Vol. 83, No. 5, May 2010
When Albert Trostel established his tannery in 1858, he could not know that 150 years later his small enterprise would burgeon into a conglomerate, manufacturing something called “plastic.” Nor could he know that his progeny, shareholders in Albert Trostel & Sons Co., would be embroiled in a dispute that would appear before the Wisconsin Supreme Court.
In Notz v. Everett Smith Group Ltd.,1 Trostel’s great-grandson, a minority shareholder, sought relief after acquisitions by the majority shareholder culminated in the majority shareholder getting complete control of the business. Notz may have been frozen out, but the supreme court did not leave him out in the cold. It ruled that one of his claims for breach of fiduciary duty against the majority shareholder could proceed and did not have to be brought as a derivative action on the corporation’s behalf. The court also held that Notz’s demand for dissolution survived the merger that ended his shareholder status.
Notz, of course, is not the first minority shareholder to claim that he was wrongfully squeezed out of a closely held corporation. Many shareholders have cried foul in the aftermath of a merger or sale or other action by controlling shareholders that stripped the minority shareholders of their ownership interest. But it was not until the 20th century that courts and legislators took meaningful action to empower minority shareholders victimized by the vagaries of corporate governance. Development of the common law and modernization of business statutes have afforded protections to minority shareholders when the majority abuses its control.
Balancing the need to protect minority shareholders with respect for business judgment, the Wisconsin Legislature and courts have incrementally established safeguards to shore up minority shareholder protection against oppressive majority rule of close corporations. In Notz, the Wisconsin Supreme Court highlighted two of these safeguards: a minority shareholders’ claim of breach of fiduciary duty based on alleged majority-shareholder self-dealing, and a request for judicial dissolution based on claimed oppressive conduct by the majority. With that case as a backdrop, this article explores the various remedies available to minority shareholders when majority shareholders commit oppressive or illegal acts.
The vast majority of companies are close or closely held.2 Although there is no single standard definition for a close corporation, such an entity is typified by a small nucleus of shareholders who are active in day-to-day operations, no ready market for the company stock, and significant majority-shareholder involvement in company management and operation.3
Unlike investors in publicly held corporations, disgruntled close-corporation stockholders cannot easily sell their shares, because they “are frequently of little value because of the lack of effective voice in the policies of the corporation on the part of the minority.”4 Since close-corporation investors are usually active employees who have infused many of their personal assets into the business, they rely heavily on the majority shareholders, who usually serve as officers and directors and control major decision-making.5 Consequently, close-corporation minority shareholders are far more vulnerable to majority abuse than their public corporation counterparts, who usually are mere passive investors. Thus, they may fall victim to one or more “freeze-out” devices, such as the refusal to declare dividends, siphoning of earnings through payment of excessive salaries to the majority, depriving minority shareholders of employment, or causing the corporation to sell its assets to the majority shareholders.6
More than 60 years ago, the Wisconsin Supreme Court observed that “the opportunity for oppression and fraud against the minority of a small and closely held corporation are great.”7 Despite such recognition of, and empathy for, the plight of the minority shareholder, it was not until 1983 that the Wisconsin Business Corporation Law (WBCL) distinguished between closely held corporations and other corporations. In 1983, the legislature enacted the Wisconsin Statutory Close Corporation Law,8 which was designed to meet the special needs of close corporations with fewer than 50 shareholders.9 For example, statutory-close-corporation shareholders may agree to operate without a board of directors, may restrict certain stock transfers, and must obtain two-thirds majority approval for fundamental corporate changes.10 Despite certain apparent benefits, relatively few entities possessing the necessary criteria (50 or fewer shareholders) have elected statutory-close-corporation status.11
Because the majority of Wisconsin corporations are not statutory close corporations, this article focuses on the remedies provided by the WBCL and common law for squeezed-out minority shareholders in closely held corporations that have not elected statutory-close-corporation status. Such shareholders can 1) dissent to certain corporate transactions (such as a merger) and demand a buy-out of their shares at fair value; 2) demand that the company be judicially dissolved as a result of majority shareholder illegality, oppression, or fraud; or 3) bring a derivative action on the corporation’s behalf or a direct action on the shareholders’ own behalf, depending on the nature of the injury, when there has been a breach of fiduciary duty or some other wrongful conduct.
