Karin Eichhoff v. New Glarus Brewing Company

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
February 22, 2024
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2022AP1958 Cir. Ct. No. 2022CV43

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV

KARIN EICHHOFF, STEVEN SPEER AND RODERICK RUNYAN,

PLAINTIFFS-APPELLANTS,

V.

NEW GLARUS BREWING COMPANY AND DEBORAH A. CAREY,

DEFENDANTS-RESPONDENTS.

APPEAL from an order of the circuit court for Green County:
FAUN MARIE PHILLIPSON, Judge. Affirmed.

Before Kloppenburg, P.J., Graham, and Nashold, JJ.

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
No. 2022AP1958

¶1 PER CURIAM. Karin Eichhoff, Steven Speer, and Roderick
Runyan (collectively, “the plaintiff shareholders”) sued Deborah Carey and New
Glarus Brewing Company (“the Brewery”) alleging claims of minority
shareholder oppression and securities fraud. The circuit court dismissed the
plaintiff shareholders’ complaint for failure to state a claim for which relief may
be granted. The plaintiff shareholders appeal, arguing that the complaint states
claims for both minority shareholder oppression and securities fraud. We reject
their arguments and, therefore, affirm.

BACKGROUND

¶2 When considering a motion to dismiss, all well-pleaded facts in a
complaint must be accepted as true. Cattau v. National Ins. Servs. of Wis., 2019
WI 46, ¶4, 386 Wis. 2d 515, 926 N.W.2d 756. The facts stated here and
throughout this opinion are taken from the allegations and uncontested documents
referenced in the operative complaint and attached either to the complaint or the
Brewery’s motion to dismiss.1 We relate here background facts sufficient to
1
See Soderlund v. Zibolski, 2016 WI App 6, ¶37, 366 Wis. 2d 579, 874 N.W.2d 561
(adopting the incorporation-by-reference doctrine, which permits a court to consider a document
attached to a motion to dismiss without converting the motion to one for summary judgment, so
long as the document is referred to in the plaintiff’s complaint, it is central to the plaintiff’s claim,
and its authenticity has not been disputed). The purpose of the doctrine is to “prevent[] a plaintiff
from evad[ing] dismissal … simply by failing to attach to [the] complaint a document that
prove[s] [plaintiff’s] claim has no merit.” Id., ¶38 (citation omitted). Any document so attached
prevails over inconsistent allegations in the complaint. Peterson v. Volkswagen of Am., Inc.,
2005 WI 61, ¶15, 281 Wis. 2d 39, 697 N.W.2d 61 (citing Friends of Kenwood v. Green, 2000
WI App 217, ¶11, 239 Wis. 2d 78, 619 N.W.2d 271).

The plaintiff shareholders do not dispute that the documents attached to their complaint
(the Shareholders Agreement, lease agreements, correspondence, the Private Placement
Memorandum, and the Amended and Restated Shareholders Agreement) and certain documents
attached to the Brewery’s motion to dismiss (the Brewery Bylaws, correspondence from the
Wisconsin Department of Revenue denying the Brewery’s application for a liquor or wine
manufacturing permit, and the 2019 stock purchase agreements signed by the plaintiff
shareholders) are properly part of our review in deciding whether the complaint states a claim.
(continued)

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No. 2022AP1958

provide context for this appeal and relate additional facts as pertinent to the
specific issues in the discussion that follows.

¶3 The plaintiff shareholders and Carey are four of approximately 25
shareholders of the Brewery, a closely held Wisconsin corporation that is
organized as a Subchapter “S” corporation and which operates a microbrewery
that brews and distributes “premium beer.”2 The Brewery was incorporated in
1993 at which time 40,000 shares, at $10 per share, were issued to the plaintiff
shareholders and others. Eichhoff’s late husband purchased 625 voting shares and
625 non-voting shares, for an initial investment of $12,500, and purchased
additional shares over time.3 Speer purchased 1,250 voting shares and 1,250 non-
voting shares, for an initial investment of $25,000. The record does not disclose
how many voting and non-voting shares Runyan purchased in 1993. When they
purchased their shares in 1993, each of the plaintiff shareholders entered into a
Shareholders Agreement.

¶4 In 1993, the Brewery also issued 25,000 voting shares to “its
founder” Carey, who provided capitalization of the Brewery in the amount of

We do not consider the email correspondence from July 2018 between Speer and the
Brewery’s then-General Counsel attached to the Brewery’s motion to dismiss, because, as the
plaintiff shareholders note, that correspondence is not referenced in the complaint and, therefore,
does not meet the Soderlund criteria.

The operative complaint for the purposes of this appeal is the First Amended Complaint.
For ease of reference, we refer to the First Amended Complaint simply as “the complaint.”
2
An “S” corporation is not taxed but passes its income, gain, or loss through to its
shareholders, who report their pro rata shares of that income, gain, or loss on their individual tax
returns. Jorgensen v. Water Works, Inc., 2001 WI App 135, ¶11, 246 Wis. 2d 614, 630 N.W.2d
230.
3
Eichhoff has held the shares since her husband’s death in 2015.

