Rupp v. Thompson
| Decision Date | 27 August 2003 |
| Docket Number | No. C5-03-347.,C5-03-347. |
| Parties | Steven Rupp, Douglas Albin, Vincent Bot, James Larson and Michael Zins, Plaintiffs, v. L. Daniel Thompson, Michael Mote, Roger Untiedt, Larry Schiavo, Joseph Bennett, Daniel Stacken, Stanley Sitton, Roger Evert, Jerry Jacoby and John and Mary Doe, Defendants. |
| Court | Minnesota District Court |
Patrick S. Williams, Bryant D. Tchida and Scott G. Knudson, Briggs and Morgan, Minneapolis, Minnesota, appeared on behalf of Defendants.
The above-entitled matter came on for hearing before the undersigned Judge of District Court on August 27, 2003 at the Brown County Courthouse in New Ulm, Minnesota.
The matter came on pursuant to Defendants' motion to dismiss for failure to state a claim upon which relief can be granted and motion for attorneys' fees. The matter also came on pursuant to Plaintiffs' motion to amend the Complaint to make "technical amendments" and to assert a claim for punitive damages as against Defendant Thompson.
Based upon the arguments of counsel at the hearing and the contents of the file, including the written memoranda and affidavits submitted by counsel, the Court makes the following:
ORDER
1. Plaintiffs' motion for permission to amend the Complaint is GRANTED.
2. Defendants' motion to dismiss Count I of the amended Complaint is DENIED.
3. Defendants' motion to dismiss Count II of the amended Complaint is DENIED.
4. Defendants' motion to dismiss Count III of the amended Complaint is GRANTED.
5. Defendants' motion to dismiss Count IV of the amended Complaint is DENIED.
6. Defendants' motion to dismiss Count V of the amended Complaint is GRANTED.
7. Plaintiff's motion for permission to amend the Complaint to allege punitive damages against Defendant Thompson is DENIED as being premature at the present time.
8. Defendants' motion for an award of attorneys' fees is DENIED.
9. The following MEMORANDUM is incorporated herein by reference.
MEMORANDUMThis a class action brought by five (5) Plaintiffs who owned Class A shares in Minnesota Corn Processors, Inc. ("MCP") between March 27, 2002 and September 5, 2002 and who tendered their shares as a result of the cashout merger ("the merger") that occurred between MCP and Archer Daniels Midland ("ADM") on September 5, 2002. Plaintiffs claim to represent approximately 5,500 persons, mostly Minnesota residents, who held approximately 130,000,000 MCP Class A shares or units. Plaintiffs are suing nine (9) Defendants who served as officers or directors of MCP during the time period leading up to the merger.
The following is a summary of the facts asserted by Plaintiffs.
Plaintiffs allege that Defendants, in connection with the merger, committed, or acquiesced in other officers/directors committing, self-dealing, corporate waste, looting, breaches of fiduciary obligations, and breaches of the duty of loyalty. Plaintiffs allege Defendants employed intimidation and disseminated misleading information, including misleading proxy materials that Plaintiffs allege resulted in Defendants improperly enriching themselves by millions of dollars.
MCP was formed as a Minnesota cooperative in 1980. Throughout its existence it was engaged in processing of field corn, creating from that corn such products as sweeteners and ethanol.
In 1997, ADM invested $120,000,000 in MCP and received a 30% non-voting interest in MCP via ownership of Class B shares.
In July of 2000 MCP became a Colorado limited liability corporation. This is apparently when MCP issued the Class A shares at issue in this litigation.
Plaintiffs allege that Defendant Thompson, the President and Chief Executive Officer ("CEO") of MCP, went to Chicago, Illinois on March 27, 2002 to meet with ADM officials. At that meeting, Plaintiffs claim, Defendant Thompson indicated to the ADM officials that he would be able to obtain a merger arrangement whereby ADM could obtain MCP shares or control of MCP at a price of $2.80 per share. A letter written by Defendant Thompson attached to the Moilanen Affidavit of August 12, 2003 (filed under seal) contains what Plaintiffs claim to be an expression by Defendant Thompson of his undertaking to undercut the MCP Board's direction that $3.00 per share should be received in any transaction. Plaintiffs allege that Defendant Thompson did not tell MCP's Board of Directors about this meeting. They further allege that, had it not been for Defendant Thompson's activities, there would have been no merger, at least at the price which was ultimately paid for the shares.
