mootness 
issue.   
We note that under the unusual circumstances presented here 
this material does not constitute "matters outside of the 
pleadings" under Wis. Stat. § 802.06(2)(b) (stating that where 
such matters are presented to the court, the motion is treated 
as one for summary judgment).  The court of appeals appeared to 
treat this material as part of the pleadings.  Under these 
circumstances, we see no reason to treat this as an action for 
summary judgment.  
No. 
2006AP3156   
 
11 
 
 
III. THE BREACH OF FIDUCIARY DUTY CLAIMS 
A. 
Acquisitions of the plastics companies 
¶17 Notz's 
claims 
of 
breach 
of 
fiduciary 
duty 
are 
primarily based on the series of transactions in which the Smith 
Group acquired two plastics companies.10  The allegations are 
that the Smith Group, as ATS's majority shareholder, rejected 
the opportunity ATS had to buy Dickten & Masch; the Smith Group 
subsequently bought Dickten & Masch itself; and the Smith Group, 
in its capacity as majority shareholder, orchestrated the sale 
of ATS's valuable plastics group, Trostel SEG, to its own new 
acquisition.  
¶18 The question is whether those allegations support 
direct claims for breach of fiduciary duty to a minority 
shareholder.  The parties suggest different cases as guides for 
our analysis.  The Smith Group argues that Rose v. Schantz, 56 
Wis. 2d 222, 201 N.W.2d 593 (1972), requires a finding that 
these are derivative claims; Notz argues that the principles 
articulated in Jorgensen v. Water Works, Inc. (Jorgensen II), 
                                                 
10 The amended complaint states,  
Defendant Smith Group breached its fiduciary duty to 
the Plaintiff by engaging in two related self-dealing 
transactions that were intended to harm the Plaintiff, 
by failing to provide Plaintiff with prior notice of 
the proposed transactions at a time when Plaintiff 
could 
have 
objected 
and 
sought 
to 
stop 
the 
transactions, by orchestrating constructive dividends 
from ATS to the Smith Group, and by acting with the 
intent to harm the Plaintiff. 
No. 
2006AP3156   
 
12 
 
2001 WI App 135, 246 Wis. 2d 614, 630 N.W.2d 230, and Luther v. 
C.J. Luther Co., 118 Wis. 112, 94 N.W. 69 (1903), compel a 
finding that these are direct claims. 
¶19 In Rose, minority stockholders sued for an injunction 
for breach of the fiduciary duties owed to them by the 
directors.  Rose, 56 Wis. 2d at 223-24.  The circuit court 
denied defendants' motion for summary judgment but was reversed 
by this court.  Id. at 224, 230.  We held that though each 
shareholder has an individual right to be treated fairly by the 
board of directors, when the injury from such actions is 
primarily to the corporation, there can be no direct claim by 
minority shareholders.  Id. at 228-29. 
¶20 In that case, we acknowledged the duty to individual 
shareholders but set important parameters.   
It is true the fiduciary duty of a director is owed to 
the 
individual 
stockholders 
as 
well 
as 
to 
the 
corporation.  Directors in this state may not use 
their position of trust to further their private 
interests.  Thus, where some individual right of a 
stockholder is being impaired by the improper acts of 
a director, the stockholder can bring a direct suit on 
his own behalf because it is his individual right that 
is being violated.   
Id. (citations omitted).  However, a right of action that 
belongs to the corporation cannot be pursued as a direct claim 
by an individual stockholder.  Id. at 229.  As we noted, even 
where the injury to the corporation results in harm to a 
No. 
2006AP3156   
 
13 
 
shareholder,11 it won't transform an action from a derivative to 
a direct one: 
That such primary and direct injury to a corporation 
may have a subsequent impact on the value of the 
stockholders' shares is clear, but that is not enough 
to create a right to bring a direct, rather than 
derivative, 
action. 
 
Where 
the 
injury 
to 
the 
corporation is the primary injury, and any injury to 
stockholders secondary, it is the derivative action 
alone that can be brought and maintained.  That is the 
general rule, and, if it were to be abandoned, there 
would be no reason left for the concept of derivative 
actions for the redress of wrongs to a corporation. 
Id. at 229-30 (citations omitted). 
¶21 Notz asserts that the principles of Jorgensen II and 
Luther apply here.  In Jorgensen II the court of appeals found 
that where shareholder-directors stopped making distributions to 
some minority shareholders while continuing to pay themselves 
distributions, such shareholder-directors had breached their 
fiduciary duty, and the injury caused was primarily personal to 
the minority shareholders.  Jorgensen II, 246 Wis. 2d 614, ¶¶18-
19.  In Luther, this court found that two shareholder-directors 
had breached their fiduciary duty when they orchestrated the 
sale of new shares to an ally in order to gain control of the 
company.  Luther, 118 Wis. at 123.  As for Rose, Notz would have 
us read it more narrowly, as holding that where the only harm 
alleged by a minority shareholder is the diminution of the value 
of the shares, and thus, harm to the corporation, there can be 
no direct claim. 
                                                 
11 We 
use 
the 
terms 
"shareholder" 
and 
"stockholder" 
interchangeably. 
No. 
2006AP3156   
 
14 
 
¶22 Notz alleges self-dealing on the part of the majority 
shareholder, but the cases on which he relies do not stand for 
the 
proposition 
that 
a 
shareholder-director's 
self-dealing 
transforms an action that primarily injures the corporation into 
one that primarily injures a shareholder.  It is clear from Read 
v. Read, 205 Wis. 2d 558, 556 N.W.2d 768 (Ct. App. 1996), that a 
majority shareholder's self-dealing may result in injury that is 
primarily to the corporation.  In that case, Read, a minority 
shareholder, had alleged that the controlling stockholders had 
misappropriated corporate assets and engaged in self-dealing 
"through their transactions with other corporations in which 
they were stockholders but he was not."  Id. at 562.  The court 
of appeals disagreed that any injury was directly to him as the 
minority shareholder:  "Here, as in the Rose case, Read's 
complaint alleges conduct that, if true, means that resulting 
primary injury is to the corporation, not the individual 
stockholder bringing the suit."  Id. at 570. 
¶23 We agree with the Smith Group that breach of fiduciary 
duty claims, based on the lost opportunity to purchase one 
company and the sale of a subsidiary with great growth 
potential, are governed by Rose.  Our analysis under Rose 
centers on a determination of whether the primary injury is to 
the corporation or to the shareholder.  Rose does not precisely 
define when an injury is "primar[ily] . . . to the corporation."  
Rose, 56 Wis. 2d at 229.  Jorgensen II does, however, define the 
opposite, 
an 
injury 
"primarily . . . to 
an 
individual 
shareholder," as one which "affects a shareholder's rights in a 
No. 
2006AP3156   
 
15 
 
manner distinct from the effect upon other shareholders."  
Jorgensen II, 246 Wis. 2d 614, ¶16.  We agree with the court of 
appeals that the allegations here are essentially that the Smith 
Group "stripped [ATS] of its most important assets" and engaged 
in various acts of self-dealing, and that those are allegations 
of injury primarily to ATS.  Notz, 312 Wis. 2d 636, ¶17.  As the 
court of appeals noted, "[A]ll of the shareholders [of ATS] were 
affected equally" by the loss of the opportunity to acquire 
Dickten & Masch and by the sale of Trostel SEG, the plastics 
division.  Id.  To hold otherwise would mean, as we said in 
Rose, that "there would be no reason left for the concept of 
derivative actions for the redress of wrongs to a corporation."  
Rose, 56 Wis. 2d at 230.  The situation here involves, as the 
circuit court noted, "the majority's power to sell a part of a 
company to an entity that it has a hundred percent interest 
in . . . [a]t a fair price."12  Such a transaction may give rise 
to a derivative claim for injury that is primarily to the 
corporation; under Rose, that is the only claim available.   
                                                 
12 It is clear from the case law applicable here that a 
derivative action is appropriate on the claim to the extent that 
it is based on the allegations concerning the Smith Group's 
purchase of Trostel SEG and Dickten & Masch.  The approach 
advocated 
by 
the 
concurrence/dissent 
would 
create 
the 
possibility of direct actions wherever there are shareholders in 
common between a parent corporation selling a subsidiary and the 
purchasing corporation.  See concurrence/dissent, ¶76.  Such an 
unworkable 
approach 
would 
impose 
unnecessary 
costs 
and 
uncertainty on routine corporate transactions. 
No. 
2006AP3156   
 
