Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
U.S. Spring Specialties, Inc.,
Dennis J. Gurskis, et al.,
Affirmed in part, reversed in part, and remanded;
motion to strike denied
Ramsey County District Court
File No. C6-96-4581
Joseph J. Dudley, Jr., Brent G. Eilefson, Dudley and Smith, P.A., 2602 Firstar Center, 101 East Fifth Street, St. Paul, MN 55101 (for respondent U.S. Spring Specialties)
John L. Devney, Neal T. Buethe, Briggs and Morgan, 2200 First National Bank Building, 332 Minnesota Street, St. Paul, MN 55101 (for respondents Gurskis, et al.)
Considered and decided by Klaphake, Presiding Judge, Short, Judge, and Willis, Judge.
William O'Neil appeals from a grant of summary judgment to respondents U.S. Spring Specialties, Inc., and its seven individual shareholders. Because appellant indicated at oral arguments that he is not appealing dismissal of his breach of contract claim and because he failed to separately address this claim and his claims of promissory estoppel and civil conspiracy in his brief, we affirm the grant of summary judgment on these claims. We reverse the grant of summary judgment on appellant's other claims involving breach of fiduciary duty, relief under Minn. Stat. § 302A.751, marital status discrimination, constructive discharge, violation of Minn. Stat. § 302A.435, and enforcement of shareholder's rights under Minn. Stat. § 302A.471, because numerous material issues of fact exist on these claims.
Respondent U.S. Spring Specialties Inc. (U.S. Spring) is a closely held corporation. Appellant and the seven individual respondents are all shareholders and directors of U.S. Spring. Respondent JoAnne O'Neil, appellant's former spouse, is also the daughter of respondents Dave and Lou Wethern, the sister of respondent Cindy Gurskis, and the sister-in-law of respondent Dennis Gurskis. Respondents Ron and Marta Snell are married to each other but are not related to any of the other respondents.
Appellant and the individual respondents incorporated U.S. Spring in October 1988. From the beginning, appellant served as the corporation's vice president and was employed as its manufacturing manager. In July 1994, appellant and JoAnne O'Neil divorced. Appellant claims that respondents began complaining about his performance and management style only after his divorce, but respondents claim that after the divorce appellant's work habits deteriorated. At the annual November 1994 board meeting, appellant was criticized because he "didn't have people working," because they were "taking extra breaks" or "extra long lunches." In April 1995, after appellant rejected the board's offer to buy his stock, his job responsibilities were reduced--he was informed that he "would have no authority over any of the employees and that [he] would have no contact with any customers." He was further informed that although his salary would remain unchanged, it was reviewable by the board and there were no guarantees. Appellant refused to accept this demotion and resigned. Appellant's ex-wife, JoAnne O'Neil, began working for the company within months of his resignation.
Summary judgment is appropriate only when there is no genuine issue as to any material fact and either party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. Summary judgment is inappropriate when reasonable persons might draw different inferences or conclusions from the evidence. DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997). In determining whether to grant or deny summary judgment, a district court must not weigh the evidence, or resolve or decide issues of fact. Id. at 70; Nord v. Herreid, 305 N.W.2d 337, 339 (Minn. 1981).
Breach of Fiduciary Duty
Shareholders in a closely held corporation owe one another a fiduciary duty. Evans v. Blesi, 345 N.W.2d 775, 779 (Minn. App. 1984), review denied (Minn. June 12, 1984). That duty requires shareholders to deal "openly, honestly, and fairly with other shareholders." Id. Fiduciaries must act "with the highest standards of integrity and good faith in their dealings with each other." Id. (quoting Prince v. Sonnesyn, 222 Minn. 528, 535, 25 N.W.2d 468, 472 (1946)). Shareholders may breach their fiduciary duty by treating another shareholder unfairly, by unjustifiably interfering with that shareholder's relationship with the corporation, or by frustrating or defeating that shareholder's reasonable expectations, which may include an ownership interest in the company, as well as a "job, salary, a significant place in management, and economic security for his family." Pedro v. Pedro, 489 N.W.2d 798, 802 (Minn. App. 1992), review denied (Minn. Nov. 20, 1992).
