Court Opinion

ID: 9804630
Source: CourtListenerOpinion
Date Created: 2023-08-31 17:01:07.61659+00
Date Added: 2024-06-11T10:28:47.105444
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       AUG 31 2023
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

DEBRA POWELL, an individual,                    No.    22-35361

                Plaintiff-Appellee,             D.C. No. 2:19-cv-01077-JR

 v.
                                                MEMORANDUM*
JOHN DENNIS RASMUSSEN, an
individual,

                Defendant-Appellant,

and

COLTON RASMUSSEN, an individual;
HEIDI RASMUSSEN, an individual; IAN
RASMUSSEN, an individual; TERRA-
MAGIC, INC., an Oregon corporation;
Nominal Defendant; TERRA-MAGIC
SEEDS, LTD., an Oregon corporation;
Nominal Defendant,

                Defendants.

DEBRA POWELL, an individual,                    No.    22-35362

                Plaintiff-Appellee,             D.C. No. 2:19-cv-01077-JR

 v.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
COLTON RASMUSSEN, an individual;
HEIDI RASMUSSEN, an individual,

                Defendants-Appellants,

and

JOHN DENNIS RASMUSSEN, an
individual; IAN RASMUSSEN, an
individual; TERRA-MAGIC, INC., an
Oregon corporation; Nominal Defendant;
TERRA-MAGIC SEEDS, LTD., an Oregon
corporation; Nominal Defendant,

                Defendants.

                   Appeal from the United States District Court
                            for the District of Oregon
                   Jolie A. Russo, Magistrate Judge, Presiding

                      Argued and Submitted August 21, 2023
                                Portland, Oregon

Before: BENNETT, VANDYKE, and H.A. THOMAS, Circuit Judges.

      Defendant John Dennis Rasmussen (Rasmussen) appeals the district court’s

Limited Judgment. Rasmussen appeals the district court’s decisions (i) not to apply

a marketability discount in determining the fair value of Plaintiff Debra Powell’s

shares in Terra-Magic, Inc. and Terra-Magic Seeds, Ltd. (collectively, Terra-

Magic), (ii) to reject Rasmussen’s proposed terms of purchase for the purchase of

Powell’s shares, (iii) to appoint a custodian to liquidate Terra-Magic’s assets, and

(iv) to allow the custodian to retain control over Terra-Magic until the conclusion

                                          2
of all related proceedings. Rasmussen also appeals the district court’s decision to

allow Powell to continue litigating some of her claims after Rasmussen elected to

purchase Powell’s shares under Oregon Revised Statute (O.R.S.) Section 60.952.

Defendants Colton Rasmussen (Colton) and Heidi Rasmussen (Heidi) also appeal

the district court’s Limited Judgment, although they limit their appeal to the court’s

decision to allow Powell to continue litigating some of her claims against Colton

and Heidi after Rasmussen’s election to purchase Powell’s shares. We have

jurisdiction under 28 U.S.C. § 1292. We affirm in part and remand in part for

further proceedings consistent with this opinion.

         We review questions of law and mixed questions of law and fact de novo,

and we review findings of fact for clear error. Heavenly Hana LLC v. Hotel Union

& Hotel Indus. of Haw. Pension Plan, 891 F.3d 839, 844 (9th Cir. 2018). “In cases

where state law applies, [we] must ‘ascertain from all the available data what the

state law is and apply it.’” Lawson v. Grubhub, Inc., 13 F.4th 908, 913 (9th Cir.

2021) (quoting West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940)). We review

the appointment of a custodian for abuse of discretion. Canada Life Assur. Co. v.

LaPeter, 563 F.3d 837, 844 (9th Cir. 2009).1

         1. Under Oregon law, “in the absence of a finding of oppression, the court

may, but need not, apply a marketability discount, depending on the particular

1
    Because the parties are familiar with the facts, we do not recount them here.

                                            3
circumstances of the case.” Ybarra v. Dominguez Fam. Enters., Inc., 521 P.3d 834,

838 (Or. Ct. App. 2022). The district court therefore had discretion not to apply a

marketability discount, based on Powell’s lack of control and knowledge

concerning Terra-Magic’s management and finances.

      2. Rasmussen argues that O.R.S. Section 60.952 did not provide the district

court with discretion to reject his proposal to complete the share purchase in

installments and instead require him to have all funds immediately available for the

purchase. In his view, the district court should have accepted his proposal under

subsection (5) of the statute, which specifies that “[i]f the court orders a share

purchase, the court shall: . . . [s]pecify the terms of the purchase, including, if

appropriate, terms for installment payments.” O.R.S. § 60.952(5)(a)(C). But the

text of this subsection plainly permits courts to authorize installment payments if

appropriate, without requiring that they do so. Here, the district court reasonably

determined that Rasmussen’s installment proposal was not appropriate, based upon

his failed attempt to sell assets in order to complete the share purchase

independently. See O.R.S. § 60.952(5)(a)(B) (if a court orders a share purchase, it

must “[c]onsider any financial . . . constraints on the ability of the . . . purchasing

shareholder to purchase the shares).