16 
 
 
B. 
The due diligence expenses 
¶24 As noted above, however, the court of appeals did not 
fully close the door on Notz's direct claim of breach of 
fiduciary duty.  Notz's amended complaint alleged that the Smith 
Group benefited from ATS's payment of due diligence expenses for 
the never-consummated acquisition of Dickten & Masch when it 
subsequently acquired Dickten & Masch for itself.  In other 
words, as ATS majority shareholder, the Smith Group made the 
decision to let ATS pick up the tab for the due diligence, the 
benefits of which expense accrued only to the Smith Group, not 
to ATS's minority shareholders, when the Smith Group made the 
decision to acquire Dickten & Masch on its own.  The court of 
appeals viewed this allegation as supporting a direct claim of 
breach of fiduciary duty because the expense was, in the court's 
words, a "dividend-like payment[]."13  Notz, 312 Wis. 2d 636, 
¶18.  It reasoned that this payment fit the description in 
Jorgensen II, which held that injury due to the act of 
shareholder-directors that affects a shareholder differently 
from others gives rise to a direct claim.  Id. 
                                                 
13 The court of appeals also referred to the payment as a 
constructive dividend.  Notz, 312 Wis. 2d 636, ¶18.  In this 
opinion, 
we 
use 
the 
terms 
"dividend-like 
payment" 
and 
"constructive 
dividend" 
interchangeably. 
 
Examples 
of 
a 
constructive dividend include "excessive compensation, bargain 
purchases 
of 
corporate 
property, 
and 
shareholder 
use 
of 
corporate property."  Black's Law Dictionary 513 (8th ed. 2004). 
No. 
2006AP3156   
 
17 
 
¶25 On this claim at least, the parties have found common 
ground.  Both argue that the court of appeals improperly 
distinguished Notz's constructive dividend from the rest of his 
fiduciary duty claims.  Notz strenuously objects to analysis 
that would treat the due diligence expense claims differently 
than those concerning the majority shareholder's squandering of 
corporate opportunities and the sale of corporate assets to 
itself.14  The Smith Group, for its part, strenuously objects to 
the applicability of Jorgensen II to the facts here and argues 
that the circuit court got it right when it wrote, "[T]he 
complaint alleges injuries that were common to the shareholders 
generally and the fact that some shareholders may have benefited 
in a way that balanced out that injury for them does not create 
a direct injury . . . ."  The Smith Group says Notz has failed 
to articulate an injury that he suffered separate from that 
allegedly suffered by all other ATS shareholders. 
¶26 As just 
noted, an injury "primarily . . . to an 
individual shareholder" is one which "affects a shareholder's 
rights in a manner distinct from the effect upon other 
shareholders."  Jorgensen II, 246 Wis. 2d 614, ¶16. 
¶27 Here, the allegation is that as majority shareholder, 
the Smith Group got the direct and immediate benefit of the due 
                                                 
14 "The 
distinction 
perceived 
by 
the 
Court 
of 
Appeals . . . lacks 
a coherent underpinning.  Candidly, a 
consistent policy should apply in either case."  Pet'r Resp. Br. 
at 5. 
No. 
2006AP3156   
 
18 
 
diligence15 expenditure as shareholders in the corporation that 
acquired Dickten & Masch.  As a minority shareholder, Notz did 
not, as the court of appeals noted, receive an offsetting 
payment.  Notz, 312 Wis. 2d 636, ¶18.  The bottom line, as 
alleged in the complaint,16 is that there was never any intention 
for the minority shareholder to benefit in any way from this due 
diligence expenditure because  
if the offer [to purchase] the stock was rejected[,] 
the Smith Group planned to freeze [Notz] out of the 
plastics business by transferring the entire plastics 
division from ATS to the Smith Group in two steps.  
First, the Smith Group rather than ATS would acquire 
Dickten & Masch.  Second, the Smith Group would 
combine the Dickten operations with the Trostel SEG 
operations to achieve the synergy savings identified 
in the due diligence investigation by acquiring the 
ATS plastics division.  After [Notz] rejected the 
Smith 
Group's 
offers 
to 
purchase 
his 
shares, 
Defendants proceeded with their plan to freeze out 
[Notz] from any interest in the ATS plastics business. 
As the court of appeals noted, it was the Smith Group that was 
"the beneficiary of that expenditure."  Notz, 312 Wis. 2d 636, 
¶18.  Such dividend-like payments were not made to Notz, and for 
that reason, Notz's rights as a shareholder were affected "in a 
manner distinct from the effect upon other shareholders."  
                                                 
15 Due diligence is defined as "[a] prospective buyer's or 
broker's investigation and analysis of a target company, a piece 
of property, or a newly issued security."  Black's Law 
Dictionary 488 (8th ed. 2004). 
16 As noted above at ¶15, at the motion to dismiss stage,  
the court must accept all facts alleged as true and construe 
"all reasonable inferences that may be drawn from those facts in 
favor of stating a claim."  Peterson v. Volkswagen of Am., Inc., 
2004 WI App 76, ¶2, 272 Wis. 2d 676, 679 N.W.2d 840. 
No. 
2006AP3156   
 
19 
 
Jorgensen II, 246 Wis. 2d 614, ¶16.  Here, cash that was part of 
the corporation's assets which could have been used to pay 
dividends was instead diverted to fund due diligence for a 
company that the majority shareholder later acquired.  It is 
this type of inequitable treatment that was at issue in 
Jorgensen 
II 
because 
the 
defendants 
had 
"stopped 
paying 
[plaintiffs] 
the 
pro 
rata 
distribution 
from [the 
corporation's] cash flow while they continued to pay themselves 
regular distributions, they treated [plaintiffs] differently, 
and inequitably, when compared with the treatment accorded all 
other shareholders."  Jorgensen II, 246 Wis. 2d 614, ¶18. 
¶28 This is different from Notz's first claim, which is 
based on the majority shareholder's acquisition of Dickten & 
Masch and Trostel SEG.  Those acquisitions, which effectively 
ended ATS' expansion into the plastics business, parallel the 
acts complained of in Rose, acts that were part of "a scheme or 
plan to deplete the corporation of its cash reserves, thereby 
rendering it incapable of continuing in business, and enabling 
[the defendant] to successfully engage in a competing business."  
Rose, 56 Wis. 2d at 224.  The majority shareholder's decisions 
with regard to ATS's plastics interest are alleged to do 
precisely the same thing:  to render ATS incapable of continuing 
in that business and to enable itself to engage in a competing 
business.  For that reason, the claim related to the purchase of 
Dickten & Masch is controlled by Rose because the injury is 
primarily to the corporation.  The claim as to the due diligence 
expenses is factually more similar to the claim of unequal 
No. 
2006AP3156   
 
20 
 
distributions alleged in Jorgensen II, as explained above, and 
is therefore properly governed by that analysis.  
IV. THE JUDICIAL DISSOLUTION CLAIM 
¶29 The court of appeals remanded with an order to dismiss 
the judicial dissolution claim after a forced cash-out merger 
was instituted while the case was pending on appeal.  Notz, 312 
Wis. 2d 636, ¶26.  Following that merger, Notz was no longer a 
shareholder in ATS.17  
¶30 Notz argues that Wis. Stat. § 180.1106(1)18 explicitly 
preserves all pending civil claims after a corporate merger.  
Subsection (d) states "a civil . . . proceeding pending . . .  
against any business entity that is a party to the merger may be 
continued as if the merger did not occur . . . ."  Wis. Stat. 
§ 180.1106(1)(d).  This statute is not limited or qualified in 
                                                 
17 The Smith Group sought to have the judicial dissolution 
claim dismissed as moot; in its decision, the court of appeals 
characterized the question as one of standing instead.  Notz, 
312 Wis. 2d 636, ¶21. 
18 Wisconsin Stat. § 180.1106.  Effect of merger or share 
exchange. 
(1) All of the following occur when a merger takes 
effect: 
. . . .  
(d) A 
civil, 
criminal, 
administrative, 
or 
investigatory proceeding pending by or against any 
business entity that is a party to the merger may be 
continued as if the merger did not occur, or the 
surviving business entity may be substituted in the 
proceeding for the business entity whose existence 
ceased. 
No. 
2006AP3156   
 