In this case, appellant presented evidence that (1) he left a job with another spring manufacturer to join U.S. Spring, which he characterized as a "risky venture," (2) he contributed capital to the new company and served in a substantial capacity as its vice president and manufacturing manager, (3) he understood that he and the other respondents were "building a company together" and had discussions about "growing old" with the company, and (4) when the company became profitable, he and the other respondents received increased salaries and dividends. Given this evidence, a jury could infer that appellant's reasonable expectations included a job, salary, significant place in management, and economic security. Appellant also presented evidence that, after his divorce, his work performance and management style were criticized, his job responsibilities were changed, and his salary and position were jeopardized. Although respondents claim that their actions were justified because appellant's work habits had deteriorated, these are fact questions that are inappropriate for resolution by summary judgment. See, e.g., Pedro, 489 N.W.2d at 801-02 (breach of fiduciary duty claim includes shareholder's harassing and firing plaintiff over his questioning discrepancy in financial records and shareholders fabricating accusations of neglect and malfeasance); Evans, 345 N.W.2d 779-80 (shareholder breached fiduciary duty by using intimidating tactics to obtain majority share and forcing another shareholder's resignation).
Relief under Minn. Stat. § 302A.751
Minn. Stat. § 302A.751, subd. 1(b)(2), (3) (1996) provides that a court may grant "any equitable relief it deems just and reasonable" in a shareholder's action against directors who have acted "fraudulently or illegally" or "in a manner unfairly prejudicial." That equitable relief may include ordering the sale of the corporation's stock to the shareholder or a sale of the shareholder's stock to the corporation. Id., subd. 2.
Conduct that may be "unfairly prejudicial" may also constitute a breach of fiduciary duty. Thus, appellant may be entitled to relief under Minn. Stat. § 302A.751, based on evidence that respondents acted in an unfairly prejudicial manner by voting to terminate him as vice president and manufacturing manager. Again, respondents argue that because their changes in appellant's job responsibilities were justified, because they made a good faith offer to buy out his stock, and because appellant continues to receive dividends on his stock, they have fulfilled their obligations to him. However, whether respondents' buy out offer was fair and whether their decision to demote appellant was justified are fact issues inappropriate for summary judgment. Thus, the district court erred in granting summary judgment on this claim.
Marital Status Discrimination
It is an unfair employment practice for an employer, because of marital status, to discharge or otherwise discriminate against an employee with respect to terms, conditions, or privileges of employment. Minn. Stat. § 363.03, subd. 1 (1996). Marital status is to be interpreted broadly; it applies not only to the employee's marital status, but also to the "identity or situation" of an employee's spouse. Kraft, Inc. v. State, 284 N.W.2d 386, 388 (Minn. 1986); Cybyske v. Independent Sch. Dist. 196, 347 N.W.2d 256, 259-61 (Minn. 1984) (emphasis omitted).
In this case, appellant met the first three requirements of a prima facie case because he presented evidence that he belonged to a protected class, was qualified for his position with the company, and was discharged or otherwise discriminated against by the terms, conditions, or privileges of his employment. See Shockency v. Jefferson Lines, 439 N.W.2d 715, 718 (Minn. 1989); Kepler v. Kordel, Inc., 542 N.W.2d 645, 648 (Minn. App. 1996), review denied (Minn. Mar. 19, 1996). The district court nevertheless concluded that appellant failed to meet the fourth requirement (i.e. that his employer hired someone outside the protected class), because his replacement was also divorced.
The appropriate inquiry, however, is not whether appellant's replacement was also divorced, but whether he was divorced from another shareholder and director of the company. Cf. Kraft, 284 N.W.2d at 388 (anti-nepotism rule denying full-time employment to individuals married to full-time employees constituted discriminatory practice based on marital status). Thus, discrimination based on marital status may exist when an individual establishes he is terminated in retaliation for his divorce or to enable his former spouse to work for the company.
The case cited by respondents is distinguishable. In State v. Floyd Wild, Inc., 384 N.W.2d 185 (Minn. App. 1986), review denied (Minn. May 22, 1986), this court held that an employee of a closely held corporation, who was terminated due to her divorce from another family-member employee, was not discriminated against because the decision to terminate her was not aimed at the institution of marriage itself, but was made in the interests of keeping a productive workplace. The facts of Floyd Wild justified such a decision: the company operated out of an addition to the family home, the terminated employee was employed only because of her family status and often worked on "personal" matters, and the employee and her ex-spouse worked in a close area. In this case, U.S. Spring operates out of a separate location; appellant was a founder and key member of U.S. Spring; appellant was not employed merely because of his family relationships but because of his experience and expertise in manufacturing springs; and appellant's ex-spouse was not employed by U.S. Spring at the time of his demotion. Thus, unlike Floyd Wild, respondents in this case were not forced to resolve a conflict between two individuals working in a close area by choosing to keep one and terminating the other.
