Shareholder claim survives: Wisconsin Supreme Court does not extinguish dissolution claim.

• Author: Ziemer, David

Byline: David Ziemer

A minority shareholder who is frozen out of a corporation can seek broad equitable remedies for oppression in an action for dissolution.

However, he cannot bring a direct action for loss of corporate opportunities.

On April 29, a divided Wisconsin Supreme Court ruled in favor of the majority shareholders on one claim, and the minority shareholder on two others.

However, how these holdings will affect the remedies available, should the minority shareholder prevail, poses an interesting question.

An appraisal action over the same conduct is currently pending in federal court, prompting Justice Patience Drake Roggensack to ponder in a concurrence: Why [the plaintiff] would choose to continue with his claim for dissolution is a mystery to me.

However, until fair value is determined by the United States District Court, I will go along with the majority opinion's decision to permit [the] claim for dissolution to proceed.

Edward U. Notz was a minority shareholder in Albert Trostel & Sons Co. (ATS), originally a tannery, but now a diversified corporation with interests and subsidiaries in plastics, among other industries.

According to Notz, ATS looked into acquiring Dickten & Masch (D&M), a competing plastics business, but chose not to. Instead, Everett Smith Group Ltd. (ATS's majority shareholder) bought D&M; the Smith group then bought ATS's plastics subsidiary from ATS.

Notz brought suit against the Smith Group, alleging breach of fiduciary duty, and requesting judicial dissolution based on oppressive conduct.

The circuit court dismissed the breach of fiduciary duty claims, finding that the injuries claimed were common to all shareholders, but allowed the dissolution claim based on oppression to go forward.

The Court of Appeals granted leave to appeal, but while the appeal was pending, ATS initiated a cash-out merger, terminating Notz' status as a shareholder.

The Court of Appeals then affirmed the dismissal of the breach of fiduciary duty claim, but carved out a portion of the claim. The court concluded that the money ATS spent performing due diligence into whether it should buy D&M benefited only the Smith Group, and this part of the suit could go forward.

The court also held that once Notz ceased to be a shareholder, he no longer had standing to pursue the dissolution claim, and directed the circuit court to dismiss that claim. Notz v. Everett Smith Group, Ltd., 2008AP 84, 312 Wis.2d 636, 754 N.W.2d 235.

The Supreme Court...