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No. 2022AP1958

$40,000, personally guaranteed a loan to purchase equipment for the Brewery, and
rendered certain services for the Brewery. Since 1993, Carey has been the
president and CEO, the sole director, and the controlling shareholder of the
Brewery (meaning that she has since 1993 owned the majority of the Brewery’s
voting shares). Since 1993, Carey has also managed the business of the Brewery
and, with the brewmaster (her husband Dan Carey), operated the Brewery. None
of the plaintiff shareholders are or have been paid employees of the Brewery.

¶5 In 2015, Carey “set up” the Brewery Employee Stock Ownership
Plan, which has since acquired shares for the benefit of Brewery employees. From
about 2016 onward, Carey has used Brewery assets and staff to construct and
operate on Brewery property the Sugar River Distillery, which is owned by Carey
and her family.

¶6 In 2019, the plaintiff shareholders sold some of their shares for
$2,071 per share as follows: Eichhoff sold 1,250 voting shares to the Brewery for
a total of $2,588,750; Speer sold 625 voting shares to the Brewery for a total of
$1,294,375; Runyan sold 40 voting shares to the Brewery Employee Stock
Ownership Plan for a total of $82,840.

¶7 In 2020, Carey voted to change the preamble to the Brewery’s
bylaws to read, as alleged in the complaint, “that the Brewery intends to remain
independent and locally owned and that it would be operated (in part) for the
benefit of the community.”

¶8 In 2021, Carey used Brewery staff and resources to form a nonprofit
foundation called “Only in Wisconsin Giving, Inc.,” to be the Brewery’s
marketing arm.

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No. 2022AP1958

¶9 Currently, Carey owns 50.48% (18,500 shares) of the voting shares;
the Brewery Employee Stock Ownership Plan owns 26.6% (9,743 shares) of the
voting shares; a trust for one of Carey’s daughters owns 4.09% (1,500 shares) of
the voting shares; Eichhoff owns 3.41% (1,250 shares) of the voting shares; Speer
owns 1.71% (625 shares) of the voting shares; Runyan owns .46% (170 shares) of
the voting shares; and other investors who are not parties to this action own the
remaining 13.25% of the voting shares.

¶10 Carey and the Brewery historically “reinvested profits into the
business, grew the business, practiced sound corporate governance, and increased
shareholder value.” The Brewery has consistently generated large profits, has paid
off all Brewery debts, has recently generated net income of between $15 million
and $20 million per year, and currently has approximately $40 million in cash and
cash equivalents.

¶11 In March 2022, the plaintiff shareholders commenced this action,
alleging minority shareholder oppression under WIS. STAT. § 180.1430(2) (2021-
22) and securities fraud claims under WIS. STAT. § 551.501(2) against Carey and
the Brewery.4 The plaintiff shareholders seek an order requiring that: Carey and
the Brewery purchase the plaintiff shareholders’ shares at “fair value”;
independent directors be appointed for the Brewery; all non-voting shares be

4
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

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No. 2022AP1958

reclassified as voting shares; and Carey and the Brewery pay damages and
attorney fees.5

¶12 The gravamen of the plaintiff shareholders’ complaint is that Carey
and the Brewery have: (1) recently and increasingly focused on operating the
Brewery to benefit the nonprofit foundation and the local community and on
taking steps to keep the Brewery “locally owned”; and (2) misrepresented or not
disclosed information potentially pertinent to the value of the plaintiff
shareholders’ shares, so as to deny the plaintiff shareholders the “reasonable
opportunity” to obtain “fair value” for their shares from an outside sale.

¶13 Carey and the Brewery each filed a motion to dismiss for failure to
state a claim for which relief may be granted, and the circuit court granted both
motions. The plaintiff shareholders appeal.

DISCUSSION

¶14 As a preliminary matter, we first address an argument made by the
plaintiff shareholders in their reply brief, which is directed at the separate briefs
that Carey and the Brewery each filed as respondents on appeal. Specifically, the
plaintiff shareholders argue that we should deem Carey and the Brewery to have
made certain concessions by arguing distinct issues in each respondent’s brief that

5
“Fair value” refers to the value of stock not as a commodity in the open market, but as
a proportionate share of the enterprise as a whole. In contrast, “fair market value” is the amount
for which the stock would sell in the open market, and, in the case of closely held corporations,
usually includes a minority discount for non-controlling shares. HMO-W Inc. v. SSM Health
Care Sys., 2000 WI 46, ¶24 n.5, ¶31, 234 Wis. 2d 707, 611 N.W.2d 250; Northern Air Servs.,
Inc. v. Link, 2011 WI 75, ¶13 n.6, 336 Wis. 2d 1, 804 N.W.2d 458 (“‘Fair market value’ refers to
a share’s value after downward adjustments are made to its ‘fair value’ to account for lack of
control (in the case of shares representing a minority interest) and lack of ready marketability.”).

