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Afremov v. Amplatz

January 13, 2004


Hennepin County District Court File No. CT 02-017734

Considered and decided by Willis, Presiding Judge; Schumacher, Judge; and Poritsky, Judge.*fn1

The opinion of the court was delivered by: Willis, Judge

Affirmed in part, reversed in part, and remanded


AGA Medical Corporation (AGA) is a Minnesota closely held corporation. At its inception, the corporation's three shareholders—respondent Michael Afremov and appellants Franck Gougeon and Kurt Amplatz—acted as directors and officers in the corporation. After several profitable years during which the shareholders cooperated in the management of the corporation, Gougeon and Amplatz, claiming that Afremov was involved in employee misconduct, took various actions against him. Afremov sought equitable relief from the district court.

The district court issued a temporary injunction against appellants AGA, Gougeon, and Amplatz; the district court later clarified the injunction. After the clarification, appellants appealed from the temporary injunction. The district court then issued a modified temporary injunction. Appellants also appealed from the modified injunction, consolidating this appeal with their original appeal. We affirm in part, reverse in part, and remand.


AGA was incorporated in 1995; the company develops, manufactures, and distributes medical devices designed to treat heart defects. After incorporation, Afremov, Amplatz, and Gougeon each became one-third shareholders in the company, and each became a director. Afremov acted as vice president of operations responsible for research and development, manufacturing, and quality control at AGA. Gougeon was the executive vice president for administration, responsible for supervising the administrative, regulatory, marketing, clinical, and financial affairs of the corporation. Amplatz was the president of AGA.

In September 1999, Amplatz entered into a share-redemption agreement with AGA under which AGA would buy out Amplatz's ownership interest in the company over time. The agreement provided that there would be no penalty if AGA accelerated the payment schedule for redemption of Amplatz's shares. At the same time that AGA executed the share-redemption agreement, Gougeon, on behalf of AGA, executed a pledge agreement with Amplatz, describing, inter alia, who would have the voting rights in Amplatz's shares during the term of the purchase contemplated by the share- redemption agreement. Since this litigation began, two inconsistent pledge agreements have surfaced. The first provides that "[p]rior to the occurrence of any Event of Default, AGA will have the right to exercise all voting rights with respect to [Amplatz's] Pledged Shares." Under the second pledge agreement, Amplatz retains his voting rights in all of his shares until AGA makes its final payment. Afremov claims that he never saw the second pledge agreement before the start of litigation; he also claims that he never agreed to the terms of the second pledge agreement and that Amplatz has no voting rights for his stock because the first pledge agreement is the effective agreement. In spring 2002, AGA attempted to accelerate the purchase of Amplatz's shares by tendering full payment to Amplatz under the share-redemption agreement. But Amplatz refused the payment.

In October 2002, at the first board meeting since 1999, Amplatz and Gougeon voted together to elect Gougeon CEO over Afremov's objection. After the meeting, Gougeon terminated Afremov's employment with AGA. Appellants claim that Gougeon fired Afremov for cause.

In December 2002, AGA held another board meeting at which, over Afremov's objection, Amplatz and Gougeon voted to create an AGA subsidiary corporation, Amplatzer Medical Sales Corporation (Amplatzer), to receive certain AGA assets and operations. After the December 2002 board meeting, on December 19, 2002, Afremov filed an action in district court, seeking equitable relief to protect his rights and to preserve his interest in AGA. Afremov sought a temporary restraining order (TRO) to stop Amplatz and Gougeon from, among other things, transferring AGA assets and operations to the subsidiary.

Appellants attempted to persuade the district court that if AGA did not establish the subsidiary corporation before December 31, 2002, AGA would lose "millions" of dollars in tax savings; acting on this information, the district court set an emergency hearing for December 31, 2002, and requested that appellants provide documentation to support their claim. Before the December 31, 2002 meeting, appellants cancelled the emergency hearing without providing the requested documentation, and the hearing was rescheduled for January 28, 2003.

Pending the outcome of the January 2003 hearing, the district court ordered appellants not to transfer any AGA assets or operations to a subsidiary, unless appellants could "guarantee the availability of $30,000,000" for a possible judgment in Afremov's favor. Although appellants produced a letter of credit showing AGA's assets and available funds, the district court found that the letter was "inadequate as a guarantee."

On March 26, 2003, the district court ordered equitable relief, pursuant to Minn. Stat. § 302A.751 (2002), which is the Minnesota business corporations statute governing judicial intervention and equitable remedies and dissolution. The March order reads, in part:

1. Until further order of this Court, the Defendants are restrained from creating and/or transferring any of the assets of or operations of AGA to any entity, whether a subsidiary or not, unless the following conditions are met:

a. Defendants Amplatz and Gougeon, personally, and Gougeon, on behalf of AGA, must provide in writing to the Plaintiff their agreement that Plaintiff has and will have an ownership interest in any such entity equal to his current interest in AGA as determined by this litigation;

b. All decisions involving the operations of AGA and any other affiliated entity or subsidiary must be by unanimous vote of Plaintiff Afremov and Defendants Amplatz and Gougeon. If the vote is not unanimous, the proposed action cannot take place.

At a May 1, 2003 hearing, the district court clarified its March 26, 2003 order for temporary injunctive relief (March order) by stating that the unanimity requirement existed whether or not the subsidiary was created. The court stated that the unanimity requirement in the March order applied to "all decisions involving the operations of AGA"; this requirement applied even in the event that AGA did not create a subsidiary corporation or transfer assets and operations to a subsidiary. Appellants then immediately appealed the March order.

On May 22, 2003, the district court modified the temporary injunction against appellants by appointing a receiver. In the May 22, 2003 order (May order) the district court recognized "the strong arguments made in [appellants'] brief against compliance as well as [appellants'] insistence that [the parties] will remain in a deadlock to the detriment of the corporation, [and therefore] any attempt to enforce the March 26th Order appears useless." The district court modified the March order by providing that (1) if Afremov, Amplatz, and Gougeon unanimously agree on a proposed corporate action, that action can be taken; (2) if there is not unanimity, the receiver is required to evaluate a proposed action of the corporation and authorize that action if the ...

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