DULUTH— The attorney for Gary and Edna Albertson repeatedly struggled to respond to the clearly skeptical questioning of a three-judge panel of the Minnesota Court of Appeals during a hearing last week at the St. Louis County Courthouse. The judges were there to hear several northeastern Minnesota cases, including the Albertsons’ appeal of a district court ruling dismissing their minority shareholder claims against the Timberjay Newspapers and the newspaper’s majority owners Marshall Helmberger and Jodi Summit.
The judges wasted little time in getting to the crux of the issue before them, whether or not the Albertsons— who are direct competitors of the Timberjay in addition to being shareholders— have any defensible legal right as minority shareholders to engage in management of the Timberjay or demand employment, dividends or a buyout on favorable terms.
Time and again, the judges pressed Albertson attorney John Colosimo to show a basis for the Albertsons’ claims.
“What is the source for your clients’ reasonable expectation to participate in management?” asked presiding Judge Kevin Ross, who queried Colosimo on whether he could cite any agreements or communications between the parties, or any right expressed in statute or the company’s bylaws.
Colosimo had no answer, other than to suggest that the real issue was the Timberjay’s failure to pay dividends to shareholders. Colosimo’s attempted pivot was unsuccessful, however, as the judges pressed him on the basis for an expectation of dividends. The judges more than once expressed incredulity at Colosimo’s suggestion that the Albertsons had an absolute right to dividends.
Colosimo argued that dividends cannot be unfairly withheld.
“Unfairly withheld, unfairly,” stressed Judge Francis Connolly, questioning whether Colosimo had any evidence that dividends were paid to other shareholders or were unfairly withheld.
But Colosimo continued to avoid the questions posed by the judges, which led Ross to finally put it more bluntly. “Please humor me by answering the question.”
When Colosimo still could not do so, Ross suggested he sit down and look for answers while Timberjay attorney Tom Torgerson presented his arguments.
In his rebuttal of Colosimo, Torgerson noted that the Albertsons had repeatedly failed to provide evidence of anything improper on the part of the Timberjay’s majority owners. Indeed, District Court Judge James Florey, who has since been elevated to the Court of Appeals, found after his review of the record that Helmberger and Summit were in full compliance with state law and the corporate bylaws.
“This case is all about a lack of evidence,” said Torgerson.
He also chastised Colosimo for, again, making claims at Thursday’s hearing that went beyond the facts in the record. “That’s a recurring theme here,” said Torgerson, who had cited more than a dozen examples in his brief submitted to the judges in May where Colosimo had made claims without any factual support in the record.
One of the most egregious at last Thursday’s hearing was Colosimo’s claim that Helmberger and Summit had no interest in a buy-out of the Albertson’s shares. While such negotiations are not relevant in such a court case, and are normally not mentioned in court unless an agreement is reached, Colosimo was aware that the parties had engaged in negotiation on a possible buyout during which the two parties initially suggested buyout figures that were only $15,000 apart. But the Albertsons then demanded a 33 percent increase over Colosimo’s initial suggestion, which blew up the negotiations.
Colosimo also falsely claimed in response to a question from Judge Heidi Schellhas, that he had made a demand for the Timberjay’s [check] ledger, but that the company had failed to provide it. In fact, Colosimo had made no such discovery request on behalf of the Albertsons, a fact that he was reminded of during depositions in the case last year. Colosimo made his claim to the judges on Thursday as he tried to address their concerns about the lack of evidence in the case, attempting to shift blame to the Timberjay’s majority owners rather than himself.
But the judges weren’t buying it, and noted that Colosimo should have filed a discovery appeal motion if information he requested was not forthcoming. In fact, the Timberjay provided all of the records in the company’s possession that Colosimo requested on behalf of the Albertsons.
The judges also took issue with Colosimo’s claim that the Albertsons had received no return on investment, noting that the company’s growth would tend to increase the value of their stock. Ross asked whether the Albertsons had ever gotten an appraisal of their stock or attempted to sell it, to which Colosimo acknowledged they had not. “Why isn’t it your clients’ obligation to show evidence that their stock has no value?” asked Schellhas. “You’re asking us to speculate,” agreed Ross.
Torgerson noted that shareholders have no guarantee of return on investment unless they have agreements in place that provide for that, and no such agreements exist between the Albertsons and the Timberjay’s majority owners, since the Albertsons bought their stock without communicating in advance with Helmberger or Summit.
The judges also noted that there was no suggestion in the record that the former Timberjay stockholder, Madonna Ohse, who sold her stock to the Albertsons in 1997, had ever given any indication of the potential of dividends. In fact, Torgerson noted, the undisputed record in the case shows that the company has reinvested profits in improving the newspaper’s quality from its inception.
Colosimo pointed to a nearly 20-year old letter from Helmberger to Gary Albertson which Colosimo claimed showed a stated intent not to pay dividends. The letter, in fact, never made such a claim, although Helmberger did make note of the company’s history of reinvestment of profits. At the same time, Helmberger put the onus on the Albertsons for putting themselves in their predicament. “If you are unhappy with the return on your investment, you have only yourself to blame,” wrote Helmberger. “You knew when you purchased your stock that the company had never distributed profits and you were provided with no promise, or even a suggestion, that it would do so for the foreseeable future. You also were quite familiar with our approach to the business, i.e. our emphasis on quality and reinvestment, and you certainly should have understood that as a minority owner you had essentially no control over the company’s direction. None of this was my doing. These are simply the rules of the game. You knew this or should have known this prior to your stock purchase. For you to complain about the situation now is no different than if you had picked up a hammer, hit yourself on the head with it, and then complained to me that you had a headache. I can only respond that your wound is entirely self-inflicted.”
The letter had been entered into evidence by the Timberjay’s majority owners as one of several letters that exposed false statements made under oath in an affidavit submitted to the district court by Colosimo, which was signed by Gary Albertson. That affidavit was the sole evidence submitted to the court by the Albertsons and Colosimo in their motion to the district court made last August.
Albertson’s false statement related to financial records, and included the claim that the Timberjay’s majority owners had failed to provide him with required financial documents, primarily tax returns, until the Albertsons filed suit in December of 2015. But Timberjay attorney Tom Torgerson provided the district court with letters and emails between the parties, as well as interrogatory answers from early on in the case, in which the Albertsons had acknowledged receiving the tax returns, which include all required financials, whenever requested.
Oral arguments took about 45 minutes, at which time the judges took the case under advisement. The court has 60 days to render its decision.