Dissenters’ Buy-out Right: Appraisal Remedy. In the early days of corporate governance, most decisions regarding fundamental corporation changes, such as mergers, required unanimous shareholder approval.12 To combat disgruntled minority shareholders bent on thwarting a transaction, there was an eventual erosion of the unanimous approval requirement.13
Unanimity gave way to majority rule when, in 1947,14 Wisconsin enacted a dissenters’ rights statute “to protect minority shareholders involuntarily subjected to significant corporate changes.”15 It is based on a quid pro quo: To protect majority shareholders, the minority shareholder’s power to veto fundamental changes was eliminated. In return, to protect the minority from forced participation in majority-imposed corporate actions, they are afforded the right to dissent and receive their shares’ fair value.16
Wisconsin Statutes sections 180.1301 – 180.1331, the dissenters’ rights provisions, specify the appraisal process that minority shareholders can invoke to compel purchase of their shares at an ostensibly “fair value” if various corporate actions are taken, including merger, share exchange, sale, or “any other corporate action taken pursuant to a shareholder vote” to the extent authorized by articles of incorporation, bylaws, or board resolution.17 A dissenting shareholder must follow certain procedures to exercise dissenters’ rights and obtain payment for his or her shares.18 If the corporation and the dissenter disagree on the fair value of the dissenter’s shares, the corporation must bring a special proceeding and petition the court for a fair-value determination.19 In the absence of fraud or breach of fiduciary duty, such an appraisal action is the exclusive judicial remedy for a shareholder objecting to fundamental corporate changes.20
Judicial Dissolution: Illegality, Oppression, or Fraud. In situations when a minority shareholder dissents to a concededly lawful act, a court will presumably only determine a fair-value buy-out and no other claims. But when there has been wrongdoing, a minority shareholder may consider bringing a claim for judicial dissolution. Under Wis. Stat. section 180.1430, shareholders have the right to petition a court for judicial dissolution when controlling shareholders act in an illegal, oppressive, or fraudulent manner or corporate assets are being misapplied or wasted.21
An allegation of oppression is not a claim for relief per se but instead is a legal standard to be fulfilled.22 While oppression is not defined in the corporation statutes, Wisconsin courts have recognized that it is “burdensome, harsh and wrongful conduct; a lack of probity and fair dealing in the affairs of the company to the prejudice of some of its members; or a visual departure from the standards of fair dealing, and a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely.”23 Dissolution is discretionary and “does not automatically result even upon proper proof.”24 With liquidation of company assets as the end game, it is a drastic discretionary remedy, especially when a company is a going concern.25
Breach of Fiduciary Duty: Derivative versus Direct Action. Wisconsin courts have long held that directors and majority shareholders owe fiduciary duties to minority shareholders.26 In cases involving a claimed breach of such duties, a shareholder may bring either a derivative proceeding on the company’s behalf or a direct action on the shareholder’s behalf, depending on the nature of the injury. If the primary injury is to the corporation, the action must be brought on the corporation’s behalf as a derivative proceeding.27 In such a proceeding, the claims belong to the corporation and not the complaining shareholder, who “is challenging, on behalf of the corporation that has been unwilling to bring the suit, specific corporate conduct.”28
Wisconsin common law recognizes “a direct action by individual minority shareholders for breach of fiduciary duty by directors and majority shareholders resulting in injury to the minority shareholders that was not an injury primarily to the corporation.”29 To bring a direct (individual) claim for breach of fiduciary duty, a shareholder must show an injury that is personal to himself or herself, rather than an injury primarily to the corporation.30
Over the last 30 years, Wisconsin courts have applied what can best be termed a special-injury test to address the direct versus derivative distinction, resulting in two lines of cases: those that involve self-dealing and misappropriation and thus are derivative, and those that involve the payment of excessive compensation or “constructive dividends” and thus are direct claims.
In Rose v. Schantz,31 the plaintiff shareholder sought an injunction prohibiting certain acts by controlling shareholders. He alleged that the defendants threatened to pay corporate debts before they were due, redeem stock in the corporation, and allow the corporation’s president to resign as part of a scheme to deplete the corporation’s cash reserves, thus allowing one of the defendants to engage in a competing business. The Wisconsin Supreme Court concluded that the only direct injury was to the corporation because the corporation’s funds were used to pay off debts before they were due, and it was the corporation that would have its working capital impaired and would no longer be able to stay in business. The fact that the injury to the corporation might affect the value of the stockholders’ shares was not enough to create a right to bring a direct action.32 In the aftermath of Rose, Wisconsin courts have held that claims based on the “improper diversion of corporate assets,”33 “waste and mismanagement of corporate assets,”34 and “misappropriation of corporate assets and self-dealing by the directors and controlling stockholder”35 belonged to the corporation and, therefore, had to be brought as derivative, not direct, actions.