21 
 
any way, Notz argues, and it expressly preserves the standing of 
plaintiffs with pending claims against merged corporations, and 
ensures that liability follows the merged entities. 
¶31 The Smith Group argues that the merger statute cannot 
preserve a claim that Notz lacks standing to pursue. 
¶32 The court of appeals agreed with the Smith Group; it 
held that the statute "does not address who is entitled to 
maintain a previously commenced action; it merely says that 
those actions survive."  Notz, 312 Wis. 2d 636, ¶25. 
¶33 As we have noted in other cases where we construed 
Wis. Stat. § 180.1106, this provision is based on Model Business 
Corporation Act § 11.07, "Effect of Merger or Share Exchange."19   
See generally Model Bus. Corp. Act Ann. § 11.07 (Supp. 1998/99) 
(listing all fifty states as having adopted this rule under the 
Model Business Corporation Act).  While cases dealing with one 
aspect or another of this provision or its variations abound, 
the Smith Group has not pointed to any case precisely on point 
where this provision has been found to work the way the Smith 
Group says it must.  It argues that the provision should be read 
as allowing a merger to strip shareholder status, and thus 
                                                 
19 "We note that this statute is based on the Model Business 
Corporation Act § 11.07 'Effect of Merger or Share Exchange.'  
We 
have 
previously 
utilized 
the 
official 
commentary 
to 
substantially similar Model Business Corporation Act statutes to 
inform our discussion of the legislative intent of Wisconsin 
Business Corporations statutes."  Farm Credit Serv. of N. Cent. 
Wis. v. Wysocki, 2001 WI 51, ¶20 n.2, 243 Wis. 2d 305, 627 
N.W.2d 444 (citing Einhorn v. Culea, 2000 WI 65, ¶29, 235 Wis. 
2d 646, 612 N.W.2d 78).  
No. 
2006AP3156   
 
22 
 
standing, from a plaintiff with a non-derivative claim that 
predates the merger.   
¶34 We begin by observing that a claim for judicial 
dissolution based on oppressive conduct, as here, is not a 
derivative claim.  See 12B William Meade Fletcher, Fletcher 
Cyclopedia of the Law of Private Corporations § 5820.10 (rev. 
ed. 2000) ("An action for relief from oppressive conduct has 
been distinguished from a derivative action, since in the former 
the complaining shareholder is ordinarily seeking some type of 
individual relief, while in the latter the action is generally 
for relief on behalf of the corporation as well as other 
similarly 
situated 
shareholders.") 
 
Direct 
claims 
of 
a 
shareholder predating a merger have been upheld, even when 
brought by a shareholder who after filing the claim lost 
shareholder status, on the basis that this statute preserves 
such claims.  For example, after determining that some of the 
plaintiff's claims "state[d] personal, as opposed to derivative, 
causes of action," the Connecticut Supreme Court addressed the 
effect of the merger on such claims under Connecticut's statute, 
which 
like 
Wisconsin's 
was 
based 
on 
the 
Model 
Business 
Corporation Act:20 
                                                 
20 All Brand Importers, Inc. v. Dept. of Liquor Control, 567 
A.2d 1156, 1163 (Conn. 1989) (discussing General Statutes § 33-
369, "Effect of merger or consolidation," and stating, "[t]he 
Connecticut statute on the effect of merger or consolidation was 
based on the ABA-ALI Model Business Corporation Act (1969) 
§ 76 . . ."). 
No. 
2006AP3156   
 
23 
 
Nor does the fact of the [corporation's] merger 
prohibit 
the 
plaintiff 
from 
proceeding 
in 
an 
individual 
capacity 
against 
[defendants]. 
 
The 
provisions of s. 33-369(e) of the General Statutes 
clearly 
state 
that 
the 
post-merger, 
surviving 
corporation shall be responsible for the liabilities, 
including liability to dissenting shareholders, of 
each of the merging corporations, and that any claim 
existing at the time of merger against one of the 
corporations may be prosecuted as if the merger had 
not taken place.  Put another way, the merger does not 
destroy the existing liabilities and obligations of 
the individual corporations; to hold otherwise would 
depart from the clear mandate of the statute and allow 
for perpetration of a fraud upon corporation creditors 
or others who, like the plaintiff, possess outstanding 
claims against the merged corporation. 
Yanow v. Teal Indus., 422 A.2d 311, 322 (Conn. 1979).  That 
court went on to distinguish derivative claims by noting that a 
derivative claim "could only be pursued by one who was a 
stockholder . . . both at the time of the alleged corporate 
delict and at the time of the filing of suit."  Id. at 323.  We 
have not located any case where a merger was permitted to strip 
No. 
2006AP3156   
 
24 
 
a 
shareholder 
of 
standing 
he 
indisputably 
held 
at 
the 
commencement of the claim.21   
 
¶35 Far from finding authority in favor of allowing a 
merger to defeat a pending direct or non-derivative claim, we 
have found significant case law that supports the opposite 
inference.  Delaware, a jurisdiction to which Wisconsin courts 
often look for "guidance on corporate law,"22 recognizes a 
                                                 
21 For cases that turn on the holding of shareholder status 
when an action is commenced, see Crippin Printing Corp. v. Abel, 
441 N.E.2d 1002, 1004 (Ind. Ct. App. 1982) (concluding that an 
agreement 
obligating 
a 
shareholder 
whose 
employment 
is 
terminated to sell stocks does not deprive plaintiff "of 
standing to bring suit . . . prior to the actual sale or 
transfer of his stock"); Artigas v. Renewal Arts Realty Corp., 
22 A.D.3d 327, 328 (N.Y. App. Div. 2005) (affirming dismissal of 
petitions for dissolution "because petitioner sold his interests 
in these corporations . . . before bringing his petitions"); 
Martin Enter., Inc. v. Janover, 140 A.D.2d 587, 587 (N.Y. App. 
Div. 1988) (finding that petitioner was without standing because 
"[p]rior to commencement of the dissolution proceeding, the 
petitioner . . . was divested of her interest in the corporation 
under an option agreement for repurchase of stock . . .") 
(emphasis added). 
22 Lane v. Sharp Packaging Sys., Inc., 2002 WI 28, ¶81, 251 
Wis. 2d 68, 640 N.W.2d 788 (Abrahamson, C.J., dissenting) 
(citing HMO-W Inc. v. SSM Health Care Sys., 2000 WI 46, ¶¶29-31, 
38, 234 Wis. 2d 707, 611 N.W.2d 250 (following Delaware law in 
rejecting application of minority discount in determining "fair 
value" in dissenters' rights proceeding); Jacobson v. Am. Tool 
Cos., 222 Wis. 2d 384, 397, 588 N.W.2d 67 (Ct. App. 1998) 
(looking to Delaware law to define fiduciary duties); Advance 
Concrete Form, Inc. v. Accuform, Inc., 158 Wis. 2d 334, 344, 462 
N.W.2d 271 (Ct. App. 1990) (citing Delaware cases to determine 
whether request to inspect corporate documents was for a "proper 
purpose"); Schweiner v. Hartford Accident & Indem. Co., 120 Wis. 
2d 344, 351, 354 N.W.2d 767 (Ct. App. 1984) (citing Delaware law 
for effect of statutory merger on liabilities of merger 
corporation)). 
No. 
2006AP3156   
 
25 
 
relevant exception to the general rule that a loss of standing 
as a shareholder for any reason, including a merger, is fatal to 
a derivative claim.23  Under Delaware law, the exceptions to that 
well-settled rule include when a merger is "perpetrated merely 
to deprive shareholders of the standing to bring a derivative 
action[.]"  Kramer v. W. Pac. Indus., Inc., 546 A.2d 348, 354 
(Del. 1998); see also In re First Interstate Bancorp Consol. 
S'holder Litig., 729 A.2d 851, 867 (Del. Ch. 1998).  
¶36 Notz has never pursued a derivative claim in this 
action, and, as noted above, his judicial dissolution claim is 
not a derivative claim.24  Delaware's narrow exception to loss of 
                                                 
