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minnisota
Veteran Contributor

An interesting case Iowa Supreme court Baur v Baur Farms Inc

http://iowatec.org/2013/07/never-the-oppressed-minority-in-iowa/

 

I've been following this case and find it rather interesting. These two cousins have been fighting for a long time. Just shows you how messy a Family farm thats been around for 150 years and decides to incorporate can be destroyed.

 

If you read about these two, one is a Lawyer the other has a Phd in economics neither one farms.  Gotta feel for the guy farming this place.  

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7 Replies
kraft-t
Senior Advisor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

It would have been much easier to set up individual trusts for each indfividual heir without giving control over the whole enterprise to one dominant heir. That is just asking for trouble within the family.

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Kay/NC
Honored Advisor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

Maybe this is one of those situations where being denied earlier on gives the partner wanting out a real increase in value today.  If so, then I revert to my old adage, that "Sometimes, the best answer you can get is 'NO!'" 

 

If this has dragged on for twenty years, the main beneficiaries are the attorneys.  Clearly, the controlling partner has not taken the corporation for a ride.  This is about setting a new precedent for how partnership assets in Iowa will be divided going forward. 

 

Families are worse to each other than anyone would ever be to a total stranger, in my opinion.  Have a couple of (hundred) examples of my own to cite, some from Mike's family.  An old neighbor from my childhood community stopped by at the house in VA yesterday, while he was there working with a couple of helpers, and filled his ear about their clan. 

 

Honestly, much I had heard or observed, as I grew up near them.  More, I had suspected.  The worst parts, beyond even my fertile imagination,  were behind closed doors, though.  I sat and listened to his account of the conversation, and just shook my head, and said, "These were the people I was taught to look up to...no wonder my head is so screwed up."

 

Values - and most especially family values - get a lot of lip service in some circles..or, at least in the only ones I travelled in growing up. 

 

That same neighbor told my husband that my father had worked us girls "like dogs."  True.

 

I know I was put into situations that no young girl should ever have had to be in: working in remote fields with hired men who wanted to see what they could get away with, absorbing enough dangerous pesticides to literally knock me off my feet and left lying in a twitch, and dealing with a raging adult nearly three times my size, who was never but so far from going off. 

 

I do not think that taking a beating in a courtroom is the worst kind of abuse that can be inflicted.  Maybe a civil court is a fairer playing field than one tilted all in favor of one party's direction. 

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hardnox604008
Advisor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

Lesson seems to be that one should be careful in what he/she chooses to leave as their legacy.

 

That was certain to happen given the structure, if not in this generation then the next.

 

Or taken another way, suppose that everybody faithfully followed Grandpa's direction and stayed on the farm. In a couple of generations you have dozens of folks operating a Soviet style collective farm.

 

All businesses die eventually, even "family farms."  Sometimes it is a good thing, particularly if everyone leaves on relatively good terms and they don't spend a good portion of the legacy on lawyers.

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tree fmr
Advisor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

As some of you know my father recently passed.  The farm was/is set up in a trust with one individual as the executor.  One sibling mentioned we are all screwed because with only one executor that person can do anything.  Of course this is not true!  Well, this sibling went on to say they thought they lost something.  My reply was "what did you lose that you did not have last month?"  The way I look at it, and told my father this years ago, if he decides to give the farm to say one person, that is ok.  No one else lost anything because they never had it!  So I explained this to a couple of family members, in the end we all agreed this is true.  Also said since I do not have any children I was going to will my land to the family trust with a few of my personal "rules".  We all had a good laugh and went about the day.

 

FWIW - the trust is set and all family members are happy!  Like to think I had a small part of this happening.

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Jim Meade / Iowa City
Senior Advisor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

Thanks for bringing up that interesting case.  I looked up the Iowa State observation on this and read a very lengthy and closely reasoned discussion of why the Supreme Court's decision (which is not final because the lower court has to figure out how to comply) has some holes in it.

What is with this court?

http://www.calt.iastate.edu/briefs/CALT%20Legal%20Brief%20-%20%20Valuing%20Minority%20Interests.pdf

 

"The court has manufactured a limitation through an ambiguous standard of “reasonable expectations” that is contrary to the majority’s control of the corporation as exercised in a manner that is consistent with state law."

 

"However, the case isn’t over. As noted above, the Court remanded the case for a determination of oppression under the “reasonable expectations theory.” While the defendant filed a motion for reconsideration on June 28, that motion was denied on July 15.33
But, as noted above, the Court’s decision is seriously flawed in numerous respects and it is not at all unlikely that the trial court could determine (even using the “reasonable expectations theory”) that the corporation did not engage in oppressive conduct and that the minority shareholder’s expectations in this case were unreasonable."

 

 

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minnisota
Veteran Contributor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

Not sure how one shareholder can deny any ROI for several years not be Oppression.

 

"majority shareholders act oppressively when, having the corporate financial resources to do so, they fail to satisfy the reasonable expectations of a minority shareholder by paying no return on shareholder equity while declining the minority shareholder’s repeated offers to sell shares for fair value." 

 

The court ruled that by refusing to buy him out and to use all the profits to reinvest in the corporation of which he was the only one to benefit was oppressive. So as I see it this may be turning point in how corporate farms use their money.

 

Gee this almost sounds like common sence.  

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sw363535
Honored Advisor

Re: An interesting case Iowa Supreme court Baur v Baur Farms Inc

A return on investment and a buyout clause would seem like reasonable expectations.

 

Can't imagine Articles of Incorportaion not having wording on buyout issues.

 

A C Corp is a difficult insturment to use for estate transfer unless it is very well written.

 

Very interesting thread.

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