Court Opinion

ID: 9685690
Source: CourtListenerOpinion
Date Created: 2023-08-24 14:57:22.147672+00
Date Added: 2024-06-11T18:18:09.496949
License: Public Domain

KEITH, Justice
(concurring in part, dissenting in part).
I concur in Section I and dissent in Section II of the lead opinion.
*21I. Claims Arising from the Pre-July 21, 1986 Events
The appellant PJ Acquisition Corporation (hereafter known as PJ) makes separate, claims relating to the misconduct of the respondents occurring before PJ acquired its shares on July 21, 1986 and misconduct occurring after that date.
The record is clear that the claims asserted by PJ are derivative in nature. These claims fail to allege any direct injury to appellants as shareholders. Rather, they claim injury to the corporation, Vikings II. The dissent appears to agree that the claims are derivative but asserts that Minn. Stat. ch. 302A as amended in 1983 make equitable relief possible.
A careful review of the available legislative history of the 1983 amendments to Minn.Stat. § 302A makes clear that the Legislature wanted to expand protection of minority shareholders from unfair conduct by corporate directors or officers. The amendments to Minn.Stat. § 302A.751 apply to shareholders’ suits which seek individual redress, not redress for injury to the corporation itself. This history makes no mention of derivative claims and Minn.Stat. § 302A.751 as amended in 1983 makes no mention of derivative claims. Clearly, Minn.Stat. § 302A.751 has not superseded Rule 23.06 of the Minnesota Rules of Civil Procedure.
Rule 23.06 requires that a shareholder bringing a claim to enforce a right of the corporation must have owned the stock at the time of the alleged misconduct. This rule prevents plaintiffs from purchasing stock for the sole purpose of bringing a derivative claim. It would not make sense to permit a plaintiff to avoid this requirement of Rule 23.06 simply by characterizing this derivative claim as a violation of § 302A.751. This was not the result intended by the 1983 amendments to the statute. Thus, the claims of misconduct occurring before PJ acquired its stock were properly dismissed by the district court.
The dissent argues that claims of misconduct arising out of the 1984 Lynn employment contract can be maintained because the Board of Directors of Vikings II voted on September 2, 1987, after PJ acquired its stock, to affirm this contract. Acts of misconduct often have effects which last many years. However, “what must be decided is when the specific acts of alleged wrongdoings occur, not when their effect is felt.” 13 Fletcher Cyclopedia of the Law of Corporations, § 5982, p. 234 (perm.rev.ed. 1984). Here, the contract was consummated before PJ was a shareholder and PJ knew of the contract when it acquired its shares. This does not constitute a continuing wrong simply because payments are currently made under the contract. Neither does the Board of Directors’ later affirmation of the contract constitute a continuing wrong. The dissent’s approach would expand the analysis of the “continuing wrong” theory to a point where the contemporaneous ownership required of Rule 23.06 is undermined. The facts of this case do not bring PJ’s claims within the “continuing wrong” exception and all claims relating to the Lynn employment contract were properly dismissed.
II. Claims Arising from Post-July 21, 1986 Events
The remaining claims allege that respondents’ officers and directors breached fiduciary duties owed by them to PJ and Vikings II in connection with various actions taken to transfer, after July 21, 1986, the original Boyer Trust stock to the Boyer Daughters Trust and ultimately to BWDL Associates, a partnership.
The lead opinion concludes that under the facts of this case, this stock acquisition was not a corporate opportunity and therefore the transfer of this stock breached no legal duties the officers and directors owed to the corporation.
PJ claims that the acquisition of the Boyer shares was a corporate opportunity which the respondents as officers and directors of Vikings II had usurped or appropriated to their own profit. PJ argues that there is a fact issue as to whether the shareholders of Vikings II had a preexisting policy of first offering available stock to the corporation. The dissent clearly points out that the 1983 amendments to Minn.Stat. § 302A provide minority share*22holders with additional protection from oppressive conduct by majority shareholders. These amendments require that shareholders in a closely held corporation owe each other a duty to act fairly and honestly apart from their specific contractual and statutory duties. Minn.Stat. § 302A.751, subd. 3(a) (1988). If the shareholders of Vikings II had an unwritten expectation that available shares would first be offered to the corporation, then the acts of the respondents may have violated their fiduciary duty. This is clearly a question of fact and summary judgment in favor of the defendants was improper and should have been denied.
In summary, I concur with Section I of the lead opinion and dissent from Section II.