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No. 2022AP1958

are not argued in the other respondent’s brief, while also joining or adopting in full
the arguments that are made in the other respondent’s brief. 6

¶15 In their reply brief, the plaintiff shareholders argue that, by filing a
separate brief and joining the other’s brief, Carey and the Brewery have each
violated WIS. STAT. RULE 809.19(5)(b), which provides, “In appeals involving
more than one respondent … each respondent may file a separate brief or a joint
brief with another respondent.” The plaintiff shareholders argue that Carey and
the Brewery have, by incorporating each other’s brief, violated this rule and
improperly exceeded the word limits in RULE 809.19(8)(c). Thus, the argument
continues, we should deem Carey to have conceded (by not arguing) the issues
argued by the Brewery, and the Brewery to have conceded (by not arguing) the
issues argued by Carey.

¶16 We decline to do so here. We acknowledge that Carey and the
Brewery’s dividing up the issues may present a challenge to fully addressing all
issues in the reply brief while staying within the word limit. However, the
plaintiff shareholders could have moved but did not move for an enlargement of
that limit. In addition, as we explain below, we agree with the arguments made by
the Brewery in its brief—that the allegations in the complaint do not establish
minority shareholder oppression or securities fraud by either Carey or the
Brewery, and we conclude that it would be inappropriate to deem that Carey has
conceded to the contrary.

6
Simply summarized, Carey argues that the complaint must be dismissed because the
plaintiff shareholders cannot obtain relief other than dissolution as a remedy for oppression, and
the Brewery argues that the complaint must be dismissed because it does not allege facts that
amount to oppression or securities fraud.

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No. 2022AP1958

¶17 We now turn to the merits of the appeal of the circuit court’s order
granting Carey’s and the Brewery’s motions to dismiss the plaintiff shareholders’
complaint. The standard of review of a motion to dismiss is well established:

A motion to dismiss tests the legal sufficiency of
the complaint. Upon a motion to dismiss, we accept as true
all facts well-pleaded in the complaint and the reasonable
inferences therefrom. However, a court cannot add facts in
the process of construing a complaint. Moreover, legal
conclusions asserted in a complaint are not accepted, and
legal conclusions are insufficient to withstand a motion to
dismiss. Therefore, our focus is on factual allegations
made in the complaint. We determine whether the facts
alleged state a claim for relief, which is a legal question
that we review independently.

Townsend v. ChartSwap, 2021 WI 86, ¶10, 399 Wis. 2d 599, 967 N.W.2d 21
(citations omitted).

¶18 Under WIS. STAT. § 180.1430(2)(b), a court may dissolve a
corporation if “the directors or those in control of the corporation have acted, are
acting or will act in a manner that is illegal, oppressive or fraudulent.”
Sec. 180.1430(2)(b). Under WIS. STAT. §§ 551.501 and 551.509, a person may
not “in connection with the … purchase of a security,” “make an untrue statement
of a material fact[,] or [] omit to state a material fact.” Sec. 551.501(2). We
address in turn whether the complaint’s allegations state claims of shareholder
oppression or securities fraud.

I. Minority Shareholder Oppression

¶19 An allegation of oppression is “a legal standard to be fulfilled before
a circuit court may [grant relief] based on the acts of those who control [a
corporation].” Reget v. Paige, 2001 WI App 73, ¶23, 242 Wis. 2d 278, 626
N.W.2d 302; Northern Air Servs., Inc. v. Link, 2011 WI 75, ¶75 n.32, 336

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No. 2022AP1958

Wis. 2d 1, 804 N.W.2d 458. Whether the facts alleged constitute oppression is a
question of law, which we decide independently. Reget, 242 Wis. 2d 278, ¶11.

¶20 Oppressive conduct against a minority shareholder is defined as
“burdensome, harsh and wrongful conduct; a lack of probity and fair dealing in the
affairs of the company to the prejudice of some of its members; or a visual
departure from the standards of fair dealing, and a violation of fair play on which
every shareholder who entrusts [the shareholder’s] money to a company is entitled
to rely.” Jorgensen v. Water Works, Inc., 218 Wis. 2d 761, 783, 582 N.W.2d 98
(Ct. App. 1998) (citation omitted). Oppression, particularly in a closely held
corporation, includes “the frustration of the reasonable expectations of the
shareholders.” Id. at 783 n.10.7

¶21 To show that the director(s) acted oppressively, a shareholder must
show injury resulting from the complained-of action that was primarily inflicted
on the shareholder, not the corporation. See Read v. Read, 205 Wis. 2d 558, 570,
556 N.W.2d 768 (Ct. App. 1996) (noting that “a shareholder may not bring suit for
actions accruing to the corporation” and affirming the dismissal of a complaint
against controlling shareholders because the alleged conduct, if true, “means that
resulting primary injury is to the corporation, not the individual stockholder
bringing the suit”); Notz v. Everett Smith Group, Ltd., 2009 WI 30, ¶22, 316
Wis. 2d 640, 764 N.W.2d 904 (stating that “a majority shareholder’s self-dealing
may result in injury that is primarily to the corporation”). “If the only direct injury

7
“In the context of a close corporation, oppressive conduct [by] those in control is
closely related to breach of the fiduciary duty owed to minority stockholders.” Jorgensen v.
Water Works, Inc., 218 Wis. 2d 761, 783, 582 N.W.2d 98 (Ct. App. 1998). The plaintiff
shareholders have filed a separate action against Carey alleging breach of fiduciary duty, which is
not part of this appeal.

