Lund v. Lund, 924 N.W.2d 274

Background

Kim A. Lund (25% indirect owner via trusts) sued her three siblings, the Lund entities (Lunds, Inc.; Lund Food Holdings, Inc.; Lund Real Estate Holdings, LLC), and trustees/directors alleging unfairly prejudicial conduct, breach of fiduciary duty, and seeking a buy-out, removal of trustees, and fees. Litigation began in 2014.
District court granted Kim a judicial buy-out under Minn. Stat. §§ 302A.751 and 322B.833, set valuation date as October 2, 2016 (fiscal-year close), and fixed fair value of Kim’s trust interests at $45.2 million.
The court removed sibling Tres as cotrustee of some of Kim’s trusts but denied removal of trustee Rein for other trusts.
The district court granted summary judgment for the trustee-defendants on Kim’s breach-of-fiduciary-duty claims (Kim failed to prove damages).
Tres and Rein sought nearly $800,000 in trustee litigation fees/costs to be paid from the trusts; the district court denied the request but applied Minn. Stat. § 501C.1004 as its legal standard.
On appeal, the Minnesota Court of Appeals affirmed the buy-out, valuation date, valuation, trustee removals, and summary-judgment rulings, but reversed/remanded the trustee-fees ruling for application of the correct legal standard (Minn. Stat. § 501C.0709/common law).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Proper standard and entitlement to judicial buy-out under Minn. Stat. §§ 302A.751 & 322B.833	Kim: equitable buy-out appropriate because conduct was unfairly prejudicial and frustrated her expectations of liquidity/independence	Appellants: buy-out on motion is like summary judgment and should be reviewed de novo; her expectations conflicted with written transfer restrictions	Court: district court may decide buy-out on motion if no genuine factual dispute about unfairly prejudicial conduct; affirmed buy-out (abuse-of-discretion review for equitable relief)
2. Valuation date and fair value amount	Kim: valuation date choice prejudiced her and complicated trial; sought higher valuation	Appellants: district court abused discretion in selecting fiscal-year end and in valuation methodology/amount	Court: affirmed selection of Oct. 2, 2016 as equitable date and affirmed $45.2M valuation (court has broad discretion; fair value usually undiscounted)
3. Breach-of-fiduciary-duty claims against trustees	Kim: genuine factual disputes exist that Tres and Rein breached duties	Trustees: summary judgment appropriate because Kim produced no evidence of damages	Court: affirmed summary judgment for trustees because Kim failed to prove damages (an essential element)
4. Trustee attorney-fees entitlement and legal standard	Trustees: entitled to reimbursement from trust for reasonable, good-faith fees incurred defending administration	Kim: district court applied Minn. Stat. § 501C.1004 and denied fees on justice/equity basis	Court: reversed/ remanded — district court erred by applying § 501C.1004; correct standard is § 501C.0709 (trustee reimbursement/common-law good-faith reasonableness), so remand to reconsider fees under that standard

Key Cases Cited

Melrose Gates, LLC v. Moua, 875 N.W.2d 814 (Minn. 2016) (appellate review of equitable relief is for abuse of discretion)
U.S. Bank N.A. v. Cold Spring Granite Co., 802 N.W.2d 363 (Minn. 2011) (unfairly prejudicial conduct includes frustrating minority shareholder's reasonable expectations)
Advanced Commc'n Design, Inc. v. Follett, 615 N.W.2d 285 (Minn. 2000) ("fair value" generally means undiscounted pro rata going-concern value)
Grigsby v. Grigsby, 648 N.W.2d 716 (Minn. App. 2002) (trial court has discretion to select valuation date with supporting findings)
Padco, Inc. v. Kinney & Lange, 444 N.W.2d 889 (Minn. App. 1989) (summary judgment proper when plaintiff fails to present evidence on essential claim elements)
In re Freeman's Trust, 75 N.W.2d 906 (Minn. 1956) (common-law rule: trustee may be reimbursed from trust for reasonable attorney fees incurred in good faith defending administration)