Court Opinion

ID: 9692074
Source: CourtListenerOpinion
Date Created: 2023-08-25 15:39:32.073434+00
Date Added: 2024-06-11T18:19:30.565285
License: Public Domain

LANSING, Judge
(concurring specially).
I concur in the decision of the court, but write separately to emphasize the broad remedial powers available to the district courts under Minn.Stat. § 302A.751 (2008), which applies independently from other provisions of the Minnesota Business Corporations Act, Minn.Stat. §§ 302A.001-.92 (2008). Section 302A.751 was originally enacted in 1981 for the express purpose of providing protection to minority shareholders, particularly those in closely held corporations. Gunderson v. Alliance of Computer Prof'ls, Inc., 628 N.W.2d 173, 184 (Minn.App.2001), review granted (Minn. *170July 24, 2001) and appeal dismissed (Minn. Aug. 17, 2001).
The legislature recognized that, given the lack of a ready market for their shares, minority shareholders in closely held corporations required enhanced protections. See Report to the Senate by Advisory Task Force on Corporation law (1981) [Advisory Task Force Report], reprinted in Minn.Stat. Ann. § 302A.001 (West supp. 2000) (noting that the Minnesota Business Corporations Act’s provisions applicable to closely held corporations are characterized by “greatly enhanced shareholder protections”). The statute has since been amended to strengthen those protections. See Pedro v. Pedro, 463 N.W.2d 285, 289 (Minn.App.1990), review denied (Minn. Jan. 24, 1991).
As this court first observed nearly twenty years ago, Minn.Stat. § 302A.751 provides the flexibility for a trial judge to exercise a broad grant of equitable authority. This authority provides courts with flexibility to provide an adequate remedy for the cases that they must decide. Id. at 288-89. Section 302A.751 is remedial in nature and should be liberally construed to supplement the rights under the law afforded to non-controlling shareholders and the corporation’s governing documents. The legislation reflects the legislature’s trust in the ability of the judiciary to achieve equitable results in individual eases. Id.
No part of our decision today should be read to dilute the broad equitable powers afforded to the district courts under section 302A.751. Appellants alleged unfairly prejudicial conduct and sought the equitable remedy of a buy-out under section 302A.751, subdivision 2, with the fair value of their shares determined by the court under that section. Although the prototypical minority shareholder claim is asserted by a terminated employee-shareholder, see, e.g., Pedro, 463 N.W.2d at 287, the protections afforded by section 302A.751 are sufficiently broad to bring within its ambit non-employee minority shareholders whose shares are involuntarily redeemed. And it is not difficult to envision circumstances in which relief for unfairly prejudicial conduct would be warranted in the context of a reverse stock split followed by redemption of fractional shares. See, e.g., Elliot M. Kaplan & David B. Young, Corporate “Eminent Domain”: Stock Redemption and Reverse Stock Splits, 57 UMKC L.Rev. 67, 79 (Fall 1988) (noting concern that “majority not manipulate the timing of a freeze-out transaction ... to create an artificially low price for the stock”). Thus, in an appropriate case, a frozen-out shareholder should be able to obtain relief under section 302A.751. We simply hold today that this is not that case.
The availability of equitable relief under section 302A.751 necessarily depends on the particular facts of a case, and on the record in this case we have determined as a matter of law that the conduct alleged by appellants was not unfairly prejudicial. The board of Cold Spring Granite (CSG) observed appropriate corporate formalities in voting on the reverse stock split and the redemption of resulting fractional shares, obtaining an independent appraisal of the corporate shares and holding meetings to discuss the structure of the proposed transaction and the appropriate value to be paid for redeemed shares. Notably, the CSG board had independent directors who questioned the appraiser outside the presence of the interested directors and voted unanimously to approve the transaction. Interested directors abstained from voting on the transaction. As we have concluded *171in the majority opinion, the record in this case does not provide adequate support to contend that the conduct of the transaction frustrated appellants’ reasonable expectations as shareholders. Accordingly, we conclude they are not entitled to relief under section 302A.751.