REGIONAL— Gary Albertson and attorney John Colosimo are offering no apology nor explanation for their submission of a false affidavit in their ongoing lawsuit against the Timberjay newspapers. The lawsuit, filed by Gary and Edna Albertson, is asking District Court Judge James Florey to order the Timberjay’s majority owners Marshall Helmberger and Jodi Summit to buy the Albertsons’ minority interest in the business for more than its market value.
The Albertsons, who own the Tower News and Cook News Herald, directly compete with the Timberjay. They purchased shares in the rival newspaper from a minority stockholder 19 years ago, without telling Helmberger or Summit in advance, and have been threatening the Timberjay’s majority owners with legal action ever since. They served their lawsuit in December 2015.
Minority stock in small closely-held companies is notoriously difficult to sell, which is why the Albertsons are seeking to force Helmberger and Summit to buy them out or have the court dissolve the Timberjay so they can recoup some of their investment. The Timberjay is asking the court to dismiss the case and require the Albertsons to pay the company’s attorney’s fees due to the baseless nature of their suit.
Courts don’t have authority to force a buyout, unless the shareholders seeking such an order can show that the majority shareholders engaged in improper or illegal activity. The Albertsons have presented no actual evidence to the court of wrongdoing on the part of the Timberjay’s majority owners. But in a final brief to the judge before a pending ruling on a motion that could end the case, the Albertsons argue that court intervention is justified because they haven’t received dividends as shareholders.
The Albertsons contend they have been “oppressed” by being prevented from sharing in the profitability of the company. State law does not require the payment of dividends to shareholders and the Timberjay’s corporate bylaws specifically allow for reinvestment of profits, as has been the company’s consistent objective since its founding.
The Albertsons’ brief was the second opportunity for Colosimo to offer an explanation for the false affidavit he submitted to the court in August, in which Gary Albertson claimed that Helmberger and Summit had failed to provide the couple with required financial records, primarily corporate tax returns, until the Albertsons began their lawsuit.
In their own briefs, Timberjay attorney Tom Torgerson argues that Gary Albertson must have known the sworn statement was false, since he had acknowledged in previous sworn interrogatories that the Timberjay’s majority owners had, in fact, provided the financial information on an annual basis, as required. Numerous letters from Albertson, dating back as far as 1998, also indicate that he had received the required financial documents. The Timberjay provided those letters to Colosimo in March and they were filed with the court by Torgerson in September.
Colosimo has not mentioned the false claim since, but has provided no explanation nor apology for the submission of the false testimony, nor have the Albertsons officially dropped the claim.
Torgerson zeroed in on that fact in his own response to Colosimo’s brief, filed with the court on Oct. 25. “Defendants [the Timberjay] submit that the unrebutted misrepresentation reflects the bad faith at the heart of this case and strips plaintiffs [Albertsons] of any right to request equitable relief in this case and entitles defendants to their attorney’s fees,” Torgerson wrote.
Helmberger and Summit serve as the Timberjay’s board of directors, and they have acknowledged in court filings that the company has not paid dividends to any of the company’s shareholders, but has instead reinvested profits in order to maintain the newspaper’s high quality. Helmberger and Summit do receive a salary for their work as publisher and general manager, respectively. The Albertsons work for their own competing newspapers and have never sought employment from the Timberjay.
The Albertsons are relying on a state law that allows courts to intervene in the affairs of a certain type of corporation, known as “closely-held,” if a shareholder can prove other shareholders have committed fraud or some other illegal act, or acted “unfairly prejudicially” towards them. The Albertsons initially accused Helmberger and Summit of fraud and numerous other illegal and unethical acts, but they have since dropped those charges due to the lack of any evidence.
The Albertsons have also alleged that they have been “shut out” from the management of the Timberjay, but that claim has no factual basis, argues Torgerson. He notes that, as shareholders, the Albertsons had a right to participate in shareholders meetings, but nothing more. The Albertsons did attend one shareholders meeting in 1997, but never attended another, despite receiving proper notice of the meetings. As competitors, the Albertsons are ethically-barred from serving on the Timberjay’s board of directors or as corporate officers.
That has narrowed the legal question to the issue of dividends, and whether a court has the right to intervene if a board of directors opts for reinvestment over the payout of profits. The Albertsons have cited no case in Minnesota where a court has ever taken such a step. Indeed, courts in Minnesota have regularly made note of the fact that closely-held corporations rarely pay dividends. Instead, shareholders in such situations typically work for the company and derive income from salaries and other benefits. That’s not the case with the Albertsons, since they work for competing businesses and are paid no salary by the Timberjay.
Courts have, on occasion, found that majority shareholders violated the “reasonable expectations” of minority shareholders, but those expectations were invariably based on shareholder agreements, employment contracts, or buy-sell provisions. In this case, the Albertsons have no such agreements with the majority shareholders, in large part because they purchased their stock without consulting with Helmberger or Summit.
In the absence of such agreements, minority shareholders have little leverage, and the mere fact that they might wish for dividends is not evidence that they have been treated unfairly, according to the courts. “Claims of unfairly prejudicial conduct may not be predicated on the failure to fulfill a minority shareholder’s subjective hopes and desires in joining the venture,” wrote appellate Judge David Minge in a 2004 case in which a court denied intervention in a similar case.
Under Minnesota law, corporate directors and officers are authorized to run their companies, and have broad discretion on how best to do so. In the current case, notes Torgerson, the Timberjay’s majority owners have “worked hard and played by the rules,” and have a right to operate the company consistent with their vision of creating “a community newspaper of exceptional quality.”
A ruling in the case is expected in three-to-four weeks.