Plaintiffs allege that Defendants Bennett and Stacken joined the discussions with ADM in April of 2002 and that the Defendants obtained the assistance of two (2) investment banking firms, ING Financial Markets, LLC and Morgan Lewins & Co., Inc., and a Houston-based law firm, Vinson & Elkins.
On April 22, 2002, Defendants Thompson, Mote, Untiedt, Schiavo, Bennett, Stacken, Sitton and Evert entered into Change of Control Agreements with MCP. These agreements provided that corporate officers were to obtain a certain amount of remuneration in the event that there was a change of control of MCP. Defendant Thompson's Employment Agreement was also modified on that date to enhance his salary and provide for a lump sum payment in the event of merger with another entity. It was on April 22, 2002 when Defendants allegedly first told the Board of Directors of the plans to sell MCP or merge it with ADM.
On May 8, 2002, MCP and ADM issued press releases to the public in which the potential purchase of MCP by ADM or merger of the two (2) entities was announced.
On May 21, 2002, Defendants Thompson and Jacoby issued a report to Class A shareholders that Plaintiffs allege made an unjustified negative portrayal of MCP's financial situation.
The MCP Board of Directors held a meeting on July 2, 2002 that Plaintiffs allege was orchestrated by Defendants Thompson and Jacoby so that the only resolution presented to the Board was one to merge with ADM and to recommend the merger to Class A shareholders. Plaintiffs allege that the Board was told that failure to take the resolution to the shareholders would result in the directors being exposed to personal liability.
A Merger Agreement was executed on July 11, 2002 that provided, inter alia, that MCP would not solicit any offers from anyone other than ADM and that MCP would recommend to shareholders that they approve the merger.
On July 12, 2002, preliminary proxy materials were filed with the Securities and Exchange Commission ("SEC"). Definitive proxy materials were filed with the SEC on August 12, 2002.
The merger took place on September 5, 2002. The shareholders, including Plaintiffs, were "cashed out" for $ 2.90 per share. Plaintiffs allege that, had the merger been fairly and properly conducted, the price per share would have been higher.
Plaintiffs allege the following Counts in their original Complaint:
COUNT I — Breach of Fiduciary Duty through Self-Dealing. Plaintiffs allege that the Change of Control Agreements, revised Employment Agreements and changes to the severance and executive retirement programs amounted to self-dealing because Defendants used any leverage MCP had with ADM to secure for their personal gain, rather than attempting to get the best price for shareholders as a whole.
COUNT II — Breach of Duty of Loyalty. Plaintiffs allege that Defendants breached the duty of loyalty by entering into lucrative agreements with a competitor that was seeking to take over MCP.
COUNT III — Corporate Waste. Plaintiffs allege that Defendants committed waste by using corporate assets to promote the merger to their own personal benefit. The alleged waste included hiring the two investment banking firms to issue compromised opinions, hiring the law firm, use of secretaries to work on the merger, and costs of marketing and public relations.
COUNT IV — Violation of Colo. Rev. Stat. 7-108-401.
COUNT V-Conspiracy as to all Defendants and those not yet named.
COUNT VI-Negligence and Breach of Fiduciary Duty by Defendant Jacoby. Plaintiffs allege Defendant Jacoby failed to supervise the other Defendants and failed to provide the Class A shareholders with objective information.1
Plaintiffs seek to make various amendments to their Complaint, including deletion of Count III, the corporate waste count.
Minnesota Rule of Civil Procedure 15.01 provides:
A party may amend a pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend it at any time within 20 days after it is served. Otherwise a party may amend a pleading only be leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires. A party shall plead in response to an amended pleading within the time remaining for response to the original pleading or within 10 days after service of the amended pleading, whichever period may be longer, unless the court otherwise orders.2
The decision to allow a party to amend its pleading is entrusted to the trial court's discretion. Coyle v. City of Delano, 526 N.W.2d 205 (Minn. App. 1995). Amendment of pleadings is to be freely granted except where to do so would result in prejudice to the opposing party. Hughes v. Micka, 269 Minn. 268, 130 N.W.2d 505 (1964).
Permitting Plaintiffs' amendment would not result in prejudice to Defendants. Indeed, Defendants have argued that Plaintiffs, even after the proposed amendments, have failed to state a claim upon which relief can be granted. Defendants' chief opposition to the motion to amend is that...
To continue reading
Request your trial