Link v. Link

• Decision Date: 05 November 2019
• Docket Number: Appeal No. 2018AP1715
• Citation: 389 Wis.2d 624,937 N.W.2d 296 (Table),2020 WI App 1
• Parties: Jay LINK, Plaintiff-Appellant, Link Snacks Global, Inc., Plaintiff, v. John LINK, Troy Link, John A. Hermeier and Link Snacks, Inc., Defendants-Respondents.
• Court: Wisconsin Court of Appeals

389 Wis.2d 624

937 N.W.2d 296 (Table)

2020 WI App 1

Jay LINK, Plaintiff-Appellant,Link Snacks Global, Inc., Plaintiff,

v.John LINK,^† Troy Link, John A. Hermeier and Link Snacks, Inc., Defendants-Respondents.

Appeal No. 2018AP1715

Court of Appeals of Wisconsin.

DATED AND FILED November 5, 2019

STARK, P.J.

¶1 This appeal is the latest installment in a longstanding intrafamilial dispute between Jay Link; Jay’s brother, Troy Link; and their father, John (Jack) Link.¹ The three Links owned various companies that produced and distributed meat products. In a prior lawsuit (hereinafter, the 2005 litigation), a jury found that Jack had breached his fiduciary duties to Jay, and Jay had breached his fiduciary duties to Link Snacks, Inc. (Link Snacks). The circuit court subsequently granted Link Snacks’ claim for specific performance of a Buy-Sell Agreement, which permitted Link Snacks to redeem Jay’s shares of the corporation at their fair market value. After the court entered judgment in the 2005 litigation, the parties stipulated to the dissolution of certain other jointly owned companies, including Link Snacks Global, Inc. (Link Global), in which Jay and Troy each held a 50% ownership interest.

¶2 Jay subsequently filed the instant lawsuit, asserting that Jack, Troy, and John Hermeier had each breached their fiduciary duties to him in various ways.² As damages, Jay sought the difference between the fair value and the fair market value of his Link Snacks shares (hereinafter, the fair value claim).³ Jay later amended his complaint to assert additional claims against Jack, Troy, and Hermeier—both on his own behalf and on behalf of Link Global—alleging that they had acted to devalue Link Global’s most profitable subsidiary, Jack Link’s Canada Company (Link Canada), in order to decrease the value of Jay’s 50% share of Link Global (hereinafter, the corporate misappropriation claims).

¶3 Applying the doctrine of claim preclusion, the circuit court concluded Jay’s fair value claim was barred by the final judgment in the 2005 litigation. The court further concluded that Jay lacked standing to bring the corporate misappropriation claims on his own behalf, and that any derivative claim should have been brought on behalf of Link Canada, rather than Link Global. Jay now appeals, arguing the court erred by dismissing his fair value and corporate misappropriation claims. We agree with Jay that the court erred by dismissing his fair value claim because the exception to claim preclusion found in § 26(1)(c) of the Restatement (Second) of Judgments is applicable here, and Jay’s fair value claim is not barred by the applicable statute of limitations as argued by Jack, Troy, and Hermeier. We conclude, however, that the court properly dismissed Jay’s corporate misappropriation claims. We therefore affirm in part, reverse in part, and remand for further proceedings on Jay’s fair value claim.

BACKGROUND

¶4 Jack began selling meat snacks in Minong, Wisconsin, during the mid-1980s. Northern Air Servs., Inc. v. Link , 2011 WI 75, ¶12, 336 Wis. 2d 1, 804 N.W.2d 458 (hereinafter, Link I ). Jack’s sons, Jay and Troy, acquired shares of Jack’s business, Link Snacks, in 1995. Id. At that time, Jack, Jay, and Troy entered into a Buy-Sell Agreement, which, among other things, granted the corporation "the option to redeem all or a portion" of Jack’s, Jay’s, or Troy’s shares if their employment with Link Snacks was terminated. Id. , ¶13. The Buy-Sell Agreement provided that the purchase price for those shares would be their fair market value.⁴ Id.

¶5 In 2002, serious disagreements arose between Jack and Jay about Link Snacks’ operations. Id. , ¶14. In 2005, Jay and Link Snacks executed a Departure Memorandum, in which they agreed that Jay would be terminated as an officer and employee of Link Snacks and its affiliates, and the parties would attempt to negotiate an amicable buy-out of his interests in the various Link-related companies. Id. Those negotiations proved unsuccessful, however, and as a result, Link Snacks, Jack, Troy, and several other plaintiffs commenced the 2005 litigation against Jay. Id. , ¶¶15-16. Among other things, they sought specific performance of the Buy-Sell Agreement and money damages for alleged breaches of Jay’s fiduciary duties. Id. , ¶16.