23 13 William Meade Fletcher, Fletcher Cyclopedia of the Law 
of Private Corporations § 5972.40 (rev. ed. 2004) ("Where there 
has been a cash-out merger, a former shareholder cannot maintain 
a derivative proceeding because the plaintiff would no longer 
have any interest in a subsequent corporate recovery."). 
24 Notz's 
amended 
complaint 
in 
regard 
to 
his 
direct 
dissolution claim seeks from the circuit court at least the 
following remedies: 
D. 
For an order pursuant to § 180.1430(2), Wis. 
Stats., ordering the dissolution of ATS;  
E. 
For 
appointment 
of 
a 
receiver 
pursuant 
to 
§ 180.1432, Wis. Stats., to dispose of the assets of 
ATS (including its equitable interest in Dickten & 
Masch and Trostel SEG) through a public sale to one or 
more third parties; 
F. 
For an award of damages as compensation for 
injuries suffered by Plaintiff as the result of 
Defendants' oppressive conduct, in an amount to be 
determined at trial; 
G. 
For an award of punitive damages in an amount to 
be determined at trial;  
No. 
2006AP3156   
 
26 
 
standing as a shareholder is instructive:  it illustrates the 
courts' recognition that mergers can be used fraudulently to 
attempt to strip plaintiffs of the opportunity, based on the 
lack of standing or on mootness, to pursue previously filed 
claims.25 
¶37 The language of the statute is remarkably clear and is 
cast 
in 
the 
broadest 
of 
terms: 
 
"A 
civil, 
criminal, 
administrative, 
or 
investigatory proceeding pending by or 
against any business entity that is a party to the merger may be 
continued as if the merger did not occur, or the surviving 
business entity may be substituted in the proceeding for the 
business 
entity 
whose 
existence 
ceased." 
 
Wis. 
Stat. 
§ 180.1106(1)(d) (emphasis added).  In applying the text of the 
statute to the facts in the instant case, it is important to 
note that the civil proceeding instituted by Notz was pending at 
                                                                                                                                                             
H. 
For the costs and disbursements of this action; 
and 
I. 
For such other relief as may be equitable and 
just under the circumstances. 
25 This is indeed what Notz alleges occurred in this 
instance, and there was persuasive information submitted to the 
court of appeals in support of this contention.  In a document 
titled 
"Information 
Statement 
for 
Special 
Meeting 
of 
Shareholders To Be Held On May 17, 2007," under the subheading 
"Primary Reasons For The Merger," is a subheading entitled 
"Protection Against Judicial Dissolution."  The text describes 
the pending litigation between Notz and ATS and says, "[O]ur 
board of directors believes that the completion of the merger 
will 
serve 
the 
best 
interests 
of 
our 
company 
and 
our 
shareholders by making the minority shareholder's dissolution 
claim moot and, as a result, eliminating any risk that the 
minority shareholder's dissolution claim will be successful."  
No. 
2006AP3156   
 
27 
 
the time of the merger.  The statute could hardly be written 
more explicitly to preserve such a claim:  "as if the merger did 
not occur."  If the merger did not occur, Notz would not have 
been forced out as a shareholder, and the claim would continue.  
Therefore, we are satisfied that the judicial dissolution claim 
may continue.26  The circuit court should consider the judicial 
dissolution 
claim 
based 
on 
oppression 
in 
light 
of 
the 
                                                 
26 The parties have made reference to a separate, somewhat 
related action that was filed in United States District Court, 
the Eastern District of Wisconsin, after the ATS merger.  In 
that action, Notz is pursuing an appraisal of his shares.  That 
action was filed after the instant case; neither the parties nor 
the issues are identical.  As the district judge noted in 
denying Notz's motion to stay the federal proceedings, "[T]his 
action is only concerned with the impact that any misconduct has 
on the value of shares whereas the state court proceeding which 
arises from breach of duty and shareholder oppression claims can 
only address appraisal indirectly."  Albert Trostel & Sons v. 
Notz, 536 F. Supp. 2d 969, 983 (E.D. Wis. 2008).  In both Notz's 
dissolution claim, based on oppression, and in the pending 
federal appraisal action, the determination of the fair value of 
the shares Notz held in ATS may be one of the issues.  We expect 
that, regardless of which proceeding concludes first, the 
parties will undoubtedly bring to the courts' attention any 
concerns about potential duplication of remedies flowing from 
the federal appraisal action and the state dissolution action.  
See HMO-W Inc. v. SSM Health Care System, 2000 WI 46, ¶¶18, 31, 
52, 234 Wis. 2d 707, 611 N.W.2d 250 (discussing the post-merger 
determination of fair value of dissenters' shares in an action 
under Wis. Stat. § 180.1302 (not Wis. Stat. § 180.1430(2), under 
which Notz makes his claim)); and Robert Rabbat, Application of 
Share-Price Discounts and Their Role in Dictating Corporate 
Behavior: 
Encouraging 
Elected 
Buy-Outs 
Through 
Discount 
Application, 43 Willamette L. Rev. 107 (Winter 2007) (discussing 
"the considerations that control the price at which the majority 
[shareholder] can lawfully eliminate the minority" and noting 
that "in states that provide for it, a controlling shareholder 
can exercise his option to buy-out the complaining shareholder 
and avoid oppression litigation altogether" (Wisconsin statutes 
do not provide this option.)). 
No. 
2006AP3156   
 
28 
 
allegations set forth in Notz's amended complaint.  Under the 
circumstances, Notz has not lost standing. 
V. CONCLUSION 
¶38 For the reasons set forth above, we affirm in part, 
reverse in part, and remand for further proceedings.  We agree 
with the court of appeals that the claims of harm alleged——the 
loss of a corporate opportunity and the sale of a subsidiary 
with high growth potential——caused harm primarily to the 
corporation, and thus we affirm the dismissal of Notz's direct 
claim of breach of fiduciary duty as to those allegations.  On 
the cross-appealed issue, we also agree with the court of 
appeals that the majority shareholder's appropriation of the due 
diligence paid for by the corporation resulted in a constructive 
dividend to the majority shareholder because it received a 
benefit at the expense of the minority shareholders.  Thus we 
affirm the court of appeals' decision permitting that claim to 
proceed and remand to the circuit court for further proceedings. 
¶39 Where we disagree with the court of appeals is on the 
question of Notz's standing to pursue his judicial dissolution 
claim.  Wisconsin Stat. § 180.1106(1)(d) is straightforward in 
its requirement that a pending claim "may be continued as if the 
merger did not occur."  Notz's judicial dissolution claim, 
initiated prior to the merger, alleged harm to that shareholder, 
not to the corporation.  Because the statute precludes a merger 
from operating to strip such a claimant of the right to pursue a 
pending action, such as his direct action here, and because we 
find persuasive support for that position, we reverse the court 
No. 
2006AP3156   
 
29 
 
of appeals' decision on that issue.  We therefore remand that 
claim to the circuit court for further proceedings consistent 
with this opinion. 
By the Court.—The decision of the court of appeals is 
affirmed in part, reversed in part, and remanded to the circuit 
court for further proceedings consistent with this opinion. 
¶40 ANNETTE KINGSLAND ZIEGLER, J., did not participate. 
 
 
No.  2006AP3156.pdr 
 
1 
 
¶41 PATIENCE DRAKE ROGGENSACK, J. (concurring).   I agree 
with, and join the majority opinion's conclusion that, with the 
exception of Albert Trostel & Sons' (ATS) expenditures for due 
diligence related to the potential acquisition of Dickten & 
Masch, LLC, the complaint fails to state a direct claim for 
breach of fiduciary duty, because the harm alleged is primarily 
to the corporation, not to Edward Notz (Notz).1  I also agree 
with and join in the majority opinion's conclusion that the 
complaint has stated a claim for relief sufficient to survive 
dismissal in regard to a direct injury to Notz based on the 
Dickten & Masch due diligence expenses paid by ATS.2 
¶42 And finally, I agree with the majority opinion's 
conclusion that Notz's claim for dissolution of ATS may proceed, 
albeit on a different rationale.  I would allow the claim to 
proceed because it is all about money, i.e., how much money can 
Notz get for the shares he held in ATS.  The amount of the 
payment due Notz is yet to be determined.   
¶43 I write separately to point out that Notz's claim for 
judicial dissolution of ATS is proceeding at the same time as is 
his claim for dissenter's rights due to the merger of ATS into 
Dickten & Masch.  Both claims will provide the same remedy if 
Notz is able to prove grounds for dissolution; i.e., the fair 
value of Notz's ATS shares will be paid to him.  His dissenter's 
                                                 
1 Majority op., ¶4. 
2 Id. 
No.  2006AP3156.pdr 
 
2 
 
rights claim is pending in a federal court action, where the 
fair value of his ATS shares is being adjudicated.3   
¶44 In regard to these two claims, I make three points.  
First, Notz must prove that grounds for dissolution exist or 
that claim will be dismissed.4  Wis. Stat. § 180.1433.  Second, 
even if Notz is able to prove oppression, the legislature has 
decided that ATS, the corporation Notz seeks to dissolve, no 
longer exists due to ATS's merger into the Everett Smith Group, 
Ltd. 
(the 
Smith 
Group). 
 