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No. 2022AP1958

is to the corporation, then the right to bring the action belongs solely to the
corporation.” Ewer v. Lake Arrowhead Ass’n, 2012 WI App 64, ¶17, 342 Wis. 2d
194, 817 N.W.2d 465. Thus, when the injury is primarily to the corporation, the
shareholder cannot bring direct claims to seek redress for that conduct and
resulting injury. The shareholder’s sole avenue for relief is to pursue a derivative
action that complies with statutory requirements on behalf of the corporation. Id.,
¶18; Rose v. Schantz, 56 Wis. 2d 222, 230, 201 N.W.2d 593 (1972).

¶22 The few published cases addressing minority shareholder oppression
claims provide some guidance as to the type of conduct that may constitute
minority shareholder oppression, as well as the type of conduct that does not.

¶23 Cases in which appellate courts have identified conduct that may
constitute minority shareholder oppression include the following. In Jorgensen,
218 Wis. 2d 761, this court ruled that the following facts warranted a trial on the
plaintiffs’ minority shareholder oppression claim: the plaintiffs were two of six
original shareholders in a corporation; all six shareholders were originally
directors and received monthly payments from the corporation, and one of the
plaintiffs was in charge of management; and after disagreements arose among the
shareholders, four shareholders voted both plaintiffs off the board of directors, the
plaintiffs no longer had any role in managing how the corporation was run or how
money was distributed, and monthly distributions that had been made to all of the
shareholders were no longer made to the plaintiffs. Id. at 768-69, 783. Similarly,
in Northern Air Services, 336 Wis. 2d 1, our supreme court acknowledged a
minority shareholder oppression claim based on the claimant’s removal as an
employee, officer, and shareholder in the corporation by the other two
shareholders. Id., ¶¶11, 14, 17, 77. Finally, in Notz, 316 Wis. 2d 640, our
supreme court ruled that a claim of minority shareholder oppression was supported

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No. 2022AP1958

by the allegation that the majority shareholder directed the company to make
expenditures for due diligence for a potential acquisition of another company that
ultimately benefited only the majority shareholder, which acquired the company
for itself, thus resulting in a “constructive dividend” to the majority shareholder.
Id., ¶¶2, 4, 38.

¶24 In all of these cases, the ground for the minority shareholder
oppression claim was that the persons who controlled the corporation used their
power to frustrate the reasonable expectations held by minority shareholders—
either by cutting off income streams or influence that the minority shareholders
reasonably expected to have in the company, or by directing the company to pay
dividends to the majority shareholder that were not shared equally by minority
shareholders.

¶25 By contrast, the leading case in which this court identified conduct
that does not constitute minority shareholder oppression is Reget, 242 Wis. 2d
278. In Reget, this court dismissed the plaintiff’s minority shareholder
suppression claim, ruling that the following facts did not warrant a trial: the
defendant shareholders did not maintain a market for the sale of the plaintiff’s
stock or offer to purchase his stock at a price he believed was fair; the corporation
had not paid dividends to any of the shareholders, despite its cash-rich position;
and five family members received compensation for their services that the plaintiff
believed was excessive. Id., ¶¶6-9.

¶26 As we next explain in detail, the plaintiff shareholders here do not
allege that they ever had any role in managing the Brewery, that they were ever
directors or employees of the Brewery, that they were ever denied distributions or
dividends made to other shareholders, or that Carey and the Brewery squeezed

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No. 2022AP1958

them out of whatever role they had as minority shareholders, as in Jorgenson, 218
Wis. 2d 761, Northern Air Services, 336 Wis. 2d 1, and Notz, 316 Wis. 2d 640.
Rather, the plaintiff shareholders make allegations more like those rejected for
failing to state a minority shareholder oppression claim in Reget, 242 Wis. 2d 278.
We address their allegations as to each aspect of their minority shareholder
oppression claim in roughly the order in which the allegations are stated in the
complaint.

Dividends

¶27 The complaint alleges that Carey and the Brewery have not paid and
refuse to pay dividends to shareholders beyond distributions sufficient to cover
their S-corporation taxes associated with the Brewery’s income. The complaint
alleges that this is so even though the Brewery is holding approximately
$40 million in cash and cash equivalents, has recently generated large profits from
annual net income of between $14 million and over $20 million, and has retained
earnings of approximately $100 million, “with virtually no debt.” The complaint
alleges that the plaintiff shareholders have been harmed by Carey and the
Brewery’s refusal “to distribute any … profits and reserves beyond the tax
distributions that are specified in the Shareholders Agreement.”

¶28 As we explain, these allegations fail to state a minority shareholder
oppression claim because the plaintiff shareholders were put on notice when they
first invested in the Brewery that no dividends would be paid to any shareholder
except as authorized by the Board of Directors, and that the Brewery would, at
most, try to make distributions to all shareholders sufficient to satisfy their tax
obligations. Thus, all shareholders were treated alike in this respect, consistent
with the Brewery’s obligation as stated to the plaintiff shareholders when they

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No. 2022AP1958

purchased their shares, and the plaintiff shareholders had no reasonable
expectations to the contrary.