Cases in which majority shareholders have paid themselves dividends in excess of those received by minority shareholders have given rise to direct claims. For example, in Jorgensen v. Water Works Inc. (Jorgensen II),36 the Wisconsin Court of Appeals held that the plaintiffs stated a claim for breach of fiduciary duty when they alleged that the defendant majority shareholders and directors caused injury to the minority shareholders by paying themselves fees and bonuses that were, in fact, dividends. The court held that the plaintiffs could bring a direct action because they alleged “an injury that is primarily to the Jorgensens, not primarily to the corporation.”37
The Notz Case: Background
In Notz v. Everett Smith Group Ltd.,38 Notz pursued each of the remedies discussed above (appraisal, dissolution, and a breach-of-fiduciary-duty claim) in a dispute with the majority shareholder of Albert Trostel & Sons Co. (ATS), a long-standing Wisconsin business that began as a tannery but branched out into rubber and plastics manufacture. Notz contended that he fell victim to wrongdoing by the majority shareholder (Smith Group) that culminated in a cash-out (or freeze-out) merger. In such a transaction, a majority of shareholders initiate a merger with the original corporation to persuade (force) the minority shareholders to accept a cash buy-out for their shares, in effect freezing the minority shareholders out of the original company.39
Mark R. Hinkston, Creighton 1988 cum laude, practices with Dye, Foley, Krohn & Shannon S.C., Racine. He can be reached at com mrh dfks-law dfks-law mrh com
The case pitted Notz, who owned 5.5 percent of ATS, against the Smith Group, which owned 88.9 percent. ATS had been formed by long-time (now-deceased) ATS president Everett Smith. The Smith Group’s officers and directors were the sole officers and directors of ATS. In 2003, as part of a new growth strategy, ATS pursued the acquisition of other plastics companies. After conducting due diligence, ATS passed up an opportunity to purchase one of its plastics competitors, Dickten & Masch (D & M). The Smith Group then purchased that business and shortly thereafter acquired ATS’s valuable plastics subsidiary.
The Smith Group had also tried to buy out Notz and the other minority shareholders, but Notz refused to sell. He believed that the Smith Group’s two-step scheme – the purchase of D & M and the purchase of the ATS subsidiary – was a freeze-out ploy as retribution for his refusal to sell out at less than fair value.40 Notz sued the Smith Group and its directors, alleging breach of fiduciary duty and requesting judicial dissolution because the defendants had acted oppressively.
Circuit Court Action. Notz alleged that the Smith Group breached its fiduciary duty to him by self-dealing in two transactions (the D & M and ATS subsidiary acquisitions) and failing to provide him with prior notice of the transactions so he could object. He also alleged that, in acquiring D & M for itself, the Smith Group wrongfully benefited from ATS’s payment of due diligence expenses for a transaction ATS never consummated. Notz based his request for judicial dissolution on what he alleged to be “a concerted effort” by the defendant “to oppress [Notz] and force him to sell his shares in ATS to the Smith Group for less than a fair value and to freeze [Notz] out of the plastics business in retaliation for refusing to sell his shares at less than fair value.”
The circuit court dismissed the breach-of-fiduciary-duty claim, holding that because the alleged injuries were common to all shareholders, Notz could not pursue a direct claim. The court allowed the judicial dissolution claim to proceed.
Federal Court Action. Notz appealed. During the appeal, the Smith Group and ATS merged, with ATS being the surviving corporation. Notz exercised his right to dissent. After the parties could not agree on a fair-value buy-out, ATS commenced an action in federal court for a determination of the fair value of Notz’s stock, pursuant to Wis. Stat. section 180.1330, the dissenters’ rights provision of the WBCL.41The U.S. District Court for the Eastern District of Wisconsin held that it had jurisdiction over Notz’s dissenters’ rights claim to determine the fair value of his shares.42 As of May 2010, the federal action is still pending.
Court of Appeals Decision. The Wisconsin Court of Appeals affirmed the circuit court in part. It held that the breach-of-fiduciary-duty claim, premised on the allegation that the defendants stripped ATS of its most important assets and diverted the corporate opportunity to buy D & M, should have been brought as a derivative claim because all of the shareholders “were affected equally.”43 However, the court agreed with Notz’s assertion that using ATS funds for due diligence was a constructive dividend to the Smith Group, which ultimately benefited from that expenditure.44 The court held that the injury was primarily to Notz because Notz did not get any such dividend and under Wisconsin law “dividend-like payments to one set of shareholders to the exclusion of another set was a primary injury to the latter,” and thus Notz could pursue a breach-of-fiduciary-duty claim premised on the due diligence expenses.45
The court of appeals dismissed the judicial dissolution claim, finding that as a result of the merger, Notz was no longer a “shareholder” and thus under the WBCL had no standing to pursue the claim.
