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Lund v. Lund

Court of Appeals of Minnesota

January 14, 2019

Kim A. Lund, as trustee and beneficiary of the Revocable Trust of Kim A. Lund; as co-trustee and beneficiary of the Trusts created by the Trust Agreement of Russell T. Lund, Jr. dated February 14, 1990 for the benefit of Kim Lund; as beneficiary of the Trusts created by the Irrevocable Trust Agreement of Russell T. Lund dated July 8, 1969; and as beneficiary of the Qualified Marital Trust under Complete Amendment to Trust of Russell T. Lund, dated September 21, 1984, Respondent,
v.
Russell T. Lund, III, et al., Appellants.

          Hennepin County District Court File No. 27-CV-14-20058

          Richard T. Ostlund, Janel M. Dressen, Shannon M. Awsumb, Anthony Ostlund Baer & Louwagie P.A., Minneapolis, Minnesota (for respondent)

          Steven J. Wells, Jaime Stilson, Timothy J. Droske, Dorsey & Whitney LLP, Minneapolis, Minnesota (for appellants)

          Jonathan M. Bye, Kim M. Ruckdaschel-Haley, Mavis J. Van Sambeek, Ballard Spahr LLP, Minneapolis, Minnesota (for amicus curiae The Probate and Trust Law Section of the Minnesota State Bar Association)

          Considered and decided by Cleary, Chief Judge; Bjorkman, Judge; and Rodenberg, Judge.

         SYLLABUS

         1. If there is no genuine issue of material fact that unfairly prejudicial conduct occurred, a district court may, without conducting an evidentiary hearing, exercise its equitable authority to grant a buy-out under Minn. Stat. §§ 302A.751, 322B.833 (2014).

         2. Minn. Stat. § 501C.0709 (2018), as supplemented by the common law, governs a trustee's entitlement to reimbursement out of trust property for attorney fees and expenses incurred in administration of the trust.

          OPINION

          BJORKMAN, Judge.

         Appellants challenge the district court's grant of a buy-out of respondent's business interests, valuation of the interests, removal of a trustee, and denial of appellant trustees' motion for attorney fees and costs. By cross-appeal, respondent/cross-appellant challenges the district court's grant of summary judgment on her breach-of-fiduciary-duty claims against appellant trustees, denial of her request to remove a second trustee, and determination of the valuation date for the buy-out of her interests. We affirm all rulings except the district court's denial of appellant trustees' motion seeking reimbursement of their attorney fees and costs from applicable trusts. On this issue, we remand to the district court for reconsideration of the motion under the correct legal standard.

         FACTS

         This appeal arises from decades-long friction among the Lund siblings, grandchildren of grocery-chain founder Russell T. Lund Sr., over one sibling's desire to divest her various trusts of interests in three privately held Lund family business entities. Like her three siblings, respondent Kim A. Lund (Kim[1]) is an indirect 25% owner, through certain trusts, of appellants Lunds, Inc., Lund Food Holdings, Inc. (LFHI), and Lund Real Estate Holdings, LLC (LREH) (together, the Lund entities). Appellant Russell T. Lund III (Tres) is the Lund entities' chairman, president, and CEO. He is the only one of the four Lund siblings who is actively involved in running the family businesses.

         In December 2014, Kim commenced this litigation against appellants Tres, the Lund entities, trustee Stanley Rein, and directors Gene Gerke and Mitch Avery, alleging breach of fiduciary duty, unfairly prejudicial conduct under Minn. Stat. §§ 302A.751, 322B.833, [2]and civil conspiracy. She sought damages, a buy-out of her interests or alternatively the sale of the Lund entities, removal of Tres and Rein as trustees of her trusts, [3] attorney fees, expenses, and other relief.

         In July 2016, Kim filed a buy-out motion under Minn. Stat. § 302A.751 and Minn. Stat. § 322B.833, [4] and appellants moved for summary judgment. The district court held a hearing on these and other motions in August. In an order filed on October 4, the district court granted Kim's buy-out motion, denied appellants' summary-judgment motion on Kim's unfairly-prejudicial-conduct and equitable-relief claims; and granted appellants' summary-judgment motion on Kim's breach-of-fiduciary-duty and civil-conspiracy claims. The district court denied appellants' request to file a motion to reconsider the October 4 order.

         After another hearing, the district court set the valuation date for Kim's interests as October 2, 2016, the close of the Lund entities' 2016 fiscal year. When the parties failed to agree on fair value and other buy-out terms within the statutory time period, the district court held a weeklong court trial on these terms and Kim's trustee-removal claims. The district court ultimately determined the fair value of the Lund entities was $191.5 million on October 2, 2016, and the fair value of the interests held by Kim's trusts was $45.2 million.[5] The district court granted Kim's request to remove Tres as trustee of her Russ Jr. and Canadian Oil trusts, but denied Kim's request to remove Rein as trustee of her Canadian Oil trusts. Tres and Rein filed a motion for trustees' attorney fees and costs, which the district court denied. This appeal follows.

         ISSUES

         I. Did the district court abuse its discretion in granting a buy-out under Minn. Stat. §§ 302A.751, 322B.833?

         II. Did the district court abuse its discretion in setting the valuation date or in determining fair value?

         III. Did the district court err in determining Kim's breach-of-fiduciary-duty claims against appellant trustees fail as a matter of law?

         IV. Did the district court abuse its discretion in granting in part and denying in part Kim's trustee-removal claims?

         V. Did the district court err in concluding the common-law standard for an award of trustees' attorney fees and costs is superseded by Minn. Stat. § 501C.1004 (2018)?

         ANALYSIS

         I. The district court did not abuse its discretion by granting a buy-out under Minn. Stat. §§ 302A.751, 322B.833.

         Appellants' primary argument on appeal is that the district court erred as a matter of law in granting Kim's buy-out motion. They contend a decision on a buy-out motion is akin to summary judgment or a directed verdict and therefore subject to de novo review. Kim argues the proper standard of review is ...


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