¶29 The 1993 Private Placement Memorandum that was provided to
prospective investors at the time of the initial stock offering stated that
shareholders “will be entitled to dividends only as authorized by the Board of
Directors,” and “THERE CAN BE NO ASSURANCES THAT DIVIDENDS
WILL BE PAID.” In its summary of the investment risks, the Memorandum
repeated that, “No assurance can be made as to the amount or timing of any
dividends to shareholders of the [Brewery] or that dividends eventually will be
paid.” The Memorandum also stated that the Brewery agreed, pursuant to the
terms of the Shareholders Agreement signed by the plaintiff shareholders, “to use
its best efforts to make distributions to the shareholders in amounts sufficient to
satisfy any tax obligations which the shareholders may incur attributable to
income of the [Brewery].” That identical language is stated in the Shareholders
Agreement.

¶30 The complaint alleges that the Brewery has since 1993 paid
distributions to the minority shareholders sufficient to cover their taxes associated
with the Brewery’s income, consistent with the Brewery’s obligation regarding
dividends and distributions as explained above. The complaint does not allege
that the Board of Directors authorized dividends beyond this obligation and that
the Brewery failed to pay such dividends. The plaintiff shareholders fail to cite
legal authority supporting the proposition that a corporation engages in oppressive
conduct when the corporation has failed to pay shareholders distributions or
dividends beyond what the corporation was obliged, or what the directors
authorized the corporation, to pay. The case law suggests the contrary.

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No. 2022AP1958

¶31 This court has explained that, “until the profits of a corporation are
declared as a dividend, the shareholders have no right or title in them and such
profits belong exclusively to the corporation. Rather than being used to pay
dividends, corporate profits may be added to the assets of the corporation to use
for other corporate purposes.”8 Reget, 242 Wis. 2d 278, ¶15 (citing Franzen v.
Fred Rueping Leather Co., 255 Wis. 265, 271-72, 38 N.W.2d 517 (1949)). In
sum, the complaint’s allegations about the Brewery’s failure to pay dividends
beyond the distributions sufficient to cover shareholders’ tax obligations fails to
state a claim of minority shareholder oppression.

Withholding and misrepresenting facts

¶32 The complaint generally alleges that Carey and the Brewery
withheld and misrepresented information “regarding the Brewery and Defendants’
intent with respect to Brewery matters.” We discuss below the specific allegations
that identify the facts allegedly withheld or misrepresented under the sub-topics to
which those facts relate. To the extent that this allegation relates to conduct
associated with the 2019 purchase of the plaintiff shareholders’ shares, we discuss
it below as pertinent to the complaint’s securities fraud claim.

8
The complaint alleges that Carey and the Brewery oppressed the plaintiff shareholders
by using the Brewery’s assets to establish and operate a distillery so as to “use up more Brewery
cash that could otherwise be paid as distributions to shareholders.” However, as explained in the
text, the shareholders had no reasonable expectation that the Brewery would use any excess cash
to pay larger distributions, and the Brewery had no obligation to do so. Thus, the complaint fails
to allege any injury resulting from the Brewery’s consistent payment of distributions sufficient to
cover shareholders’ tax obligations, regardless of how much cash the Brewery held or the other
corporate purposes for which the Brewery used that cash.

We address the complaint’s additional allegations about the distillery separately below.

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No. 2022AP1958

Carey’s “autocratic control”

¶33 The complaint broadly alleges that Carey is free to approve matters
without holding a Board of Directors meeting or calling for a vote at shareholder
meetings, because Carey is the sole director and sole majority shareholder and,
therefore, has voting control and can approve matters unilaterally.9 The complaint
alleges that Carey has told the minority shareholders that she desires “to have as
much control as possible with as many options as possible for herself.” The
complaint alleges in its concluding paragraph that the plaintiff shareholders are
oppressed because they “have no say in the Brewery’s operation.”

¶34 To the extent that the allegations imply that this situation frustrates
the plaintiff shareholders’ reasonable expectations, the documentary record
precludes such an inference. That record establishes that, when the plaintiff
shareholders first invested in the Brewery in 1993, they were fully apprised that,
as the complaint also alleges, Carey would be the sole director and majority
shareholder with controlling “say” in the Brewery’s operation.

¶35 The 1993 Private Placement Memorandum that made the offering to
investors states that Carey will be the president and director of the Brewery and
will be “responsible for overall operation of the [Brewery], including sales and
marketing.” The Brewery’s Bylaws state that there will be one director and vest
the president and director with broad authority over the operation and management
of the Brewery. Specifically, the Bylaws provide that the president shall:

9
As examples, the complaint alleges that the Brewery made a loan to Carey and
transferred brewery assets to the Sugar River Distillery, owned solely by Carey and her husband,
without submitting these items for a vote. We address the loan and the distillery, separately,
below.

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No. 2022AP1958

supervise and control all of the Brewery’s business and affairs; appoint and
determine the powers, duties, and compensation of the Brewery’s agents and
employees; “execute … all deeds, mortgages, bonds, stock certificates, contracts,
lease, reports and all other documents or instruments … in the course of the
[Brewery’s] regular business”; and “shall perform all duties incident to the office
of chief executive officer and such other duties as may be prescribed by the Board
of Directors.” The Bylaws provide that the Board of Directors: shall exercise all
corporate powers and manage the Brewery’s business and affairs; may authorize
contracts and loans on behalf of the Brewery; and may amend the Bylaws.

