REGIONAL— A hearing before Judge James Florey on Tuesday may well be pivotal in the course of an unusual lawsuit filed by the owners of the Cook News Herald and the Tower News against the majority owners of the Timberjay, although it’s likely to be several weeks before the judge issues a ruling.
Gary and Edna Albertson purchased a minority stake in the Timberjay almost twenty years ago from Madonna Ohse, one of the business’s original shareholders. The Albertsons, who own the rival newspapers to the Timberjay, never spoke to Timberjay publisher Marshall Helmberger or general manager Jodi Summit, who held the majority interest in the company, prior to purchasing Ohse’s stock. Neither the Timberjay, as a corporation, nor the Timberjay’s majority owners ever received any proceeds or benefit of any kind from the Albertsons’ purchase of stock from Ohse.
The Albertsons and their attorney John Colosimo began a lawsuit last December making a wide range of unsubstantiated allegations, none of which they have backed up with evidence submitted to the court.
Arguing in district court on Tuesday, however, Colosimo urged Judge Florey to order mediation on a forced buyout of the Albertsons. Colosimo complained that his clients have not been given a role in management of the Timberjay, nor have they received dividends as they had hoped. “Their rights remain in an inert state,” said Colosimo. “They’re left in a powerless, impotent state by a majority that views them as competitors.”
Neither of the Albertsons were present in the courtroom during the hearing. Both Helmberger and Summit did attend.
Colosimo said his clients have no ready market for their stock, leaving it essentially worthless, and he asked the court to appoint appraisers and force the company’s majority owners to purchase the Albertsons’ stock at a value that would likely far exceed what any other buyer would be willing to pay for their stock. “If this was a marriage, it would have been dissolved,” he told the judge.
“This is not a marriage, it’s corporate law,” responded attorney Tom Torgerson, of Hanft-Fride, who is representing the Timberjay . Torgerson told the judge that the Albertsons have no legal basis to request a court intervention in the operations of the company since its majority owners have run the business strictly according to state statute and its corporate bylaws. As such, Torgerson urged the judge to deny the Albertsons’ motion and to dismiss the case. He also urged the judge to require the Albertsons to pay the Timberjay’s attorney’s fees for having brought a “vexatious” case filed in bad faith.
Torgerson acknowledged that courts do have the authority to require appraisals and force a buyout in closely-held corporations, but only if the party seeking such action can show that a “triggering event” has occurred. Under the law, that could include a demonstration of fraud, illegal activity, or actions “unfairly prejudicial” to one of the shareholders.
While Colosimo’s initial legal summons, served on the Timberjay’s majority owners in December, alleged all of those things, his motion seeking partial summary judgment is limited to his claim that the majority owners have been unfairly prejudicial by not allowing the Albertsons to participate in managing the company or paying them dividends.
But Torgerson, citing the company’s bylaws and state law, notes that it is the role of the board of directors, not shareholders, to run the company. “The Albertsons have never been elected as directors,” said Torgerson. “Both the law and the facts show they don’t have any right to be in control of management,” he added.
Torgerson, again citing the company’s bylaws, noted that the distribution of dividends is left solely to the discretion of the board of directors. He noted that the Timberjay’s majority owners have, from the beginning, opted for reinvestment in the business over the payment of dividends, in order to focus on building a high quality publication. “The defendants’ effort to invest in quality has certainly paid off,” said Torgerson.
While Colosimo, in his written brief on the Albertsons’ motion, claimed that the Timberjay’s majority owners had failed to provide the Albertsons with required financial information, he did not repeat that claim to the judge on Tuesday.
That claim, which is made in a sworn affidavit signed by Gary Albertson, is false, noted Torgerson, who cited the Timberjay’s own submission to the court, which included letters and answers to interrogatories by the Albertsons, in which they acknowledged receiving the company’s annual corporate tax returns, which contain the financials that companies are required to provide to shareholders. Colosimo never disputed Torgerson on the point during oral arguments.
Torgerson said Gary Albertson’s submission of a false claim in his affidavit is further evidence of the bad faith nature of the couple’s claim, and he urged the judge to issue an order requiring the Albertsons to pay the Timberjay’s legal bills. “This is the very kind of case that calls for award of attorney’s fees,” he said. “They are attempting to get a buyout order based on ‘facts’ that aren’t true.”
Dispute over service
The hearing got underway with Colosimo claiming that he had never received the Timberjay’s legal response from Torgerson. Judge Florey appeared skeptical of the claim, however, noting that the Timberjay’s response was entered into the court’s electronic filing system, to which Colosimo has ready access. The court’s electronic system, available at www.mncourts.gov, states that the newspaper’s response was served on its due date, of Sept. 9, more than a month before the Oct. 11 hearing. Colosimo, when questioned by the judge, acknowledged that he had never contacted Torgerson about the issue.
Torgerson said the response was submitted through the e-service system, as is now statndard practice in the court system. Florey agreed. “I’m looking at it,” he said, glancing at a computer monitor on his bench. “I don’t know why you haven’t seen it,” said Florey to Colosimo. “This case has been in the newspapers and even on MPR,” he said.
Torgerson, clearly concerned that Colosimo was seeking baseless delay, noted he had to drive from Duluth for the hearing. But Florey said he would allow both attorneys to make their oral arguments in spite of Colosimo’s claim, which he did.
Following the hearing, Torgerson provided Colosimo and the court with the electronic receipts automatically issued by the court’s electronic system, which confirmed proper service. During a conference call with the judge Tuesday afternoon, Colosimo acknowledged that his office did receive the Timberjay’s submission but that his secretary deleted it without notifying him.
Florey, on Wednes-day, opted to give both parties a chance to file one additional reply brief ahead of his ruling. A final brief from the plaintiffs is due Oct. 19. Defendants will have until Oct. 26 to reply.
A decision in the case is now expected in mid-to-late November.