Wis. 
Stat. 
§ 180.1106(1)(a).  
Therefore, there is no corporation to dissolve, and a cash 
payment is all Notz can receive.  Third, due to the merger of 
ATS, Notz requested to be paid the fair value of his shares in 
ATS, pursuant to Wis. Stat. § 180.1323.  Accordingly, when this 
case 
is 
returned 
to the circuit court, if grounds for 
dissolution are proved, the determination of what, if anything, 
will 
be 
paid 
to 
Notz 
must 
await 
the 
federal 
court's 
determination of the fair value because Notz is not entitled to 
be paid twice for the fair value of his interest in ATS. 
                                                 
3 See Albert Trostel & Sons Co. v. Notz, Case No. 07-C-0763, 
United States Dist. Ct., E. Dist. of Wisconsin.   
4 Notz has alleged oppression, pursuant to Wis. Stat. 
§ 180.1430(2)(b).  The circuit court will be required to 
determine whether issue preclusion bars further proof of 
oppression, given that this issue was among those already 
addressed by the Special Litigation Committee to the Board of 
Directors of Albert Trostel & Sons Company in its report dated 
June 15, 2006 (the Report).  Joint App. at 95.  Notz did not 
challenge the Special Litigation Committee's conclusions.   
No.  2006AP3156.pdr 
 
3 
 
I.  BACKGROUND 
¶45 Notz was displeased with the management of ATS.  He 
complained that the board of directors decided not to purchase 
Dickten & Masch, a plastics company, and instead caused the Smith 
Group to purchase it.  He also alleged that selling the assets of 
ATS's wholly owned subsidiary, Trostel SEG, to Dickten & Masch 
was not in the best interests of ATS.  Notz made demands upon 
ATS's board of directors pursuant to Wis. Stat. § 180.0742 to 
correct actions he believed were damaging ATS.5   
¶46 Notz alleged that the Smith Group, who was the 
majority shareholder of ATS, breached its fiduciary duty by:  
(1) purchasing an interest in Dickten & Masch LLC——a 
clear usurpation of an ATS opportunity; (2) causing 
the sale of the thermoplastics business of Trostel SEG 
(an ATS subsidiary) to Dickten & Masch LLC——a conflict 
of 
interest; 
(3) 
avoiding 
the 
declaration 
of 
dividends, despite cash reserves of over $82 million, 
until offering dividends initially conditioned upon 
approval of the sale of the ATS interest in [the] 
thermoplastics 
business to the Smith Group; (4) 
failing to disclose to the minority shareholders of 
ATS the administrative expenses of ATS (particularly 
insider 
compensation); 
(5) 
transferring 
the 
ATS 
pension plan to the Smith Group without explanation; 
and (6) engaging in bad faith negotiations to buy the 
shares of minority shareholders.6 
¶47 In response to Notz's demands, pursuant to Wis. Stat. 
§ 180.0744(2)(b), ATS convened a Special Litigation Committee to 
evaluate Notz's claims.  The Special Litigation Committee was 
composed of three independent directors who investigated and 
                                                 
5 August 2, 2005 demand letter, Joint App. at 106. 
6 Id. at 107. 
No.  2006AP3156.pdr 
 
4 
 
evaluated 
the 
facts 
relating 
to 
Notz's 
demand 
that 
the 
corporation take certain actions.7  The Special Litigation 
Committee hired appraisers and met in excess of 20 times to 
conduct an investigation and to evaluate the allegations in 
Notz's demand letter.8   
¶48 Upon 
the 
conclusion 
of 
its 
investigation 
and 
evaluation, the Special Litigation Committee advised Notz as 
follows:  (1) ATS's board of directors would continue to include 
at least three independent directors with specified duties 
relative to minority shareholders, and (2) the Smith Group would 
pay $1,500,000 to ATS.9  Beyond these two concessions, the 
Special Litigation Committee concluded that it was in the best 
interests of ATS to take no further action regarding the matters 
raised by Notz's demands.10  The Special Litigation Committee came 
to this conclusion after "exercising [its] informed business 
judgment 
after 
conducting, 
and 
based 
upon, 
a 
reasonable 
inquiry."11  The Special Litigation Committee also concluded that 
it had "identified no intentional behavior or maliciousness on 
the part of [ATS] fiduciaries to disadvantage the minority 
shareholders."12  The Special Litigation Committee concluded that, 
in regard to the Notz demands, 
                                                 
7 The Report, Joint App. at 92-93. 
8 Id. at 92. 
9 Id. at 93. 
10 Id. 
11 Id. 
12 Id. at 94. 
No.  2006AP3156.pdr 
 
5 
 
no further action by [ATS] is warranted or in [ATS's] 
best interests concerning the allegations regarding 
(i) [ATS's] failure to declare dividends; (ii) the 
administrative expenses charged to [ATS] by [the Smith 
Group]; (iii) the negotiations for the purchase of 
shares held by the minority shareholders; (iv) the 
consolidation of [ATS's] pension plan; and (v) the 
claim of oppression of the minority shareholders.13   
The Special Litigation Committee then stated that with "the 
fulfillment of the commitments detailed above, including the 
payment of $1.5 million to [ATS, the Special Litigation 
Committee] effectively and adequately responds to the matters 
raised in the Demand Letters that could be addressed in an action 
brought on [ATS's] behalf.  . . .  [B]ased upon our reasonable 
inquiry, . . . it is in the best interest of [ATS] to take no 
further action on the matters raise[d] in the Demand Letters."14   
¶49 Notz did not challenge any of the conclusions of the 
Special Litigation Committee.  Instead, he began the action that 
is before us, in which he has made many of the same allegations 
that he made in his Wis. Stat. § 180.0742 demands, and which the 
Special Litigation Committee has already addressed.  
¶50 Subsequent to Notz's filing his claim for judicial 
dissolution of ATS, ATS was merged into Dickten & Masch, a wholly 
owned subsidiary of the Smith Group.  Notz was served with a 
notice of dissenter's rights, pursuant to Wis. Stat. § 180.1322.  
When that occurred, Notz demanded payment for his shares in ATS, 
thereby meeting his obligations under Wis. Stat. § 180.1323.  
Notz demanded payment at a price acceptable to him pursuant to 
                                                 
13 Id. at 95. 
14 Id.  
No.  2006AP3156.pdr 
 
6 
 
Wis. Stat. § 180.1328.  ATS did not accept Notz's price demand, 
but instead, ATS filed a court action to determine the fair value 
of Notz's shares.  Wisconsin Stat. § 180.1330 required ATS to do 
so.  That action is currently pending in the United States 
District Court for the Eastern District of Wisconsin.15  
II.  DISCUSSION 
A. 
Standard of Review 
¶51 The review before us arose from a motion to dismiss 
for failure to state a claim.  We independently review such a 
motion as a question of law.  John Doe 1 v. Archdiocese of 
Milwaukee, 2007 WI 95, ¶12, 303 Wis. 2d 34, 734 N.W.2d 827.  In 
so doing, we accept the facts alleged in the complaint as true.  
Id.  However, we are not required to accept a plaintiff's legal 
conclusions.  Id.  Whether the facts alleged in a complaint are 
sufficient to constitute oppression is a question of law for our 
independent review.  Reget v. Paige, 2001 WI App 73, ¶11, 242 
Wis. 2d 278, 626 N.W.2d 302.   
B. 
Dissolution 
¶52 Notz has asserted a claim for judicial dissolution of 
ATS, thereby invoking Wis. Stat. § 180.1430 (grounds for 
dissolution) and Wis. Stat. § 180.1431 (procedure for judicial 
dissolution).  Dissolution is a harsh remedy, especially when 
the corporation is a going concern, as was ATS.  See Pueblo 
Bancorporation v. Lindoe, Inc., 37 P.3d 492, 496 (Colo. Ct. App. 
2001).  Even when grounds for dissolution are proven, it "is 
well-settled that dissolution of a solvent corporation is a 
                                                 