¶36 The Memorandum also vests Carey with voting control.
Specifically, the Memorandum calls for the issuance to investors of up to 20,000
voting shares and 20,000 non-voting shares at a price of $10 per share in 32 units
of 625 voting shares and 625 non-voting shares each, and provides that Carey as
the founder would be issued 25,000 voting shares. The Memorandum provides
that, “Investors must purchase, minimally, One Unit consisting of 625 shares of
voting stock and 625 shares of non-voting stock” for $12,500. The Memorandum
states that, among other investment risks, investors’ voting power is limited
because of the requirement that shareholders purchase equal numbers of voting
and non-voting shares, while Carey holds only voting shares.

¶37 Thus, when the plaintiff shareholders first invested in the Brewery,
they had no reasonable expectation that Carey would act inconsistent with her
broad authority and obligations as the sole director and majority shareholder. The
complaint does not allege that the “complete autocratic control” exercised by
Carey over the Brewery’s operations has been inconsistent with the authority
vested in her since 1993. Simply stated, consistent with the 1993 Private
Placement Memorandum and the Brewery’s Bylaws, since the plaintiff

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No. 2022AP1958

shareholders first invested in the Brewery in 1993, they have not “had any say” in
the Brewery’s operation.

¶38 In addition, as alleged in the complaint and shown in the documents
attached to the parties’ pleadings, the Brewery “has consistently generated large
profits” and built up approximately $40 million in cash and cash equivalents with
no debt, and in 2019 the plaintiff shareholders sold for $2,071 per share some of
the shares that they purchased in 1993 for $10 per share. These allegations do not
establish that Carey exercised her “autocratic control” either oppressively or
contrary to the plaintiff shareholders’ reasonable expectations that she would
“operat[e] a profitable business” as provided in the Memorandum.

¶39 In sum, the complaint’s allegations about Carey’s autocratic control
fail to state a claim of minority shareholder oppression.

Self-dealing

¶40 The complaint appears to also allege that certain decisions that
Carey made and certain actions that Carey and the Brewery took constituted self-
dealing that oppressed the plaintiff shareholders and caused them injury by
increasing the value of Carey’s shares or suppressing the value of their shares, to
their detriment. As we now explain, in each instance the complaint’s allegations
of self-dealing either allege conduct consistent with the Brewery’s Bylaws and
Private Placement Memorandum that were known to the plaintiff shareholders
when they first invested in the Brewery in 1993, or allege injuries that are
primarily injuries to the Brewery that cannot be the basis of a direct claim by
shareholders. We address each of the challenged decisions and actions in turn.

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No. 2022AP1958

Compensation and loans

¶41 The complaint alleges that the Brewery has paid bonuses to Carey
and her husband, that in 2008 Carey authorized a $170,000 loan to herself and her
husband that was subsequently paid back, and that Carey has employed her
daughter as the Brewery’s staff architect. However, the complaint provides no
specific details beyond these conclusory allegations to permit the inference that
the bonuses and daughter’s salary have been disproportionate to the services
provided by Carey and her husband and daughter, or that the bonuses, repaid loan,
or daughter’s salary caused any injury to the plaintiff shareholders so as to support
an allegation of self-dealing in the form of excessive compensation. In addition,
the Brewery’s Bylaws authorize the Board of Directors to establish reasonable
compensation for directors and reasonable benefits for employees, and the
complaint does not allege any unreasonable compensation or benefits. The
Brewery’s Bylaws also authorize the Board of Directors to authorize loans, and
the complaint does not allege that Carey did not authorize the $170,000 loan.

¶42 Not only does the complaint fail to allege excessive compensation to
Carey and her family employees, but the plaintiff shareholders fail to cite legal
authority supporting the proposition that such conduct, even if alleged, states a
minority shareholder oppression claim. See Reget, 242 Wis. 2d 278, ¶15
(explaining that paying some shareholders excessive compensation in bad faith
could state a claim for breach of fiduciary duty to the other shareholders);
Jorgensen, 218 Wis. 2d at 776 (same).

Employee Stock Ownership Plan (ESOP)

¶43 The complaint alleges that Carey unilaterally set up the Brewery
ESOP in 2015, to “assure long-term operation of the Brewery as a locally-owned

18
No. 2022AP1958

brewery, that would be operated for the benefit of employees and the public and
not necessarily for the benefit of the minority shareholders” and to enable Carey
and her family to sell their shares “without selling the entire brewery for the
benefit of all shareholders.”

¶44 We address separately below the allegations directed at Carey’s
intent to keep the Brewery locally owned. The allegations directed at the benefit
of employees and the public state a primary injury to the Brewery, to the extent
that such benefits come at the Brewery’s expense. As for the allegations that the
ESOP provides a vehicle for Carey and her family to benefit at the plaintiff
shareholders’ expense, the claim seems to be that: (1) Carey and her family could
sell their shares to the ESOP for high prices without the Brewery being sold to an
outside buyer; and (2) while the plaintiff shareholders could also sell their shares
to the ESOP, they would do so at lower prices than if all the shareholders sold
their shares to an outside buyer. This claim is speculative and amounts only to the
allegation that the plaintiff shareholders will not be able to obtain the price that an
outside buyer would pay, but, as explained separately below, they have had no
reasonable expectation of a sale to an outside buyer.