The Wisconsin Supreme Court Decision in Notz
In an opinion written by Justice Crooks, the Wisconsin Supreme Court framed the issues as whether 1) allegations as to the Smith Group’s acquisitions stated a direct claim for breach of fiduciary duty, 2) an allegation that the majority shareholder benefited from ATS’s due-diligence payments supported a direct claim by the minority shareholder for breach of fiduciary duty, and 3) Notz’s direct claim for judicial dissolution (based on oppression) survived a cash-out merger that eliminated his shareholder status.46
Breach of Fiduciary Duty: Due-diligence Expenses Carve-out. The court stated that the breach-of-fiduciary-duty claims, based on the lost opportunity to purchase one company and the sale of a subsidiary with great growth potential, were governed by Rose v. Schantz. It noted that while the Rose analysis centers on “whether the primary injury is to the corporation or to the shareholder,” the case did not define when an injury is primarily to the corporation. The court then observed that Jorgensen II does, however, define the opposite, an injury primarily to an individual shareholder, as one that “affects a shareholder’s rights in a manner distinct from the effect upon other shareholders.”47
The supreme court agreed with the court of appeals that the allegations that the Smith Group “stripped [ATS] of its most important assets” and engaged in various acts of self-dealing were allegations of injury primarily to ATS because all the ATS shareholders were affected equally by the loss of the opportunity to acquire D & M and by the sale of ATS’s plastics division to the Smith Group. The court noted that those acquisitions effectively ended ATS’s expansion into the plastics business and paralleled the acts complained of in Rose that were part of a scheme to deplete the corporation’s cash reserves so that the defendant could engage in a competing business.48
As for Notz’s breach claim premised on the due-diligence expenses, and his allegation that as majority shareholder, the Smith Group received the direct and immediate benefit of those expenses in acquiring D & M with no offsetting payment to him, the court held that the situation was governed by the Jorgensen II analysis, which involved claims of unequal distributions. The court likened the due-diligence expenses to constructive dividends, such as “excessive compensation, bargain purchases of corporate property, and shareholder use of corporate property.” In view of such dividend-like payments, which benefited the Smith Group, Notz was affected differently than were the other shareholders. In addition, the diversion of cash that was part of the corporation’s assets (and which could have been used to pay dividends) to fund due diligence for a company that the majority shareholder later acquired, was the type of inequitable treatment that was at issue in Jorgensen II. In Jorgensen II, the majority stopped paying the minority cash-flow distributions while they continued to regularly pay themselves.49
Judicial Dissolution Claim: Statute’s Clarity. In addressing the court of appeals’ dismissal of the judicial dissolution claim, the supreme court focused on Wis. Stat. section 180.1106(1)(d), which provides that a civil proceeding pending “against any business entity that is a party to the merger may be continued as if the merger did not occur….” The court looked to other jurisdictions that, like Wisconsin, have adopted the Model Business Corporation Act’s (MBCA’s) equivalent provision and noted the absence of cases in which a merger had stripped a shareholder of standing he or she held at the commencement of the claim. The court noted that a claim for judicial dissolution based on oppressive conduct is not a derivative claim and noted case law from other jurisdictions, wherein the courts held that mergers do not defeat a pending direct or nonderivative claim. It concluded that the statute’s language is “remarkably clear” that a civil proceeding pending against any business entity that is a party to the merger may be continued as if the merger did not occur. Because the civil proceeding instituted by Notz was pending at the time of the merger and because the statute preserves such a claim “as if the merger did not occur,” the court held that Notz had not lost standing and allowed the claim to continue.50
In summary, in a 4-2 decision, the supreme court affirmed the court of appeals in part (permitting the breach-of-fiduciary-duty claim premised on appropriation of due-diligence funds), reversed in part (reinstating the judicial dissolution claim), and remanded the matter to the circuit court for further proceedings consistent with its opinion.51
The Notz Aftermath
The supreme court in Notz forecast that, because the dissolution claim may require a determination of the fair value of Notz’s shares (which is the same issue being decided in the federal action), “regardless of which proceeding concludes first, the parties will undoubtedly bring to the courts’ attention any concerns about potential duplication of remedies flowing from the federal appraisal action and the state dissolution action.”52 Whether via a revisit of the Notz case to address concerns over duplication of remedies or the appeal of another minority-shareholder dispute, there appear to be several legal issues ripe for resolution by the supreme court, including whether 1) a shareholder bringing a judicial-dissolution claim based on oppression must show direct injury, 2) a court may afford monetary remedies under section 180.1430, and 3) a shareholder may assert claims for breach of fiduciary duty in a dissenter’s appraisal action. The court also may be presented with the opportunity to further define and hone the relative parameters of the direct versus
