                     United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 97-2246
                                   ___________

William B. McCallum,                       *
                                           *
              Plaintiff-Appellant,         *
                                           *
       v.                                  *   Appeal from the United States
                                           *   District Court for the District
Rosen's Diversified, Inc., a               *   of Minnesota.
Minnesota Corporation,                     *
                                           *
              Defendant-Appellee,          *
                                           *
Ludwig M. Rosen, individually;             *
Elmer H. Rosen, individually; Thomas       *
J. Rosen, individually; Rosen's            *
Diversified, Inc., sued as "Rosen's        *
Diversified, Inc. Employee Stock           *
Ownership Plan and Trust"; Ludwig M. *
Rosen; Elmer H. Rosen; Thomas J.           *
Rosen; Richard Rosen; Robert Hovde; *
Jane Doe; David Roe; Sally Roe, whose *
true and correct names are unknown but *
who are, upon information and belief       *
Administrators, Fiduciaries and            *
Trustees of the Rosen's Diversified, Inc., *
Employee Stock Ownership Plan and          *
Trust; Steven Roe; Roe Corporation,        *
whose true and correct names are           *
unknown as named fiduciaries of the        *
Rosen's Diversified, Inc. Employee         *
Stock Ownership Plan and Trust,            *
                                           *
             Defendants.                 *
                                    ___________

                                 Submitted: June 11, 1998
                                     Filed: August 19, 1998
                                   ___________

Before BEAM, ROSS, and MAGILL, Circuit Judges.
                            ___________

BEAM, Circuit Judge.

       William B. McCallum, a minority shareholder in Rosen's Diversified, Inc. (RDI),
appeals from two adverse grants of summary judgment. McCallum seeks to have his
shares in RDI redeemed for fair value pursuant to a court ordered buy-out. The district
court held that McCallum failed to present evidence showing that RDI acted unfairly
prejudicial toward him. We reverse and remand for a determination of the fair value
of McCallum's shares.

I.    BACKGROUND

       This case involves a contentious dispute between the minority and controlling
shareholders of a closely held Minnesota corporation. Two brothers, Elmer and
Ludwig Rosen, founded RDI as a livestock trading business in the late 1940's. Today,
RDI has grown into a thriving company, primarily engaged in meat packing and other
agricultural businesses. In 1992, RDI had more than $400 million in sales. Members
of the Rosen family own a majority of RDI's outstanding capital stock.

      In January 1984, RDI hired McCallum, who had previously provided legal
services to the company, as Executive Vice President and Chief Executive Officer
(CEO). He was named a director in 1986. RDI performed well under McCallum's
command. Accordingly, RDI rewarded McCallum—and three other key

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employees—with a bonus of $186,815 in cash and 12,000 shares of common stock in
the company.1 According to RDI, these payments were made because the key
employees were almost entirely responsible for the financial success of the corporation,
because the compensation package of the employees had been artificially low, and in
order to maintain the unswerving loyalty of these employees. The parties did not enter
into a shareholder's agreement or provide any mechanism for the transfer of those
shares if circumstances changed.

        By 1991, the amiable relationship between McCallum and RDI deteriorated,
ultimately resulting in McCallum's termination and removal from the board.
Subsequently, McCallum proposed that RDI redeem his shares for $5 million. RDI
responded with an offer to redeem the shares for $600,000, which was at a small
premium over the value determined by the annual valuation for RDI's Employee Stock
Ownership Program (ESOP). The parties could not agree on a price and extensive
litigation has followed. See, e.g., McCallum v. Rosen's Diversified, Inc., 41 F.3d 1239
(8th Cir. 1994). The present case involves McCallum's 12,000 shares of RDI common
stock which is not contained in the ESOP.

      McCallum alleges that RDI's controlling shareholders have acted unfairly
prejudicial toward him because they: (1) undermined his authority as CEO; (2)
excluded him from important company decisions; (3) engaged in conduct directed at
minimizing the value of the company; (4) terminated his employment; (5) offered to
redeem his shares at an artificially low price; (6) denied him access to company books,
records, and financial information; (7) engaged in self-dealing, usurped company
opportunities, and commingled personal ventures with the affairs of the company.


      1
       During the course of his employment, McCallum also received approximately
3,300 shares of common stock in RDI through an Employee Stock Ownership Program
(ESOP). McCallum's total ownership represented nearly 3% of the company's capital
stock.

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       The district court dismissed many of McCallum's allegations as improperly
pleaded derivative claims. The district court dismissed McCallum's request for a buy-
out of his stock on a subsequent motion for summary judgment. McCallum appeals.