15 Supra, note 3.  
No.  2006AP3156.pdr 
 
7 
 
drastic measure to be invoked only in extreme circumstances."  
Cerami v. Dignazio, 424 A.2d 881, 889 (Pa. Super. Ct. 1980).   
¶53 The majority opinion has concluded that all except one 
of the allegations in the amended complaint cannot be proceeded 
upon by Notz because they allege harm that is primarily to ATS.16  
Those allegations therefore are not relevant to Notz's claim for 
dissolution based on the claim that he, personally, was 
oppressed by the Smith Group.  However, the majority opinion has 
permitted one of Notz's claims, that "ATS funds were used to 
complete the due diligence"17 for the purchase of Dickten & Masch 
by the Smith Group, to proceed.  The majority opinion permits 
this claim to proceed in order to determine whether it was in 
reality a dividend-like payment to the Smith Group that Notz was 
not permitted to share.18  Whether this claim is sufficient to 
constitute oppression will depend upon whether Notz is able to 
prove this allegation, and upon the defenses that the Smith 
Group raises in response.   
1. 
Fair value  
¶54 As explained above, petitions for dissolution rarely 
result in the actual dissolution of a corporation.  Id.  It is 
also instructive to note that many jurisdictions have adopted 
Model Business Corporation Act § 14.34, "Election to Purchase in 
Lieu of Dissolution," wherein a corporation or the other 
shareholders can elect to purchase all the shares held by the 
                                                 
16 Majority op., ¶4. 
17 Amended Complaint, ¶31.  
18 Majority op., ¶¶24-28. 
No.  2006AP3156.pdr 
 
8 
 
shareholder who seeks dissolution.19  Under the Model Business 
Corporation Act, the parties are to try to come to an agreement 
on the fair value of the shares to be purchased.20  However, if 
the parties do not come to an agreement on price, the court will 
determine the fair value of the shares on the day before the 
petition for dissolution was filed.21  Notz's petition for 
dissolution was filed September 29, 2006.   
¶55 The Model Business Corporation Act does not describe 
the components of fair value under § 14.34 when an action for 
dissolution is pending.  However, the official comments to 
§ 14.34 explain that it may be "useful to consider valuation 
methods that would be relevant to a judicial appraisal of shares 
under section 13.30."  Section 13.30 of the Model Business 
Corporation Act is the section that addresses the judicial 
determination of fair value during a dissenter's rights action 
subsequent to a corporate merger.  This is the same type of 
action Notz has pending in federal district court pursuant to 
Wis. Stat. § 180.1330.   
¶56 Wisconsin does not have an Election to Purchase 
provision in its Business Corporation Act.  The absence of a 
Wisconsin provision parallel to § 14.34 of the Model Business 
Corporation Act may be due to the fact that § 14.34 was added to 
                                                 
19 Model Business Corporation Act § 14.34(a); see, e.g., 
Ala. Code § 10-2B-14.30; Alaska Stat. § 10.06.630; Ariz. Rev. 
Stat. Ann. § 10-1434; Cal. Corp. Code § 2000 (West). 
20 Model Business Corporation Act § 14.34(c). 
21 Id., § 14.34(d). 
No.  2006AP3156.pdr 
 
9 
 
the Model Business Corporation Act in 1990 and Wisconsin enacted 
its Business Corporation Act prior to 1990.  However, Wis. Stat. 
§ 180.1330, which provides for determination of the fair value 
of a dissenter's shares subsequent to a merger, is the parallel 
provision to the fair value determination of § 13.30 of the 
Model Business Corporation Act.  Therefore, the legislature has 
provided the components that it has concluded are relevant to 
determining fair value.22  In addition, we have addressed the 
components of fair value in a dissenter's rights action.  HMO-W 
Inc. v. SSM Health Care Sys., 2000 WI 46, 234 Wis. 2d 707, 611 
N.W.2d 250.   
2. 
Merger 
¶57 Section 180.1330 is important to the circuit court's 
consideration of Notz's dissolution claim because ATS has merged 
into Dickten & Masch.  When a corporation is merged into another 
corporation, Wis. Stat. § 180.1106(1)(a) controls subsequent 
consideration of the merged corporation and the shares held in 
that corporation.  Section 180.1106(1) provides in relevant 
part: 
(1) All of the following occur when a merger 
takes effect: 
                                                 
22 Courts in other jurisdictions have concluded that fair 
value in a dissenter's rights action subsequent to merger is 
equivalent to fair value determined subsequent to a petition for 
dissolution.  See e.g., Balsamides v. Protameen Chemicals, Inc., 
734 A.2d 721, 733 (N.J. 1999) (concluding that fair value in an 
action alleging oppression means the same thing as fair value in 
a dissenting shareholder action); Robblee v. Robblee, 841 P.2d 
1289, 1294 (Wash. Ct. App. 1992) (concluding that fair value in 
a dissenter's rights action is equivalent to fair value in an 
action based on oppression).  
No.  2006AP3156.pdr 
 
10 
 
 
(a) Every other business entity that is party to 
the merger merges into the surviving business entity, 
and the separate existence of every business entity 
that is a party to the merger, except the surviving 
business entity, ceases. 
. . .  
 
(b) The title to all property owned by each 
business entity that is party to the merger is vested 
in the surviving business entity without reversion or 
impairment.   
. . . 
(f) The shares . . . of each business entity that 
is party to the merger that are to be converted into 
. . . cash or other property are converted, and the 
former holders of the shares or interests are entitled 
only to the rights provided in the articles of merger 
or to their rights under ss. 180.1301 to 180.1331 or 
otherwise under the laws applicable to each business 
entity that is party to the merger. 
Because of ATS's merger into Dickten & Masch, ATS no longer 
exists.  § 180.1106(1)(a).  Because the merger was a cash-out 
merger, 
Notz's 
shares 
in 
ATS 
were 
converted 
to 
cash.  
§ 180.1106(1)(f).  Therefore, the most that can result from 
Notz's dissolution claim is a determination of the fair value of 
Notz's former shares in ATS.   
¶58 Notz's conduct shows he understands the effect of the 
merger on his former shares in ATS, as he filed a claim 
asserting dissenter's rights pursuant to Wis. Stat. § 180.1323.  
Notz requested payment for his former shares of ATS at a price 
acceptable to him pursuant to Wis. Stat. § 180.1328.  When ATS 
did not agree to pay what Notz requested, ATS filed a court 
action to determine the fair value of his shares as it was 
required to do by Wis. Stat. § 180.1330.   
No.  2006AP3156.pdr 
 
11 
 
¶59 Therefore, in the action before us, any determination 
of the fair value of Notz's shares must await the fair value 
determination by the United States District Court for the 
Eastern District of Wisconsin, where a statutory action to make 
that determination is currently pending.23  Notz is not entitled 
to be paid twice for the fair value of his former shares in  
ATS——once due to his claim for dissenter's rights in the merger 
proceedings, and once as the only viable alternative for a 
proven claim of dissolution.   
¶60 Why Notz would choose to continue with his claim for 
dissolution is a mystery to me.  However, until fair value is 
determined by the United States District Court, I will go along 
with the majority opinion's decision to permit Notz's claim for 
dissolution to proceed.  Accordingly, I respectfully concur. 
¶61 I am authorized to state that Justice MICHAEL J. 
GABLEMAN joins this concurrence. 
 
