Family Feud: A Cautionary Tale of the Costs, Risks, and Uncertainty of Minority-Shareholder Litigation

There is no shortage of ways in which parties in closely held corporations or partnerships can find themselves at odds. Those shareholders who control the majority of a company’s stock generally set the corporate strategies and make key decisions. But their rights to set that strategy and make those decisions are tempered by the fiduciary duty they hold to their other shareholders, even those in the minority. If a minority shareholder believes the majority shareholders are acting in a way that is unfair or “oppressive” to her or that she is being “frozen out,” she can bring a suit seeking various relief— up to, and including, dissolving the corporation.

But litigation is an inherently risky game. It is expensive, can last for years, is emotionally tolling on those involved, and offers little certainty on what will happen—especially in the minorityshareholder dispute scenario where valuations of closely held corporations can vary wildly. For these reasons, litigation should be the last resort after every other avenue fails.

The Lund v. Lund case serves as a reminder of the challenges, risks, and uncertainty of litigation.¹ In December 2014, one of the four Lund siblings, Kim Lund, brought suit against company CEO Russell T. (“Tres”) Lund III (her brother), the Lund entities (a trustee), and directors of the board, alleging breach of fiduciary duty, unfairly prejudicial conduct,² and civil conspiracy. In 2016, she brought a buy-out motion seeking to be bought out of her 25% share of the family grocery business. Defendants moved for summary judgment. In October 2016, the court granted the motion, finding that Kim Lund was, as a minority shareholder, “in a particularly vulnerable position.”³ At the same time, the court denied Defendants’ summaryjudgment motion on Kim’s unfairly prejudicial-conduct and equitablerelief claims but granted Defendants’ summary-judgment motion on Kim’s breach-of-fiduciary-duty and civilconspiracy claims. In other words, each side won and lost some, but winning the buy-out motion was a big win for Kim. Yet, her battle was far from over.

After the parties were unable to agree on a buy-out price, the court held a one-week trial in February 2017.⁴ The parties’ experts had wildly diverging opinions on the value of the company and, in turn, Kim Lund’s share of the business. Kim Lund’s expert opined that her share was worth $80.4 million, while Defendants’ expert opined it was $21.275 million. In June 2017, the court ultimately decided her share was valued at $45.2 million—squarely between the two valuations. Id. at 284. But the case was still not over.

Both parties appealed the trial court’s ruling; Kim appealed the grant of summary judgment on her breachof-fiduciary-duty and civil-conspiracy claims, as well as the court’s denial, in part, of her trustee-removal claims. On January 14, 2018—over four years after she filed suit—the Minnesota Court of Appeals affirmed in large part the trial court’s order (it reversed and remanded, holding that the trial court used the wrong standard on the issue of whether Defendants could recover nearly $800,000 in attorney fees and costs from Kim’s trusts). On March 27, 2019, the Minnesota Supreme Court declined to review the Defendants’ appeal, finally bringing the legal matter to a close.

And while the legal battle was costly for all in terms of attorney fees, all parties likely incurred greater costs that cannot be quantified. As was reported during the trial, “the two other Lunds siblings … have testified that Kim’s deal would unfairly place her interests above theirs, including endangering the full amount of their dividend payouts.”⁵ While it goes unmeasured, one cannot underestimate the unquantifiable cost of having siblings testify against siblings.

By any legal measure, Kim Lund “won” her case. But she no doubt paid a heavy price and spent years with the uncertainty before obtaining that win. And her adversaries faced the same price and uncertainty during those nearly five years of litigation—and then lost. Thus, this story is a cautionary tale for potential litigants in any litigation, but particularly those considering going to battle against family members. Go into litigation braced for a lengthy, and emotionally and financially fraught, battle. And go into it only if you have exhausted all other options.