¶45 The complaint also alleges that Carey and the Brewery have
“attempted to shift vast amounts of potential market value from the minority
shareholders … perhaps to the ESOP’s shares.” However, the complaint does not
allege that Carey and the Brewery have actually done so.

¶46 In sum, the complaint’s allegations about the ESOP fail to state a
claim of minority shareholder oppression.

19
No. 2022AP1958

Distillery

¶47 The complaint alleges that Carey unilaterally established the Sugar
River Distillery, used Brewery assets and resources for the benefit of the distillery,
and allowed Carey and her family to take ownership of the distillery when Carey
had a conflict of interest.

¶48 More specifically, the complaint alleges that Carey told the
shareholders at an annual meeting that the Brewery was working on establishing a
distillery. The complaint alleges that Carey caused the Brewery to: pay the costs
and expenses of developing plans for, acquiring assets for, registering for federal
trademarks for, providing distillery training for Carey’s husband for, and
constructing on Brewery property a distillery; approve contracts for the lease of
Brewery employees, utilities, and space for below market value; and provide raw
material and products at cost. The complaint alleges that the Brewery makes beer
and mash that are sold at cost to the distillery, and that Carey and the Brewery
intend to use Brewery earnings to expand the Brewery’s capacity to benefit the
distillery. The complaint alleges that Carey continues to use Brewery profits to
expand and purchase equipment for use in the distillery.

¶49 The complaint also alleges that Carey converted the distillery to a
business owned by her and her husband, without consulting other shareholders,
and subsequently explained to the shareholders that she did so because the
Brewery could not legally own the distillery, a fact confirmed in the Wisconsin
Department of Revenue correspondence attached to the Brewery’s motion to
dismiss. The complaint alleges that Carey took all of these actions related to the
distillery at the Brewery’s expense, despite the conflict of interest resulting from
her ownership of the distillery, solely for the benefit of herself and her family.

20
No. 2022AP1958

¶50 The allegation that Carey took all of these actions to benefit herself
“at the Brewery’s expense,” along with the allegations that the Brewery is “not
fully compensate[d]” for its assets and resources used by the distillery, indicate
that any injury resulting from those alleged actions was to the Brewery, not the
shareholders. Thus, the right to bring any claim based on these allegations
belongs to the corporation, and cannot be the subject of a direct action by
shareholders. See Ewer, 342 Wis. 2d 194, ¶17 (“If the only direct injury is to the
corporation, then the right to bring the action belongs solely to the corporation.”).
Beyond any alleged injury to the Brewery, the complaint does not allege that
Carey’s and the Brewery’s actions related to the distillery adversely affected
plaintiff shareholders’ role in the corporation. In sum, these allegations fail to
state a claim of minority shareholder oppression.

Nonprofit foundation and intent to operate Brewery for benefit of public

¶51 The complaint alleges that Carey unilaterally caused the Brewery to
use its staff and other resources to pursue her own personal interest in forming a
charitable nonprofit foundation. The complaint alleges that the foundation is
called “Only in Wisconsin Giving, Inc.” and that two of the foundation’s three
board seats are chosen by Carey’s family. The complaint alleges that the
Brewery’s resources have been used to set up the foundation and that Carey and
the Brewery have said that they intend for the foundation to be the Brewery’s
“marketing arm.” The complaint alleges that Carey’s actions concerning the
foundation demonstrate her “intent to operate the Brewery for the benefit of the
public” and to use the foundation “to acquire other minority shareholders’ shares
to retain her control of the Brewery.” The complaint also alleges that Carey and
the Brewery intend to donate at least 5% to 10% of the Brewery’s annual net
income to the foundation, forcing the plaintiff shareholders “to donate their pro

21
No. 2022AP1958

rata share of the Brewery’s income” to the foundation and “complicat[ing] the
shareholders’ personal tax situations.”

¶52 These allegations fail to state a claim of minority shareholder
oppression for at least the following reasons. The complaint does not allege that
the plaintiff shareholders are required to donate shares to the foundation. Nor does
the complaint allege that the Brewery’s donations have prevented or will prevent
the Brewery from making distributions sufficient to cover the plaintiff
shareholders’ tax payments. That the donations complicate any shareholder’s
personal taxes is not oppression as defined in the case law cited above.

¶53 In addition, to the extent that the complaint alleges that Carey’s use
of Brewery assets to benefit the public, such as to support the foundation or
“acquire additional lands and develop outdoor park space for the public,” will
decrease the Brewery’s profits, the injury would be primarily to the Brewery and,
therefore, cannot be the subject of direct claims by the shareholders.

2019 purchase of plaintiff shareholders’ voting shares

¶54 The complaint alleges generally that Carey and the Brewery have
tried to buy back voting shares to consolidate Carey’s control of the Brewery. The
specific allegations regarding the 2019 purchase of some of the plaintiff
shareholders’ voting shares include the following.