 
                                                 
23 Supra, note 3.  
No.  2006AP3156.awb 
 
1 
 
¶62 ANN 
WALSH 
BRADLEY, 
J.   (concurring 
in 
part, 
dissenting in part).  I agree with the majority that the 
judicial dissolution claim may continue and that Notz has a 
direct claim for breach of fiduciary duty relating to the due 
diligence expenses.  I disagree with the majority, however, that 
Notz's claim for breach of fiduciary duty arising out of 
corporate usurpation is a derivative rather than a direct claim 
and that it thus must be dismissed.   
¶63 Instead, based on the facts alleged in the amended 
complaint, I conclude that Notz states a direct claim for breach 
of fiduciary duty arising out of the defendants' usurpation of a 
corporate opportunity.  The defendants breached their fiduciary 
duty to minority shareholders by using their position of trust 
to further their private interest.  Unlike the majority 
shareholders, Notz was denied continued participation in a 
thriving growth industry.  This injury was unique to him.   
¶64 Further, I conclude that the majority fails to 
articulate and apply a consistent analysis.  It provides no 
principled distinction justifying the disparate treatment of the 
two breach of fiduciary duty claims.  Accordingly, I concur in 
part and dissent in part.    
¶65 As we have previously explained, when an injury is 
primarily to a shareholder, that shareholder can bring a direct 
cause of action.  Rose v. Schantz, 56 Wis. 2d 222, 228-29, 201 
N.W.2d 593 (1972).  When the injury is primarily to the 
corporation, a shareholder derivative action is appropriate.  
Id. at 229.  Our case law, however, has provided scant guidance 
No.  2006AP3156.awb 
 
2 
 
for 
determining 
whether 
an 
injury 
is 
primarily 
to 
the 
shareholder or primarily to the corporation.   
¶66 Presented with a difficult case, the majority splits 
the difference.  According to the majority, when the directors 
and majority shareholder1 usurp a corporate opportunity and sell 
the corporation's most valuable asset to their own competitive 
enterprise, the injury is primarily to the corporation.  The 
majority 
explains 
that 
this 
is 
because 
"[a]ll 
of 
the 
shareholders [] were affected equally." Majority op., ¶23.  
However, when corporate assets are spent for due diligence in 
furtherance of such a scheme, the majority concludes that the 
injury is primary to the minority shareholder.  It explains that 
this is because the defendants "received a benefit at the 
expense of the minority shareholders" and "there was never any 
intention for the minority shareholder to benefit in any way 
from this due diligence expenditure[.]"  Majority op., ¶¶4, 27.   
I 
¶67 I disagree with the majority's conclusion that the 
Smith Group's breach of fiduciary duty for usurpation gives rise 
to only a derivative claim.  In Rose, we stated, "where some 
individual right of a stockholder is being impaired by the 
improper acts of a director, the stockholder can bring a direct 
suit on his own behalf because it is his individual right that 
                                                 
1 Notz brought suit against ATS's controlling shareholder, 
the Smith Group, and four of ATS's officers and directors, all 
of whom belong to the Smith Group.  I will refer to ATS's 
officers, directors, and controlling shareholder collectively as 
the "Smith Group" or "the defendants."    
No.  2006AP3156.awb 
 
3 
 
is being violated."  Rose, 56 Wis. 2d at 228-29.  Thus, to 
determine whether an injury is to the corporation, to the 
individual shareholders, or to both,2 the court must begin by 
identifying the right that has been violated. 
¶68 Fiduciary duties confer legal rights.  In Wisconsin, 
officers and directors owe a fiduciary duty to shareholders to 
act in good faith and to treat each shareholder fairly.  Id. at 
228.  "[T]he directors and officers of a corporation owe a 
fiduciary duty to not use their positions for their own personal 
advantage . . . to the detriment of the interests of the 
stockholders of the corporation."  Borak v. J.I. Case Co., 317 
F.2d 838, 842 (7th Cir. 1963) (applying Wisconsin law).   
¶69 That same fiduciary duty is also owed by majority 
shareholders to minority shareholders: "The same fiduciary duty 
is due from a dominant or controlling shareholder or group of 
shareholders to the minority as is due from the director of a 
corporation to the shareholders."  12B William Meade Fletcher, 
Fletcher Cyclopedia of the Law of Private Corporations § 5810 
(perm. ed., rev. vol. 2000) (citing Grognet v. Fox Valley 
Trucking Serv., 45 Wis. 2d 235, 172 N.W.2d 812 (1969)). 
¶70 Officers, 
directors, 
and 
controlling 
shareholders 
breach 
their 
fiduciary 
duties 
when 
they 
treat 
minority 
                                                 
2 A single course of conduct may give rise to both direct 
and derivative claims "when there are duties owing both to a 
corporation and to a stockholder personally."  Johnson v. Am. 
Gen. Ins. Co., 296 F. Supp. 802, 808 (D.D.C. 1969); see also 
Buschmann v. Professional Men's Ass'n, 405 F.2d 659, 661-62 (7th 
Cir. 1969); Vickers v. First Miss. Nat'l Bank, 458 So.2d 1055, 
1063-64 (Miss. 1984); Empire Life Ins. Co. Am. v. Valdak Corp., 
468 F.2d 330, 335 (5th Cir. 1972).  
No.  2006AP3156.awb 
 
4 
 
shareholders "differently, and inequitably," or when they "use 
their position of trust to further their private interests."  
See Jorgensen v. Water Works, Inc. (Jorgensen II), 2001 WI App 
135, ¶¶10, 17-18, 246 Wis. 2d 614, 630 N.W.2d 230; see also 
Rose, 56 Wis. 2d at 228.  "If through that control a sale of the 
corporate property is made and the property acquired by the 
majority, the minority may not be excluded from a fair 
participation in the fruits of the sale."  S. Pac. Co. v. 
Bogert, 250 U.S. 483, 488 (1919). 
¶71 Notz asserts that the Smith Group identified the 
thermoplastics business as a growth industry critical to the 
future success of ATS.3  In 2004, the Smith Group learned of an 
opportunity to acquire Dickten & Masch, a direct competitor of 
ATS's thermoplastics business.  Notz alleges that the Smith 
Group determined through a due diligence investigation that 
"acquiring Dickten & Masch and combining it with the ATS 
plastics 
operations 
would 
result 
in 
substantial 
positive 
synergies."  Instead of authorizing ATS's purchase, the Smith 
Group caused ATS to pass on the sale and then bought both 
Dickten & Masch and ATS's plastics division itself.  Notz 
further alleges that the defendants breached their fiduciary 
duties, and that this breach inflicted an injury on him that the 
majority shareholders did not suffer. 
                                                 
3 Specifically, the amended complaint alleges that the 
defendant and president of ATS explained in 2003, "We have a 
very focused acquisition strategy in the rubber and plastics 
platform that will provide additional scale for their future 
growth."   
No.  2006AP3156.awb 
 
5 
 
¶72 The Smith Group had an interest in owning 100 percent 
of a thriving thermoplastics business.  However, the Smith Group 
would own only 89 percent of this business if ATS purchased 
Dickten & Masch.  Thus, Notz asserts, the Smith Group decided to 
purchase both Dickten & Masch and ATS's plastics business.  The 
Smith Group's interest in fully owning these businesses was 
adversarial to Notz's interest in maintaining holdings in the 
plastics industry.  The defendants used their positions of trust 
and control to further their own private interest at Notz's 
expense.  Under these alleged facts, the defendants breached 
their fiduciary duties to minority shareholders by favoring the 
corporation in which they had a 100 percent ownership interest.  
See Fletcher, supra, § 5764. 
¶73 Whether Notz can maintain his direct action depends on 
whether the injury was primarily to him, or primarily to the 
corporation.  See majority op., ¶23.  For determining when an 
injury is "primarily to the corporation," Wisconsin case law 
provides no explicit test.  See id.  As the majority 
acknowledges, the only articulated test is for an injury 
"primarily to an individual shareholder."  Id.   
¶74 An injury is primarily to the shareholder when it 
"affects a shareholder's rights in a manner distinct from the 
effect upon other shareholders."  Id. (citing Jorgensen II, 246 
Wis. 2d 614, ¶16.) 
 When a breach of a fiduciary duty 
"inflict[s] a harm on [the minority shareholder] that other 
No.  2006AP3156.awb 
 
6 
 
shareholders did not suffer," the minority shareholder has a 
direct cause of action.  See Jorgensen II, 246 Wis. 2d 614, ¶18.4  
¶75 After setting forth the test for when an injury is 
primarily to the shareholder, and with only cursory explanation, 
the majority summarily concludes: "All of the shareholders of 
ATS were affected equally by the loss of the opportunity to 
acquire Dickten & Masch and by the sale of [Trostel's] plastics 
division."  Majority op., ¶23. 
¶76 This conclusion is antithetical to the facts.  It is 
true that all shareholders suffered a common injury in that the 
value of their investment in ATS depreciated.  Nonetheless, Notz 
suffered an additional injury that was unique to the minority 
shareholders.  The Smith Group who planned and executed these 
transactions received a net gain, but Notz suffered a net loss.  
                                                 
4 Wisconsin is not alone.  Other jurisdictions recognize 
that breaches of fiduciary duty resulting in unique harm to 
minority shareholders can give rise to direct suits: 
In general, actions for breach of fiduciary duties are 
to be brought in derivative suits.  However, a breach 
of fiduciary duty alleged by minority shareholders 
against shareholders who control a majority of shares 
in a close corporation, and use their control to 
deprive minority shareholders of the benefits of their 
investment, may be brought as an individual action.   
12B William Meade Fletcher, Fletcher Cyclopedia of the Law 
of Private Corporations § 5909 (perm. ed., rev. vol. 2000). 
Further,    
[W]here there is no question that plaintiffs are 
claiming an injury that was not suffered by all 
shareholders, but only by minority shareholders, that 
action is properly classified as [direct] rather than 
derivative.   
Id. § 5908.  
No.  2006AP3156.awb 
 
