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Response: Lawsuit has no legal support

Timberjay v. Albertson hearing is Tuesday in Virginia courtroom

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REGIONAL— In documents and legal arguments filed last Friday, Sept. 9, with the district court in Virginia, the Timberjay provided its first official response to a lawsuit filed by competitors Gary and Edna Albertson.

The legal brief, combined with more than 100 pages of supporting exhibits, argues that the Albertsons’ lawsuit has no legal or factual support, relying instead on a misunderstanding of the law and on a false affidavit signed by Gary Albertson.

A hearing on the motion is set before Judge James Florey on Sept. 20 at the Virginia courthouse.

Timberjay attorney Tom Torgerson, of the Hanft Fride law firm of Duluth, filed the response, which seeks the immediate dismissal of the Albertsons’ suit and the awarding of attorney’s fees that the Timberjay has incurred defending against the questionable claim.

The Albertsons, who operate the Tower News and Cook News Herald, purchased a minority interest in the Timberjay from Madonna Ohse 19 years ago without ever discussing the investment with the majority owners of the company. In a motion filed by the Albertsons’ attorney, John Colosimo, last month, the Albertsons ask for unspecified judicial intervention that could include a forced buyout of the Albertsons’ shares or even dissolution of Timberjay, Inc., the corporation that operates the award-winning newspaper.

That outcome appears increasingly unlikely, however, as the Albertsons appear to have abandoned hopes of finding evidence of wrongdoing against the Timberjay’s majority shareholders Marshall Helmberger and Jodi Summit. The motion filed by the Albertsons in August makes no mention of a slew of unsubstantiated allegations that the Albertsons had included in their original complaint, filed with the court a little over a month ago and initially served on the majority owners in December. That complaint had accused Helmberger and Summit of fraud, illegal activity, of failing to notify the Albertsons of shareholder meetings and of squandering corporate assets. The case involved months of discovery during which the Timberjay provided hundreds of pages of corporate records that disproved the Albertsons’ claims. Indeed, Colosimo’s most recent motion includes not a single document, other than Gary Albertson’s affidavit, to bolster its case.

Colosimo argues that the Albertsons, as minority shareholders, have been denied a voice in the management of the company and have failed to receive dividends, as they had hoped, which they claim is “prejudicial” to their interests. According to Colosimo, the Albertsons “fundamentally disagree with the majority owners regarding the mission and purpose of the Timberjay ‘as a business that should turn a profit for the benefit of all shareholders.’”

The company is, in fact, generally profitable, but it has never generated annual profits of 15-25 percent, as Gary Albertson has repeatedly stated it should in letters to the majority owners. Albertson announced last month that he was shutting down his own newspaper in Biwabik, due to lack of profitability.

Torgerson, in his motion for summary judgment, argues that the Albertsons have no basis for seeking court intervention in the running of the Timberjay since the company’s directors have operated the company in full compliance with state law and the company’s bylaws. And Torgerson notes that the Albertsons have a perfectly reasonable solution if they disagree with the majority owners’ decisions. The Albertsons, he notes, “are perfectly free to sell their shares to anyone they choose at any price they can obtain.” They are also free, he notes, to buy all or a portion of the stock held by the majority owners if they wish to actively participate in management of the business. “What they are not free to do is demand that other shareholders pay them for the shares they bought at a time they had no contractual right to be bought out and where the corporation and controlling shareholders have complied with all statutory obligations.”

Torgerson notes that the Albertsons never spoke to the majority owners prior to purchasing their stock from Ohse and never received any promises of dividends. Instead, the company’s board has followed a longstanding practice of reinvestment in the company in order to produce a high-quality newspaper and other publications. Torgerson notes that the Albertsons could not realistically have expected a role in managing the company given their minority ownership, and their status as direct competitors.

False statement submitted to court

Perhaps the only allegation upon which the court could act is a claim by Albertson that the Timberjay’s majority owners have refused to provide the Albertsons with year-end financial information, such as a profit and loss, balance sheet, and corporate tax return, as required by law.