Judicial-dissolution Oppression Claim: Direct Injury Required? While the Wisconsin Supreme Court predicted that it might see the case again, it perhaps did not anticipate that it be asked to review it again so soon. The supreme court’s remand mandate on the dissolution claim was that the circuit court should consider the claim based on oppression “in light of the allegations set forth in Notz’s amended complaint.”53 After the decision, the circuit court ruled that the only factual allegation in the amended complaint that can provide the basis for the plaintiff’s oppression-based dissolution claim is the allegation regarding ATS’s payment of due-diligence expenses in connection with the Smith Group’s eventual acquisition of D & M. Notz then petitioned the supreme court for leave to commence an original action for writ of mandamus to compel the circuit court to comply with the supreme court’s mandate, which he contends requires consideration of all allegations of oppressive conduct alleged in the amended complaint. The supreme court has not yet ruled on the petition. Although lower courts seem to imply that direct injury must be shown in a judicial dissolution action based on oppression,54 the supreme court has not expressly addressed the issue.
Breadth of Remedy Under Section 180.1430. The supreme court at some point also likely will need to clarify the breadth of relief afforded under section 180.1430, more specifically whether the statute even allows a monetary remedy. In cases involving judicial dissolution of statutory close corporations, petitioning shareholders are afforded broad relief in addition to dissolution, including a buy-out of the minority shareholder in lieu of dissolution and an award of damages, because the applicable statute expressly affords such relief.55 Yet with respect to judicial dissolution of nonstatutory close corporations, although under section 180.1430 a court may issue injunctions, appoint a receiver, preserve corporate assets, and carry on the corporate business until a full hearing can be held, the statute makes no mention of the power to award relief, such as a minority shareholder buy-out, in lieu of dissolution.
Other jurisdictions’ high courts have held that equitable relief, such as a purchase of minority shares in lieu of dissolution, is available even though the particular jurisdiction’s judicial dissolution statute does not expressly so provide.56 Recognizing that dissolution actions are equitable proceedings, some Wisconsin courts, albeit in unpublished decisions, have entertained requests for fair-value buyouts in lieu of dissolution.57
Wisconsin’s business law mirrors for the most part the MBCA. Several jurisdictions have adopted MBCA § 14.34 (Election to Purchase in Lieu of Dissolution), which specifically allows the corporation or other shareholders to purchase the shares of the shareholder seeking dissolution, in lieu of dissolution. Wisconsin has no equivalent, perhaps because the provision was added to the MBCA in 1990, after creation of the WBCL.59 It is up to the Wisconsin Legislature to consider supplementing the dissolution statute by enacting a similar provision. Until then, the breadth of monetary relief, if any, under section 180.1430 is ripe for determination.
Breach of Fiduciary Duty/Appraisal Consolidation. In an appraisal proceeding a dissenter does not have to prove wrongdoing to obtain payment,59 but when misconduct assertions “are intertwined with the value of shares subject to appraisal, a shareholder may make these assertions” in the context of the appraisal proceeding.60 Thus, in determining fair value, a court may consider all relevant factors including “unfair dealing affecting the value of a dissenter’s shares” and may consider wrongful actions “in gauging or impeaching the credibility of majority shareholders with respect to their valuation contentions.”61 However, in cases of claims premised on wrongdoing, Wisconsin cases “have not addressed whether actions for fraud or breach of fiduciary duty must be brought as separate actions or may be consolidated with an appraisal proceeding.”62
Ongoing Debate Over Direct versus Derivative Standards. In Notz, there was not consensus as to whether Notz’s claims were direct or derivative. For example, in her dissent, Justice Bradley noted that Wisconsin case law has provided scant guidance and “no explicit test” for determining whether an injury is primarily to the shareholder or primarily to the corporation.63 Contrary to the majority, she opined that Notz had a claim for breach of fiduciary duty arising out of the defendants’ usurpation of a corporate opportunity because he suffered a net loss by being squeezed out and excluded from the fruits of the sale of the plastics business that the Smith Group acquired for itself.64 She also disagreed with the majority carve-out of due-diligence expenses because “all shareholders were affected equally” by the funds paid for due diligence.65 She concluded that the majority analysis “does not provide a coherent and consistent principle to explain why the due diligence claim gives rise to a direct action when the usurpation claim gives rise to only a derivative action” and provides “little guidance to either a shareholder asserting a claim or the party defending against it.”66
The debate over the appropriate paradigm for the direct versus derivative debate did not end with Notz. In Krier v. Vilione,67 a shareholder in a waste disposal company asserted claims against a fellow shareholder and his accountants arising out of allegations of embezzlement by the fellow shareholder. The court, in an opinion authored by Justice Ziegler, who did not participate in the Notz case, held that because Krier was not a current shareholder, he did not have standing to sue and even if he were a current shareholder, he could only bring the action as a derivative suit on the corporation’s behalf and not in his own name.
