Baur v. Baur Farms

832 N.W.2d 663 (2013)

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Baur v. Baur Farms

Iowa Supreme Court
832 N.W.2d 663 (2013)

Facts

Jack Baur (plaintiff) and his cousin Bob Baur were both shareholders in Baur Farms, Inc. (defendant), a closely held family-farm corporation. Bob was the majority shareholder, and Jack was a minority shareholder. Because of the corporation’s closely held nature and the transfer restrictions in its bylaws, there was no open market for shares in the corporation. Rather, the bylaws contained a buyout provision that required a shareholder to offer his shares to the corporation or to other shareholders before attempting to find a third-party buyer. In the event that a mutually agreed-upon price could not be reached, the provision further allowed the shareholder to be redeemed by the corporation at a price set equal to the shares’ book value, as determined by the board of directors. That book value was calculated in 1984 but was never updated during the corporation’s substantial subsequent growth. Baur Farms never paid dividends. Instead, under Bob’s control as majority shareholder, Baur Farms always reinvested its profits. Over a period of over 20 years, Jack made repeated efforts to sell his shares back to the corporation so as to realize a return, but in every instance, Jack considered the corporation to undervalue his shares. Jack eventually sued the corporation, alleging oppressive conduct. The district court dismissed the suit after Jack presented his evidence, and Jack appealed.

Rule of Law

Issue

Holding and Reasoning (Hecht, J.)

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