Even though appellant resigned from his position, his termination may constitute a constructive discharge if he resigned to escape intolerable working conditions caused by illegal discrimination. See Continental Can Co. v. State, 297 N.W.2d 241, 251 (Minn. 1980). The employer, "with the intention of forcing the employee to quit," must have created those intolerable working conditions. Johnson v. Bunny Bread Co., 646 F.2d 1250, 1256 (8th Cir. 1981). Whether conditions are in fact intolerable for an employee is judged by a reasonable person standard. Hukkanen v. International Union, 3 F.3d 281, 284 (8th Cir. 1993).
Appellant alleges respondents illegally discriminated against him after his divorce and created intolerable working conditions in an effort to force him to quit, as evidenced by their ignoring him, demoting him to a shop position, and removing his job security and pay guarantees. Again, we conclude that genuine issues of material fact exist on this claim, and the district court erred in granting summary judgment.
Violation of Minn. Stat. § 302A.435
Appellant alleges that respondents failed to give him notice of shareholder meetings held in 1995, particularly the spring meeting or meetings at which the valuation of his stock was discussed and the decision to demote him was made. Assuming this meeting was a special meeting, even though appellant opted not to attend any discussion involving buying his stock, he was entitled to some notice that the board also intended to discuss demoting him. See Minn. Stat. § 302A.435, subds. 1, 3 (1996) (shareholder entitled to "notice of all meetings of shareholders" and notice of special meeting must contain "statement of the purposes of the meeting"). Contrary to the district court's ruling on this claim, there is no evidence to suggest or infer that this meeting was an adjourned shareholder's meeting. See id. at subd. 1(1) (notice need not be given of adjourned meeting held within 120 days after date of original meeting).
In addition, from the evidence presented, it may be inferred that the board has met to discuss other issues and that appellant has been excluded from these meetings. In particular, in the fall of 1995, appellant received a letter informing him that respondents had decided that he should resign his director's position. Finally, although appellant attended a December 1995 meeting, he was not given advance notice of the issues to be discussed at that meeting, including the appointment of a new director and the adoption of new bylaws. Thus, appellant has presented sufficient evidence to establish that genuine issues of material fact exist on whether respondents improperly excluded him from meetings.
Action to Enforce Rights under Minn. Stat. § 302A.471
Appellant alleges that he was rebuffed in his efforts to call a special meeting to discuss another company's offer to purchase U.S. Spring and that he was entitled to vote on this issue. He seeks relief under Minn. Stat. § 302A.471, subd. 1 (1996), which provides that a shareholder may dissent from and obtain payment for the fair value of his stock in the event of a corporate action that materially and adversely affects the dissenting shareholder's rights.
Appellant argues that he properly demanded a special meeting in a September 25, 1995 letter, but that he never received a response. Appellant was entitled to demand a special meeting. See Minn. Stat. § 302A.433, subd. 2 (shareholders may demand special meeting through written notice to chief executive officer, and within 30 days the board "shall cause a special meeting * * * to be called"). Although the language of his letter requests, rather than demands, a board meeting, its details, including setting out the purpose of the meeting and discussion topics, and requesting input on the time and place of the meeting, create genuine fact issues on whether appellant is entitled to relief under this statute.
In oral arguments before this court, appellant indicated that he is not appealing the district court's grant of summary judgment on his breach of contract claim. In addition, appellant failed to separately address his promissory estoppel and civil conspiracy claims in his appellate brief. We therefore affirm the grant of summary judgment on these claims.
Motion to Strike
Finally, appellant moves to strike portions of respondents' brief and appendix. See Minn. R. Civ. App. P. 110.01 (record on appeal consists of papers and exhibits included in proceedings before trial court). Even if respondents' brief includes or refers to materials or evidence not properly part of the record, these inclusions are not relevant to our decision and have not affected it. We therefore deny appellant's motion to strike.
Affirmed in part, reversed in part and remanded; motion to strike denied.
 This court must view the evidence in the light most favorable to appellant, the party against whom summary judgment was granted. Grondahl v. Bullock, 318 N.W.2d 240 (Minn. 1982).