Applicable Statute: 302A.751, subd. 3a – In determining whether to order equitable relief, dissolution, or a buy-out, the court shall take into consideration the duty which all shareholders in a closely held corporation owe one another to act in an honest, fair, and reasonable manner in the operation of the corporation and the reasonable expectations of the shareholders as they exist at the inception and develop during the course of the shareholders’ relationship with the corporation and with each other.
The court in the case of Pedro v. Pedro 489 N.W.2d 798 (M.N. Court of Appeals 1992), held that when the shareholder shows enough evidence of liability, the shareholder could recover both lost wages and damages for breach of fiduciary duty.
In this case, the court found that defendant shareholders in the closely held corporation breached a fiduciary owed to the plaintiff shareholder when evidence was presented that they harassed and fired the plaintiff after he insisted on resolving a discrepancy in financial records, even though there was no showing of diminution in value of corporation or value of plaintiff’s stock.
The shareholder/employee of the closely held corporation who prevailed on the claim that other shareholders had breached fiduciary duty in firing him, was entitled to damages in the amount of the difference between fair value of his stock and the lesser amount which defendants were contractually required to pay him pursuant to stock retirement agreement.
The trial court has broad equitable powers in fashioning relief for buyout of shareholders in closely held corporations. The court can look to shareholder’s ownership interest as well as his reasonable expectations when awarding damages under M.S.A. 302A.751, subd. 3a.
These cases typically hinge on whether or not the plaintiff can show sufficient evidence for the trial court to determine that there was a breach of fiduciary duty. When that is shown, the trial court can order an equitable buyout.
The Minnesota Supreme Court in Advanced Communication Design, Inc. v. Follett 615 N.W.2d 285 (2000) held that: