## Facts

- Three brothers (Alfred, Carl, and Eugene Pedro) each owned one-third of a closely held Minnesota corporation, The Pedro Companies (TPC), and worked in the business for decades.
- The shareholders executed a Stock Retirement Agreement (SRA) setting a buyout price at 75% of net book value, used previously for the father’s shares.
- Alfred sought an independent investigation into suspected financial irregularities; he encountered resistance to access and cooperation.
- Carl and Eugene engaged in conduct found by the trial court to be oppressive, including surveilling Alfred, fabricating accusations, spreading false claims that he had a “nervous breakdown,” and threatening termination if he dropped the financial concerns.
- Alfred, age 62 with approximately 45 years of service, was terminated from employment in 1987.
- Alfred asserted a reasonable expectation of continued (effectively lifetime) employment in the family close corporation.
- Alfred sought dissolution; defendants moved to proceed as a statutory buyout under Minn. Stat. § 302A.751.
- After a first appeal held the jury’s verdict was advisory in the equitable proceeding, the trial court on remand ordered a buyout and awarded (1) SRA price for Alfred’s shares, (2) additional damages for breach of fiduciary duty equal to the difference between fair market value and SRA value, (3) lost wages for wrongful termination based on lifetime-employment expectations, and (4) attorney’s fees for bad faith.
- Defendants appealed, challenging liability findings, remedies (including joint and several liability, interest), denial of recusal, and attorney’s fees.

## Issues

1. Whether controlling shareholders in a closely held corporation breached fiduciary duties by forcing out a minority shareholder and using oppressive tactics, even without a decline in overall corporate value.
2. Whether the trial court could award damages to reach fair market value notwithstanding a stock agreement’s formula buyout price.
3. Whether the evidence supported a finding that the terminated shareholder had a reasonable expectation of lifetime employment warranting lost-wage damages.
4. Whether Minn. Stat. § 302A.751 authorized the trial court’s combined equitable relief, including damages, fees, and interest, and whether ancillary rulings (joint and several liability, recusal) were proper.

## Decision

- The court of appeals affirmed the post-remand judgment in all material respects.
- The court upheld findings that Carl and Eugene breached fiduciary duties owed to Alfred as a fellow shareholder in a close corporation.
- The court affirmed an award consisting of the SRA buyout amount plus additional damages equal to the difference between fair market value and the SRA formula value.
- The court affirmed lost-wage damages based on Alfred’s reasonable expectation of continued (lifetime) employment in the close corporation.
- The court upheld the trial court’s authority under Minn. Stat. § 302A.751 to fashion broad equitable relief, including damages beyond the contract price.
- The court affirmed prejudgment interest and attorney’s fees, and rejected the recusal challenge; it also upheld joint and several liability (including on waiver grounds for certain allocation arguments).

## Legal Principles

- Shareholders in a closely held corporation owe each other fiduciary duties of good faith, honesty, and fair dealing; squeeze-out conduct can constitute a breach even if the corporation’s overall value does not decrease.
- In a close corporation, forcing a minority shareholder out through unfairly prejudicial conduct can support fiduciary-duty liability and monetary relief tailored to make the injured shareholder whole.
- A contractual buyout formula in a shareholder agreement does not bar supplemental equitable damages when controlling shareholders use the agreement as part of oppressive conduct; courts may award amounts necessary to reach fair market (fair) value.
- A shareholder-employee in a family close corporation may have a protectable reasonable expectation of continued employment based on the parties’ understandings, history, and corporate structure; wrongful termination may be remedied with lost-wage damages in an oppression proceeding.
- Minn. Stat. § 302A.751 confers broad equitable power to order a buyout in lieu of dissolution and to grant ancillary relief (including damages, interest, and attorney’s fees) appropriate to the misconduct and resulting harm.
- Attorney’s fees may be awarded for bad-faith conduct in close-corporation disputes; recusal requires a showing of bias beyond disagreement with judicial rulings.

## Conclusion

The court affirmed broad equitable remedies for oppressive conduct in a closely held corporation, holding that controlling shareholders who force out a minority owner may be liable for fiduciary-duty breaches and may be required to compensate the minority owner up to fair market value and for lost wages where a reasonable expectation of continued employment is defeated.


Pedro v. Pedro, 489 N.W.2d 798 (Minn. Ct. App. 1992)