## Facts

- Dean Jensen worked for Christensen & Lee Insurance, Inc., a closely held corporation, for about 20 years, serving as a top salesperson.
- Jensen was also a minority shareholder and a director of the corporation.
- A shareholders’ retirement agreement provided for a mandatory repurchase of a shareholder’s stock at a defined value upon reaching a specified retirement age.
- The controlling directors/officers terminated Jensen’s employment and, about a month later, removed him from the board.
- Jensen alleged these actions triggered an involuntary repurchase of his shares before the contractual retirement age, when his shares allegedly would have been worth more.
- Jensen further alleged the corporation used a conflicted accountant to undervalue his shares and that the controlling group knowingly relied on that undervaluation.
- Jensen sued the corporation and controlling directors/officers for, among other claims, breach of fiduciary duty; the trial court dismissed the fiduciary-duty claim at the pleading stage.

## Issues

1. Whether the complaint alleged sufficient facts to state a claim that controlling shareholders/directors of a closely held corporation breached fiduciary duties to a minority shareholder by terminating his employment, removing him as director, and forcing an allegedly undervalued repurchase of his shares.

## Decision

- The Wisconsin Court of Appeals reversed the dismissal of the breach-of-fiduciary-duty claim and remanded for further proceedings.
- Taking the allegations as true and construing them in Jensen’s favor, the court held the complaint sufficiently alleged that the controlling group used corporate power to force an early, low-value buyout.
- The court indicated that facial authorization of corporate acts (e.g., termination, use of a buyout agreement) did not bar a fiduciary-duty claim when the alleged purpose was self-interested and harmful to the minority shareholder.

## Legal Principles

- In a closely held corporation, controlling shareholders/directors owe fiduciary duties of good faith, loyalty, and fair dealing to minority shareholders.
- Allegations that controllers used their authority over employment, board status, and compulsory repurchase mechanisms to force a minority shareholder out and acquire shares at an unfairly low value can state a breach-of-fiduciary-duty claim.
- At-will employment status does not preclude a fiduciary-duty claim where termination is alleged to be part of a scheme to appropriate minority equity through an unfair repurchase.
- On a motion to dismiss, the court tests legal sufficiency of the pleadings; well-pleaded allegations and reasonable inferences are accepted as true.

## Conclusion

The court reinstated Jensen’s fiduciary-duty claim, holding that a minority shareholder plausibly alleged that the controlling group in a closely held corporation acted in bad faith by using termination, board removal, and an allegedly conflicted valuation to compel an early repurchase of his shares at a depressed price.


Jensen v. Christensen & Lee Ins., Inc., 157 Wis. 2d 758, 460 N.W.2d 441 (Wis. Ct. App. 1990)