679 F.3d 627 (7th Cir. 2012), 10-3509, Albert Trostel & Sons Co. v. Notz
|Citation:||679 F.3d 627|
|Opinion Judge:||EASTERBROOK, Chief Judge.|
|Party Name:||ALBERT TROSTEL & SONS COMPANY, Plaintiff-Appellee, v. Edward NOTZ and Sandra K. Notz, Defendants-Appellants.|
|Attorney:||Thomas L. Shriner, Jr. (argued), Foley & Lardner LLP, Milwaukee, WI, for Plaintiff-Appellee. Matthew W. O'Neill (argued), Fox, O'Neill & Shannon, Milwaukee, WI, for Defendants-Appellants.|
|Judge Panel:||Before EASTERBROOK, Chief Judge, and TINDER and HAMILTON, Circuit Judges.|
|Case Date:||May 10, 2012|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued Sept. 21, 2011.
Albert Trostel & Sons Company (Trostel) was founded in 1858. By 2007 the founder's relations still owned about 11% of its stock. Everett Smith Group, Ltd. (Smith), which owned the other 89%, decided to acquire the remaining shares via a freezeout merger. Voting was a formality; Smith's shares assured the merger's approval. Trostel became Smith's wholly owned subsidiary. Edward Notz, one of Albert Trostel's great grandchildren, who owned 5.5% of the stock (some directly, some through a trust), rejected the proffered compensation of $11,900 per share— which came to about $7.7 million for his 5.5% interest. Notz contended that the shares were worth more than twice that much. The rest of the outside investors accepted the offer, however.
When investors dissent and reject the compensation offered in a merger or other major restructuring, a Wisconsin corporation must commence a judicial proceeding to have the stock appraised. Wis. Stat. § 180.1330(1). Trostel filed in the United States District Court for the Eastern District of Wisconsin under the diversity jurisdiction, 28 U.S.C. § 1332(a): Trostel is incorporated in Wisconsin and has its principal place of business there, both Edward Notz and the trustee (Sandra Notz) are citizens of Illinois, and the amount in controversy substantially exceeds $75,000. Notz nonetheless contended that the court lacks subject-matter jurisdiction. He insisted that appraisal proceedings must be conducted in state court. The district judge disagreed and denied Notz's motion to dismiss. 536 F.Supp.2d 969 (E.D.Wis.2008). After a trial, the judge concluded that the fair value of Trostel's stock on the merger date was $11,900 per share. 2010 WL 3835117, 2010 U.S. Dist. LEXIS 108778 (E.D.Wis. Sept. 28, 2010). Notz's appeal contests both the jurisdictional ruling and the calculation of the stock's value.
Notz's jurisdictional argument rests on Wis. Stat. § 180.1330(2), which provides that " [t]he corporation shall bring [the appraisal action] in the circuit court for the county where its principal office ... is located." Subsection (4) adds that " [t]he jurisdiction of the court in which the special proceeding is brought under sub. (2) is plenary and exclusive."
Wisconsin draws its corporate code from the Model Business Corporation Act, so this language or something similar appears in the statute books of 30 states. Several other states, including Delaware, have functionally identical provisions. Truck Components Inc. v. Beatrice Co., 143 F.3d 1057, 1061-62 (7th Cir.1998), holds that Delaware's version concerns venue rather than jurisdiction. See also TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456, 460 n. 3 (2d Cir.1982) (dictum understanding New York law the same way). Treating the statute...
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