¶6 Jay subsequently filed various counterclaims, asserting that Jack and Troy had breached their fiduciary duties to him; that their actions in removing him as an officer and shareholder were tortious; and that Jay was oppressed by Jack’s and Troy’s tortious actions. Id. , ¶17. As a remedy for his oppression claim, Jay sought dissolution of Link Snacks and its affiliates under WIS. STAT. § 180.1430(2)(b) (2005-06).⁵ Link I , 336 Wis. 2d 1, ¶17. In the alternative, Jay sought to recover the fair value of his Link Snacks shares, as opposed to the fair market value to which he was entitled under the Buy-Sell Agreement. Id. , ¶¶17-18. It is undisputed that as of July 31, 2005, the fair value of Jay’s Link Snacks shares was $31.8 million, whereas their fair market value was only $19.4 million. Id. , ¶17 n.13. Jay claimed he should be allowed to recover the difference between those amounts because it represented "ill-gotten gain associated with Jack’s and Troy’s wrongful actions." Id. , ¶18.

¶7 In February 2008, the circuit court granted summary judgment to Link Snacks, Jack, and Troy on their claim for specific performance of the Buy-Sell Agreement, but only to the extent that the court determined the Buy-Sell Agreement was a valid, enforceable, and unambiguous contract. Id. , ¶19. The court left for trial Jay’s defense and counterclaim that enforcement of the Buy-Sell Agreement would be oppressive. Id.

¶8 The circuit court ultimately conducted a three-phase trial in the 2005 litigation, beginning in May 2008. Id. , ¶20. Phase I involved claims that are not relevant to this appeal. Id. , ¶20. In Phase II, the court empaneled a jury to resolve the parties’ legal claims against each other for money damages. Id. , ¶21. The jury concluded that Jack had breached his fiduciary duties to Jay, and that Jay had breached his fiduciary duties to Link Snacks and a related entity. Id. , ¶22. Jay believed the proper measure of damages on his breach of fiduciary duty claim was the difference between the fair value and the fair market value of his Link Snacks shares. Id. , ¶98. However, the court prevented him from presenting that damages theory to the jury. Id. , ¶99. The jury instead awarded Jay $736,000 in compensatory damages, which was approximately one year of Jay’s salary when employed by Link Snacks. Id. , ¶22 & n.14.

¶9 During Phase III of the trial in the 2005 litigation, the circuit court addressed the parties’ equitable claims for specific performance of the Buy-Sell Agreement and judicial dissolution of the Link companies. Id. , ¶27. The court concluded, as a matter of law, that Jay was not oppressed under WIS. STAT. § 180.1430(2)(b) (2005-06). Link I , 336 Wis. 2d 1, ¶27. Accordingly, the court denied Jay’s claim for judicial dissolution of Link Snacks and granted Link Snacks’ motion to compel specific performance of the Buy-Sell Agreement. Id. The court ordered Jay to surrender his Link Snacks shares for their appraised fair market value. Id. The parties subsequently entered into an agreement for the judicial dissolution of other Link entities, including Link Global.

¶10 On November 14, 2008, Jay filed a notice of appeal from the circuit court’s judgment in the 2005 litigation. One week later, on November 21, 2008, Jay filed a motion in the circuit court seeking to "enforce" that judgment and compel the redemption of his Link Snacks shares pursuant to the Buy-Sell Agreement. Jay ultimately surrendered his shares to Link Snacks on June 30, 2009. Id. , ¶77.

¶11 In his appeal from the circuit court’s judgment in the 2005 litigation, Jay argued the evidence at trial established oppression as a matter of law. Id. , ¶28. However, because he no longer owned any shares of Link Snacks, Jay requested only money damages as a remedy for that oppression, rather than judicial dissolution of Link Snacks. Id. Jay also argued, among other things, that the circuit court had erred by preventing him from arguing to the jury that the proper measure of damages for his breach of fiduciary duty claim was the difference between the fair value and fair market value of his Link Snacks shares. Id.

¶12 This court ultimately issued an order concluding that Jay had voluntarily waived his right to appeal the circuit court’s decision preventing him from presenting his fair value damages theory to the jury. Id. , ¶31. However, the supreme court accepted Jay’s petition for review of our decision and disagreed with our conclusion in that regard. Id. , ¶97. The supreme court therefore remanded the matter to this court "to decide whether the circuit court erred in limiting the evidence Jay could present regarding his theory of damages relating to his breach of fiduciary duty claims against Jack and Troy." Id. , ¶104. The supreme court also held that once Jay surrendered his Link Snacks shares under the Buy-Sell Agreement, he was no longer a Link Snacks "shareholder" and could not assert a claim for oppression/dissolution under WIS. STAT. § 180.1430(2)(b) (2005-06). See Link I , 336 Wis. 2d 1, ¶81.

¶13 On remand, we concluded the circuit court had erred "by determining that a minority shareholder alleging that majority shareholders breached their fiduciary duties in a ‘squeeze out’ cannot recover the difference between fair value and fair market value for his or her shares where a buyout agreement specifies the latter value." Northern Air Servs., Inc. v. Link , No. 2008AP2897, unpublished slip op. ¶2 (WI App Jan. 18, 2012) (hereinafter, Link II ). We reasoned that a fiduciary is liable for any benefit received as a result of his or her wrongdoing, and the duty of loyalty demands "that a fiduciary be compelled to disgorge any profits received as...