7 
 
Because Notz was squeezed out of the thermoplastics business 
that the Smith Group took for itself, he was "excluded from a 
fair participation in the fruits of the sale."  See S. Pac. Co., 
250 U.S. at 488.  Notz's injury was distinct from the "injury" 
to the controlling shareholder——unlike the defendants, Notz was 
denied continued participation in a thriving growth industry.    
¶77 I conclude that Notz states a direct cause of action 
for breach of fiduciary duty arising out of the defendants' 
usurpation of a corporate opportunity.  Based on the facts 
presented in Notz's amended complaint, the defendants breached 
their fiduciary duty to minority shareholders by using their 
position of trust to further their private interests.  This 
breach caused Notz a unique injury.   
II 
¶78 I also part ways with the majority because of its 
failure to articulate and apply a consistent analysis.  I find 
no principled distinction justifying the majority's disparate 
treatment of the two breach of fiduciary duty claims.5  Neither 
do the parties in this case.  In his brief, Notz argued, 
"Candidly, a consistent policy should apply . . . .  [T]here is 
no meaningful difference between the Smith Group using ATS funds 
for its own purposes and the Smith Group taking corporate 
opportunities and then 'selling' corporate assets to itself in 
an effort to squeeze out minority shareholders." 
                                                 
5 Notably, Notz's amended complaint did not distinguish 
between the claims.  However, the court of appeals treated the  
claims separately. 
No.  2006AP3156.awb 
 
8 
 
¶79 Nevertheless, having first determined that Notz did 
not suffer a unique injury when the Smith Group usurped a 
corporate opportunity, the majority changes course.  Even though 
all shareholders presumably suffered the same diminution of 
their stock value based on ATS's expenditure for due diligence, 
the majority concludes that this particular injury was primarily 
to the minority shareholders.  It explains that the Smith Group 
"received a benefit at the expense of the minority shareholders" 
and "there was never any intention for the minority shareholder 
to benefit in any way from this due diligence expenditure[.]"  
Majority op., ¶¶4, 27.   
¶80 When addressing the usurpation claim, the extrinsic 
benefit to the Smith Group was apparently irrelevant to the 
majority's analysis.6  If this analysis is correct, then the 
injury caused by the Smith Group's decision to use ATS's funds 
to conduct due diligence was an injury primarily to the 
corporation as well, because extrinsic benefit is irrelevant and 
"all shareholders were affected equally" by the funds paid for 
due diligence.  Instead of applying a consistent principle, 
however, the majority opinion carves out the due diligence 
                                                 
6 The majority never states why, exactly, an exclusive 
benefit to officers, directors, and controlling shareholders is 
irrelevant to the analysis.  The majority does imply that a 
shareholder-director's self-dealing does not transform an action 
that primarily injures the corporation into one that primarily 
injures a shareholder.  See majority op., ¶22.  Further, the 
majority quotes, apparently with approval, the circuit court's 
determination that "any ancillary benefit the Smith Group 
received from the transaction did not create a direct injury" to 
minority shareholders.  See majority op., ¶11.   
No.  2006AP3156.awb 
 
9 
 
expenditure paid by ATS and labels it a constructive dividend.  
See majority op., ¶4.   
¶81 The term constructive dividend is inapt.  Before this 
case, Wisconsin courts have not used the term "constructive 
dividend" outside of the context of tax statutes.  See, e.g., 
Wis. Dep't Rev. v. Sentry Fin. Servs. Corp., 161 Wis. 2d 902, 
469 N.W.2d 235 (Ct. App. 1991).  The majority opinion fails to 
define the term here. 
¶82 I am not sure what it means in the context of this 
case.  Black's Law Dictionary, however, defines a constructive 
dividend as a "taxable benefit derived by a shareholder from the 
corporation even though the benefit was not designated a 
dividend."  Black's Law Dictionary 492 (7th ed. 1999).   
¶83 In Jorgensen II, the court of appeals did not use the 
term "constructive dividend" when it concluded that some 
shareholders were disproportionately paid directors' fees.  See 
246 Wis. 2d 614.  In that case, however, "it was obvious" that 
the fees were "related to profits of the corporation" rather 
than salaries paid "as compensation for work done."  Id., ¶6.  
That is, the court concluded that these fees were in reality a 
share of the corporation's profits and should have been 
distributed evenly to all shareholders.  It is unclear, however, 
if the directors' fees in Jorgensen II would have fit the 
Black's Law Dictionary definition of a constructive dividend.   
¶84 In this case, however, the Smith Group did not receive 
anything resembling a dividend.  First, the expenditure was a 
business expense, and the Smith Group could not be taxed based 
No.  2006AP3156.awb 
 
10 
 
on ATS's expenditure for due diligence.  Second, the money used 
for due diligence was not paid to the Smith Group.  Instead, the 
due diligence funds would have been paid to various third-
parties as compensation for their work evaluating whether ATS 
should purchase Dickten & Masch.  Thus, it is incorrect to 
characterize the due diligence expenditure as a "constructive 
dividend" or a "dividend-like payment."   
¶85 Stripped of the inapt term, the inconsistent analysis 
becomes apparent.  The majority attempts to explain why the due 
diligence expenditure gives rise to a direct action: "The bottom 
line . . . is that there was never any intention for [Notz] to 
benefit in any way from this due diligence expenditure" because 
the Smith Group planned to freeze Notz out of a profitable 
growth industry.  Majority op., ¶27.  Put another way, the 
majority determines that the due diligence expenditure was an 
injury to Notz because the Smith Group put its own interest 
before Notz's interests, causing a harm unique to minority 
shareholders.  Yet, this is the exact conduct underlying Notz's 
fiduciary duty claims, which the majority previously determined 
were derivative because the injury was to the corporation.7 
¶86 The only true distinction I see between Notz's two 
claims is that a dollar value is more easily assigned to the 
                                                 
7 The majority further distinguishes the two claims by 
stating that the facts underlying the fiduciary duty claim are 
more similar to Rose, and the facts underlying the claim for the 
due diligence expenditure are more similar to Jorgensen II.  
Majority op., ¶28.  The "factual similarity" the majority points 
to does not serve as a substitute for a controlling legal 
principle. 
No.  2006AP3156.awb 
 
11 
 
claim for the due diligence expenditure.  This is not a 
distinction that is relevant in determining whether the injury 
was primarily to the shareholder or to the corporation. 
¶87 The majority analysis does not provide a coherent and 
consistent principle to explain why the due diligence claim 
gives rise to a direct action when the usurpation claim gives 
rise to only a derivative action.  Ultimately, its analysis 
provides little guidance to either a shareholder asserting a 
claim or the party defending against it. 
¶88 I conclude that if Notz's allegations are true, the 
Smith Group's conduct was in breach of their fiduciary duties to 
Notz, causing the minority shareholders a unique injury.  
Allegedly, the Smith Group put its own self-interest ahead of 
the minority shareholders' interests when it decided that ATS, 
rather than the Smith Group, should fund the due diligence.  
Additionally, the Smith Group put its own self-interest ahead of 
the minority shareholders' interests when it cut out minority 
shareholders' participation in a thriving growth industry by 
causing ATS to pass on purchasing Dickten & Masch and by 
deciding to sell ATS's plastics division to itself.  The 
minority shareholders were uniquely injured because they were 
denied continued participation in the thermoplastics industry.   
¶89 In sum, based on the facts presented in the amended 
complaint, I conclude that Notz states a direct claim for breach 
of fiduciary duty arising out of the defendants' usurpation of a 
corporate opportunity, and that breach caused the minority 
shareholders a unique injury.  Further, I conclude that the 
No.  2006AP3156.awb 
 
12 
 
majority fails to articulate and apply a consistent analysis.  
There is no principled distinction justifying the majority's 
disparate treatment of the two breach of fiduciary duty claims.  
Accordingly, I concur in part and dissent in part.   
¶90 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON joins this concurrence in part and dissent in part.  
 
 
No.  2006AP3156.awb 
 
 
 
1