Hennepin County District Court File No. CT 03-2445.
Considered and decided by Lansing, Presiding Judge; Kalitowski, Judge; and Wright, Judge.
A corporation's bylaws establish rules of internal governance, which, like contracts and statutes, are construed according to their plain meaning within the context of the document as a whole.
The opinion of the court was delivered by: Lansing, Judge
In this dispute among shareholders of a family-owned corporation, the district court ruled on cross-motions for summary judgment; directed entry of final judgment on several claims in accordance with Minn. R. Civ. P. 54.02; and, relying on a stipulated agreement, referred the remaining claims for determination by a court-appointed referee. John Isaacs appeals the summary-judgment dismissal of his claims for relief under Minn. Stat. §§ 302A.467 and .751 (2002) for improper and prejudicial conduct in violation of corporate bylaws. Although we analyze the issues differently from the district court, we conclude that dismissal was appropriate and affirm as modified. We decline to address John Isaacs's motion to strike and motion to vacate. We also decline to address Mindy Odegard and Fred and Rhea Isaacs' motion to dismiss.
Fred Isaacs owns fifty-four percent of American Iron & Steel Company. Fred Isaacs's son, John Isaacs, owns the remaining forty-six percent. Before July 2002, American Iron had two board members--Fred and John Isaacs. John Isaacs was also employed with American Iron and has held the positions of president, CEO, COO, and treasurer.
At the July 2002 shareholder meeting, Fred Isaacs voted his majority shares to expand the board of directors from two members to four and to elect Mindy Odegard, his daughter, and Rhea Isaacs, his wife, to the new directorships. John Isaacs voted against the expansion of the board and the election of Odegard and Rhea Isaacs. Over a period of approximately five months, the newly constituted board demoted, suspended, and eventually terminated John Isaacs from his positions with the company.
In his complaint, John Isaacs alleged multiple claims arising from the July 2002 shareholder meeting and the board actions that followed. In part, he claimed that the election of Odegard and Rhea Isaacs violated American Iron's bylaws and demanded equitable relief under Minn. Stat. §§ 302A.467 and .751 (2002). Odegard and Fred and Rhea Isaacs moved for summary judgment on those claims.
On the section-302A.751 claim, the district court concluded that the bylaws had been violated, but the claim was moot because Fred Isaacs could have acted in a manner compliant with the bylaws and achieved the same result. The district court dismissed the section-302A.467 claim for failure to specify which section of chapter 302A had been violated.
The district court ordered entry of judgment on these issues under Minn. R. Civ. P. 54.02, and John Isaacs appeals. In accordance with a stipulation reached among all of the Isaacs and Odegard, the claims and counterclaims that ...