## Facts

- Black Hills Jewelry Manufacturing Co. (BHJMC) was a South Dakota close corporation with four shareholders: Jo Landstrom (minority) and J. Milton “Milt” Shaver, Jack Devereaux, and Constance Drew (remaining shareholders).
- A buy-sell agreement governed stock transfers and included a veto mechanism enabling other shareholders to block a proposed transfer.
- Landstrom alleged Shaver did not disclose the veto provision and that the remaining shareholders used it to prevent her from selling her shares and to keep her locked into the corporation.
- Landstrom sued the remaining shareholders asserting an equitable claim for shareholder oppression and legal claims including breach of fiduciary duty, tortious interference with prospective economic advantage, negligent misrepresentation, and negligence.
- The case was tried in a consolidated proceeding: the jury returned a binding verdict on the legal claims and an advisory verdict on oppression.
- The jury found the remaining shareholders intentionally interfered with Landstrom’s business relations and expectancies by refusing either to sell all shareholders’ stock or to allow Landstrom to sell her stock.
- The trial court adopted findings and conclusions on oppression consistent with the advisory verdict and awarded substantial relief.
- On appeal, the remaining shareholders argued, among other points, that Landstrom’s claims were derivative (belonging to the corporation) and that consolidating legal and equitable claims was improper.

## Issues

1. Whether a minority shareholder in a close corporation may pursue a direct action rather than a derivative action when the challenged conduct also affects the corporation.
2. Whether the remaining shareholders’ use of the buy-sell agreement (including the veto mechanism) and refusal to permit a sale constituted shareholder oppression.
3. Whether the trial court abused its discretion by trying legal claims and an equitable oppression claim together, with the jury rendering a binding verdict on legal claims and an advisory verdict on the equitable claim.
4. Whether the evidence and relief (including damages and equitable remedies) were proper.

## Decision

- The Supreme Court of South Dakota affirmed in part and reversed in part.
- The court approved allowing Landstrom to proceed by direct action under a close-corporation fairness approach, rather than requiring a derivative suit.
- The court upheld the trial court’s approach to the oppression claim in substantial part, including reliance on the jury’s advisory verdict and the court’s independent equitable findings.
- The court held the trial court did not abuse its discretion by consolidating legal and equitable claims for trial.
- The court reversed or modified certain aspects of the judgment, while leaving the core liability and major rulings intact.

## Legal Principles

- In a close corporation, a minority shareholder may be permitted to sue directly (instead of derivatively) when: (a) a derivative recovery would likely benefit alleged wrongdoers through increased corporate value, (b) a direct action reduces multiplicity of suits, and (c) direct recovery will not materially prejudice creditors or impair the corporation’s ability to operate.
- Majority shareholders in a close corporation can commit actionable oppression by using corporate or contractual mechanisms to frustrate a minority shareholder’s reasonable expectations, including the ability to obtain a fair exit.
- A trial court may consolidate related legal and equitable claims for a single trial when efficiency is served and prejudice is not shown; a jury may decide legal claims while serving an advisory role on equitable claims, with the judge making independent findings on equity.

## Conclusion

The court largely sustained a minority shareholder’s direct claims in a close-corporation dispute, concluding that the remaining shareholders’ conduct supported tort liability and equitable oppression findings, and that consolidating the legal and equitable claims in one trial was permissible, while modifying portions of the overall relief.


Landstrom v. Shaver, 561 N.W.2d 1 (S.D. 1997)