In a sworn affidavit, Gary Albertson states that the Timberjay’s majority owners have provided him with “little or no information regarding the finances of the business nor had they ever received a profit and loss statement or corporate income tax returns until this lawsuit was commenced.”

If true, that would provide a judge some justification for judicial intervention, although it’s unlikely a judge would order a forced buyout or break-up of the company as a result.

But the affidavit is demonstrably false, points out Torgerson, referencing substantial evidence demonstrating that the Timberjay’s majority owners did, in fact, provide the Albertsons with the required information every year since their purchase of stock.

Indeed, the Albertsons acknowledged in sworn interrogatories served by the Timberjay early on in discovery that they had received the full tax returns, although they complained that sometimes they didn’t receive them until the summer. Torgerson’s motion also includes nearly a dozen letters and emails from Gary Albertson written between 1998 and 2014. In those letters, Albertson acknowledges receiving the returns, asks questions about certain expenses, and complains about limited profitability.

In a May 15, 2000, letter, for example, Albertson states: “I have just finished reviewing the tax returns from the Timberjay for the year 1999 and I see you have failed, again, to show a decent profit.” In another letter, dated July 7, 2008, Albertson wrote: “I received the copy of the Timberjay’s 2007 tax return and see you were unable to post a profit, again.”

Other letters submitted to the court show Timberjay President Marshall Helmberger regularly answering Albertson’s questions about financial matters, often in detail. The Timberjay provided all of the letters to Colosimo back in March and were presumably reviewed by him prior to the production of the false affidavit. Attorneys are bound by ethical rules that prohibit them from submitting false evidence to the court.

The tax returns, notes Torgerson, are used by the Timberjay as their annual financial report, since the document includes a detailed profit and loss calculation and the complete balance sheet, as required under the law. By providing the document to the Albertsons, argues Torgerson, the company has met its legal obligation for financial reporting to shareholders.

The case for

attorney’s fees

Torgerson, in his legal arguments, notes that judges can award attorney’s fees when plaintiffs file cases that are “arbitrary, vexatious, or in bad faith,” and he argues that the claim by the Albertsons meets all three criteria. “An award of fees is justified against the Albertsons based on their prosecution of this action without facts supporting their claims and based on their misrepresentation to the court that they never received tax returns; all of which have caused defendants to incur unnecessary legal fees.”

Torgerson argues that the Albertsons have no legal or factual cause for their claim that they have been denied a role in the management of the Timberjay. As shareholders, the Albertsons had a right to participate in shareholder meetings but only attended one such meeting in 19 years. Yet state law and the company’s bylaws clearly confirm that members of the board of directors are to manage the company, not shareholders, notes Torgerson. The Albertsons are not on the company’s board.

As for dividends, Torgerson argues that the company’s bylaws give the board of directors sole discretion to determine if such payments are issued. As such, he says, the Albertsons’ claim “has no legal support and is in direct conflict with the company’s bylaws.”

As such, said Torgerson, the Albertsons have no right to ask a court to intervene in the running of the corporation, something that is only allowed if a shareholder can demonstrate actual wrongdoing. “And they certainly have no right to any equitable relief when they come to court with unclean hands by misrepresenting facts,” he added.

Torgerson notes also that, as competitors, the court needs to be particularly concerned about the Albertsons’ motivations. “Plaintiffs have used this lawsuit for the improper purpose of imposing unnecessary expenses on their newspapers’ competitor, Timberjay, Inc., and for seeking to obtain an order for dissolution of Timberjay, Inc. that would increase the value of their competing newspapers, which they are presently attempting to sell.”

Timberjay Publisher Marshall Helmberger has also alleged that attorney Colosimo is motivated by personal bias, stemming from a campaign finance case against the St. Louis County School District, during which Helmberger exposed questionable legal advice provided by Colosimo to the school district. Colosimo has denied that his lawsuit on behalf of the Albertsons is in any way retaliatory.

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