      3. The district court did not abuse its discretion in appointing a custodian “to

oversee the sale of sufficient [Terra-Magic] assets to pay [Powell] the fair value of

                                            4
her shares.” Federal courts consider “a variety of factors” in deciding whether to

appoint a custodian, including (i) “whether the party seeking the appointment has a

valid claim,” (ii) whether the relevant “property is in imminent danger of being

lost, concealed, injured, diminished in value, or squandered,” and (iii) “the

possibility of irreparable injury to [the] plaintiff’s interest in the property.” Canada

Life, 563 F.3d at 844 (cleaned up). Given Rasmussen’s failure to secure the funds

for an immediate share purchase, and given the district court’s finding that

Rasmussen could not be trusted to complete a share purchase in installments, the

district court did not abuse its discretion when it appointed a custodian to oversee

the sale. For the same reasons, the district court did not abuse its discretion in

permitting the custodian to retain control over Terra-Magic’s assets until the

conclusion of all related proceedings.

      4. Rasmussen contends that the district court erred in permitting Powell to

continue pursuing her remaining direct claims against him for allegedly

participating in or aiding and abetting Colton’s allegedly tortious conduct. He also

contends that the court erred in permitting Powell to pursue her derivative claims

against Rasmussen as direct claims. Rasmussen argues that his election to purchase

Powell’s shares under O.R.S. Section 60.952(6) eliminated Powell’s right to

continue litigating these claims. Colton and Heidi similarly contend that the district

                                           5
court erred in allowing Powell to continue pursuing her derivative claims against

them as direct claims.

      This appeal raises interesting and difficult questions regarding the scope of a

court’s authority under O.R.S. Section 60.952. Both the language of the statute and

the Oregon Supreme Court’s decision in Graydog Internet Inc. v. Giller, 406 P.3d

45 (2017), however, could be read to suggest that, under the circumstances

presented here, the district court should not have permitted Powell to continue

litigating her remaining claims against Rasmussen. We therefore remand for the

district court to reopen these proceedings and redetermine the fair value of

Powell’s shares, while accounting for the impact of Rasmussen’s alleged conduct

upon the value of those shares, pursuant to O.R.S. Section 60.952(5)(a)(A).

      The conduct Powell complains of—Rasmussen’s alleged conversion, unjust

enrichment, breach of fiduciary duty, and waste of corporate assets—is precisely

the conduct “giving rise to [Powell’s] proceeding under subsection (1)” of the

statute. See O.R.S. § 60.952(5)(a)(A). And the statute directs that, when the court

orders a share purchase, it shall “[d]etermine the fair value of the shares . . . taking

into account any impact on the value of the shares resulting from” such actions.2

Id. (emphasis added). Allowing resolution of Powell’s claims against Rasmussen

2
 This is, indeed, how Powell anticipated the court would proceed, as her counsel
acknowledged at oral argument.

                                           6
via further litigation, rather than by including them in the valuation of the share

purchase, may thus run contrary to the Oregon Supreme Court’s admonition that

the statute was designed to “[r]educ[e] litigation between shareholders” and

“provid[e] a shortcut to a remedy.” See Graydog, 406 P.3d at 56.

      Upon remand, the district court should also factor Powell’s derivative claims

against Colton and Heidi into its fair value determination under O.R.S. Section

60.952.3 As the Oregon Supreme Court stated in Graydog, when a shareholder files

a proceeding under subsection (1) of O.R.S. Section 60.952, she “in effect makes

an offer to sell all of [her] shares, for fair value, to the corporation or another

shareholder, without resolving the merits of the complaint . . . that [she] filed,”

Graydog, 406 P.3d at 48 (emphasis added). Because the district court must resolve

the allegations against Colton and Heidi in order to address Powell’s allegations

against Rasmussen, those allegations are best viewed as an essential part of the

events giving rise to the proceeding Powell filed under subsection (1) of the

statute. We express no view regarding how the district court may organize the

factfinding process; our holding is only that a unified proceeding is required in this

matter.

3
 Colton and Heidi have not appealed the district court’s decision to let Powell
continue litigating her direct claims against them.

                                            7
      5. Finally, Powell contends that the procedures set forth in O.R.S. Section

60.952 violate her right to a jury trial. By invoking O.R.S. Section 60.952,

however, she waived the right to obtain a resolution of her claims under subsection

(1) outside of the procedures provided for by the statute. See Graydog, 406 P.3d at

48; see also Horton v. Oregon Health & Sci. Univ., 376 P.3d 998, 1044 (Or. 2016)

(“Neither the text nor the history of the jury trial right suggests that it was intended

to place a substantive limitation on the legislature’s authority to alter or adjust a

party’s rights and remedies.”). While nothing in this opinion should be taken to

limit the district court’s discretion to employ an advisory jury if it so wishes, the

fact that this case was filed in federal, rather than state court, does not alter the fact

that Powell is no longer entitled to a resolution of the merits of her claims under

subsection (1). Given Rasmussen’s election to purchase Powell’s shares under

O.R.S. Section 60.952(6), the only thing Powell is entitled to is the purchase of her

shares, pursuant to the terms set by the court under O.R.S. Section 60.952(5). See

O.R.S. § 60.952(6)(f).

                                          ***

      For the reasons set forth above, we remand in part in order for the district

court to reopen proceedings under O.R.S. Section 60.952 and redetermine the fair

value and terms of purchase of Powell’s shares under subsection (5) of that statute,

                                            8
while “taking into account any impact on the value of the shares resulting from the

actions giving rise to” this proceeding. See O.R.S. § 60.952(5)(a)(A), (6)(f);

Graydog, 406 P.3d at 48.

      AFFIRMED in part and REMANDED in part for further proceedings

consistent with this opinion. Each party is to bear its own costs and fees on

appeal.

                                          9