As they had done in Notz, Justice Bradley and Justice Abrahamson dissented. They asserted that the majority had failed to follow the Jorgensen II test to determine whether Krier’s rights were affected in a manner distinct from the effect on the other shareholder (the alleged embezzler). They opined that the misappropriation caused Krier’s investment to be “driven into the ground,” while the defendant shareholder “directly profited” and thus the plaintiff could pursue a direct claim. The dissenters also asserted that the majority’s holding conflicted with the court’s decision in Notz because, as in Notz, the defendant was the sole beneficiary of the funds and there was never an intention that the plaintiff benefit in any way from the money taken out of the corporation. Justice Bradley concluded that the “inevitable result” of the conflicting decisions is “confusion in the law.”68
The majority’s response to the dissenters was: “Hogwash; when corporate funds are misappropriated, the injury to the corporation is the primary injury even though shareholders suffer from those misappropriations.”69 Justice Zeigler wrote that the decision in Krier does not conflict with Notz because acting shareholders have a right to dividends paid on a pro rata basis equivalent to their stock ownership. “Embezzlement, however, is distinguishable from a dividend” and the “injury from not receiving a dividend is to the shareholder. The injury from the embezzlement is to the corporation. A misappropriation is not a constructive dividend.”70
As a practical matter, there is often a tendency by aggrieved minority shareholders to gravitate away from pursuit of a derivative action and try to pigeonhole their claims as direct. Some have a feeling of inevitable futility because if an independent special litigation committee, comprised of the corporation’s directors, acting in good faith and after reasonable inquiry, recommends not to proceed with a derivative action, a court will defer to the directors’ business judgment and dismiss the action.71 Others may be scared away by the specter of fees because even though a plaintiff whose action garners a substantial benefit to the corporation may recoup expenses, including attorney fees, a plaintiff who brings an action without reasonable cause or for an improper purpose will have to foot the bill.72 Finally, ferreting out whether a shareholder has direct or derivative standing is also a daunting task.
Determining whether an alleged injury is primarily to the corporation, to be pursued as a derivative action, or primarily to the minority shareholder, to be pursued as an individual claim, is not always straightforward. Indeed, as the Seventh Circuit Court of Appeals has noted, “[d]etermining when a shareholder has suffered a distinct and separate injury from that suffered by other shareholders is not without complication.”73 The Wisconsin Supreme Court’s apparent lack of unanimity as to the exact parameters of the special-injury standard is not a judicial enigma. There continues to be ubiquitous national debate on the topic among commentators and other judiciary. The Delaware Supreme Court has noted that the standard to distinguish between direct and derivative claims must be “clear, simple and consistently articulated and applied by our courts.”74 That would appear far easier said than done. Indeed, there is no doubt of a need for Wisconsin courts to further clarify the test to be applied to determine whether a minority shareholder claim is direct or derivative. The careful attention Wisconsin courts have paid to the issues, manifest in the rational and intellectual ongoing debate among the supreme court justices, is a harbinger that natural progression will likely lead to further enlightenment.
Because the close corporation will always be a mainstay of the American business landscape, it is inevitable that shareholder disputes will get frequent attention by courts. Whether a minority shareholder dissents to corporate action, seeks to dissolve the entity, sues for breach of fiduciary duty, or – as in Notz – does all of those things, Wisconsin law will provide remedies. The extent to which future judicial consideration and analysis of the remedies leads to a more specific test for direct claims, and resolution of some other unresolved legal issues relating to corporate governance and minority shareholders (such as the breadth of relief afforded by the judicial-dissolution statute), remains to be seen.