• February 7, 2014

While neither our religious texts nor our laws mandate that we love our fellow shareholders in closely held companies, the law does impose “fiduciary duties” on and between fellow shareholders and the majority must take care not to behave in a manner that is “unfairly prejudicial” to minority shareholders.  Translation: you don’t have to love fellow shareholders but you have to be nice and inclusive. Even when you hate them.

These duties and responsibilities can sometimes be quite difficult. Let’s say, for example, the majority shareholders feel like a minority shareholder committed “hostile and offensive misconduct in the workplace…[and] belittled and degraded the female employees.”  After he is terminated from his position with the company (for the good of the company, from the majority’s perspective, of course, and not pure self-interest), must the majority shareholders still invite this guy to shareholder meetings and give him a meaningful voice in the management of the company?


Shareholder disputes in closely held business may be the thorniest and complicated of all business disputes. They often involve family members. They often involve deep-seated and long-smoldering resentments. They always involve money. And, maybe most difficult for Minnesota business people (that is, non-lawyers) to appreciate, they involve actors who “wear different hats” — minority shareholder, business partner, boss, subordinate, etc. The acts of one person might trigger different (and maybe even conflicting) responses depending on their various roles.

In the case of James Piche against Bruce Braaten, Michael Brodsho, and Robert Poolman, it seems that the majority of the shareholders failed to appreciate or understand that Piche’s perceived failure and deficits as a supervisor or co-employee did not, by themselves, justify stripping Piche of his rights as a shareholder.

The most important aspect of the Piche v. Braaten case, however, might be its outcome. After a six-day court trial and an appeal, it looks like the ultimate outcome will turn out to be roughly along the lines of the parties’ stock-purchasing agreement entered into back in 2006: Piche is to be bought out with monthly payments over 15 years.

In other words, lawyers battled this case before then-Becker County District Court Judge Michael L. Kirk (now on the Minnesota Court of Appeals) starting in December, 2010, the parties went through a 6-day trial in the summer of 2012, and they went through an appeal decided this week….

Any guess what the legal fees were for the nearly four years of fun?  Anyone want to try to quantify the stress, anxiety, and lost time attributable to civil litigation? And, in the end, the outcome is pretty much the same as if the parties had just followed the stock-purchasing agreement.

Who knew?  No one, of course. But it is a lesson that many civil litigants have learned the hard way, banking on their lawyers to win decisively only to find that the end-result is quite often a punishing and very expensive stale-mate.

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