II.   DISCUSSION

       Minnesota law governs the substantive issues in this diversity action. See Vrban
v. Deere & Co., 129 F.3d 1008, 1009 (8th Cir. 1997). We give no deference to the
district court's interpretation of Minnesota law. See id. The Supreme Court of
Minnesota has not confronted the issue of when a minority shareholder is entitled to a
court ordered buy-out. Thus, "we must determine what that court would probably hold
were it to decide the issue. In making this determination, we may consider relevant
state precedent, analogous decisions, considered dicta, scholarly works and any other
reliable data" Farr v. Farm Bureau Ins. Co., 61 F.3d 677, 679 (8th Cir. 1995).

       The district court erred in dismissing certain of McCallum's allegations as failing
to observe the derivative pleading requirements for shareholder proceedings.
McCallum's several assertions were merely examples of unfairly prejudicial conduct
on the part of the controlling shareholders, not separate claims in and of themselves.
McCallum sought no relief on behalf of the corporation. Cf. PJ Acquisition Corp. v.
Skoglund, 453 N.W.2d 1, 6 (Minn. 1990) (inferring that a shareholder action for
equitable relief is not a derivative action). In any event, we find that McCallum is
entitled to equitable relief based on the uncontroverted assertions that were not
dismissed as derivative claims.

       Concerned with the vulnerable position of minority shareholders in closely held
corporations, the Minnesota legislature has provided the courts with broad equitable
authority to protect the interests of minority shareholders. See Minn. Stat. § 302A.751
(amended 1994) (hereinafter "Section 751"). Section 751 provides for the buy-out of
a minority shareholder's interest when "the directors or those in control of the


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corporation have acted in a manner unfairly prejudicial toward one or more
shareholders in their capacities as shareholders or directors . . . or as officers or
employees of a closely held corporation."

       The phrase "unfairly prejudicial" is to be interpreted liberally. See Pedro v.
Pedro, 463 N.W.2d 285, 288-89 (Minn. Ct. App. 1990). One commentator, who
helped draft certain revisions to the Minnesota Business Corporation Act and Section
751, stated that:

      The section is remedial in nature and should be liberally construed as an
      addition to the rights afforded non-controlling shareholders by law and the
      corporation's governing documents. The broad scope of Section 751
      reflects the Legislature's trust in the ability of the judiciary to achieve
      equitable results on the facts appearing in individual cases.

See Joseph Edward Olson, Statutory Changes Improve Position of Minority
Shareholders in Closely Held Corporations, The Hennepin Lawyer, Sept.-Oct. 1983,
at 11. In deciding whether to order a buy-out, the courts should consider "the
reasonable expectations of the shareholders" with respect to each other and the
corporation. See Minn. Stat. § 302A.751, subd. 3a (amended 1994). Oftentimes, a
shareholder's reasonable expectations include a significant voice in management and
an opportunity to work. See Olson at 23.

       We find that the uncontested facts demonstrate that McCallum's reasonable
expectations were defeated. RDI terminated McCallum's employment as CEO and
subsequently offered to purchase his RDI shares at a small premium over the value
determined by an annual valuation for RDI's ESOP. McCallum had received these
shares as compensation for his outstanding service and as an inducement to remain at
RDI, in order to foster its continued growth. Although the employment relationship




                                         -5-
later deteriorated, our focus is on McCallum's reasonable expectations at the inception
of the relationship. See Minn. Stat. §302A.751, subd. 3a.

        On his termination, McCallum was divested of his primary expectations as a
minority shareholder in RDI—an active role in the "management of the corporation and
input as an employee." Pedro, 463 N.W.2d at 289. This expectation was particularly
reasonable since McCallum was CEO of RDI. We need not extend our holding as far
as the Minnesota Court of Appeals, which held that controlling shareholders that
terminate the employment of a minority shareholder must make a good-faith effort to
buy out the shareholder at a fair price. See Sawyer v. Curt & Co., 1991 WL 65320,
at *2 (Minn. Ct. App. Feb. 12, 1991) (publication order vacated). We simply hold that
terminating the CEO—as opposed to an employee that did not have a significant role
in management—and then offering to redeem his stock, which was issued partially to
lure him to remain at the company, constituted conduct toward McCallum as a
shareholder sufficient to invoke the requirements of the Minnesota Act. Accordingly,
we remand the matter for a determination of the fair value of his stock.
        On remand, the district court shall determine the fair value of McCallum's shares
in accordance with Minn. Stat. § 302A.751, subd. 2 (amended 1994) and put an end
to this pugnacious litigation. We express no opinion on the fair value of McCallum's
shares or whether the ESOP valuation represents fair value.

III.   CONCLUSION

     For the foregoing reasons, we reverse the judgment of the district court and
remand for further proceedings consistent with this opinion.




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A true copy.


      Attest:


               CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




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