¶55 The complaint alleges that Carey and the Brewery knowingly
purchased some of the plaintiff shareholders’ voting shares at below fair market
value; that Carey and the Brewery based the purchase price on the 2017 ESOP
valuation (which Carey and the Brewery disclosed); but that Carey and the
Brewery did not provide the plaintiff shareholders, despite repeated requests, with

22
No. 2022AP1958

complete annual ESOP stock valuations reports. The complaint also alleges that
Carey has received offers for her shares that greatly exceed what she and the
Brewery paid for the plaintiff shareholders’ shares, and has otherwise suggested
that the value of the Brewery is significantly more than the ESOP valuation
allegedly used to establish the purchase price of the plaintiff shareholders’ shares.
The complaint alleges that Carey and the Brewery applied a minority discount to
the 2017 ESOP valuation so as to further reduce the price for the plaintiff
shareholders’ shares below fair market value while increasing the value of Carey’s
controlling shares; required that the plaintiff shareholders first sell their voting
shares so as to consolidate Carey’s control; and took other steps to ensure that
Carey retains her majority control over voting shares.

¶56 The documents attached to the complaint and the Brewery’s brief
supporting its motion to dismiss show that the plaintiff shareholders purchased
their shares in 1993 for $10 per share and sold some of them to the Brewery and
the ESOP in 2019 for $2,071 per share. Most of the above-stated allegations
concern the claim that the plaintiff shareholders received less than what they
believed to be the fair market value for their shares when they sold them. As to
that claim, the allegations fail to allege minority shareholder oppression because
the plaintiff shareholders were free to not sell their shares at the price offered.
Indeed, the same claim was rejected in Reget, 242 Wis. 2d 278, ¶¶6-9, 15
(dismissing plaintiff’s minority shareholder suppression claim that the defendant
shareholders did not maintain a market for the sale of the plaintiff’s stock or offer
to purchase his stock at a price he believed was fair).

¶57 Moreover, the plaintiff shareholders had no reasonable expectations
of receiving the fair “market value” for their shares, because they were informed
from the start that there would be no market for their shares. The Private

23
No. 2022AP1958

Placement Memorandum provided to the plaintiff shareholders in 1993 stated,
“NO PUBLIC MARKET FOR THE STOCK NOW EXISTS OR IS LIKELY TO
DEVELOP.” The Memorandum also stated that, among other investment risks,
“[t]here is no established market for the sale of the Stock” and that “transfer of the
Stock will be severely restricted.” The Memorandum stated, “Since its
transferability is limited, it is clear that a public market in the Stock will never
develop. The Corporation is under no obligation to establish a market for the
Stock.”

¶58 The remaining allegations concern the claim that Carey and the
Brewery pursued the purchase of some of the plaintiff shareholders’ shares to
consolidate Carey’s control of the Brewery. However, these allegations fail to
allege minority shareholder oppression because, as explained above, Carey already
had control over almost all aspects of the Brewery’s business and operation, as the
majority shareholder, president, and sole director. The complaint does not allege
that the sale of some of the plaintiff shareholders’ shares decreased their power as
to those matters outside of Carey’s control or requiring the shareholders’
unanimous consent.10

¶59 In sum, the complaint’s allegations about the 2019 purchase of some
of the plaintiff shareholders’ voting shares fail to state a claim of minority
shareholder oppression.11

10
As discussed separately below, the complaint alleges that amendment to the
Shareholders Agreement requires a unanimous vote of the shareholders.
11
To the extent that these allegations also pertain to the plaintiff shareholders’ securities
fraud claim, we address them further in our analysis of whether the complaint states that claim.

24
No. 2022AP1958

Refusal to sell Brewery and intent to keep it locally owned

¶60 The complaint alleges that Carey intends to keep the Brewery locally
owned to prevent the plaintiff shareholders from benefitting from a sale of the
Brewery to an outside buyer at a per share price greater than the price offered by
Carey for their shares, which prevents the plaintiff shareholders from “realiz[ing] a
fair return on their investment.” The complaint alleges that Carey unilaterally
amended the preamble to the Brewery’s bylaws “to read that the Brewery intends
to remain independent and locally owned, and that it would be operated (in part)
for the benefit of the community.”12 The complaint alleges that this amendment
signaled a shift from the initial focus on operating a profitable business for the
benefit of the investors and frustrated the plaintiff shareholders’ reasonable
expectations “that they would receive fair value for their shares.” These
allegations fail to state a claim of minority shareholder oppression for at least the
following reasons.

¶61 The documents attached to the pleadings refute the allegations that
Carey’s alleged intent to keep the Brewery independent and locally owned, and to
operate it “in part” to benefit the community, frustrated the plaintiff shareholders’
reasonable expectations. The Private Placement Memorandum that has been in
place since 1993 states that the Brewery will “cultivate its image with a program
of personal interaction intended to create a strong presence in the local market”
and a strong connection between retailers and customers with “their local
brewery.” The Memorandum also stresses the importance of the “local food

12
The Bylaws provide that the bylaws may be amended either by a majority of voting
shares present at an annual or special shareholders meeting or by a majority of the Board of
Directors.

25
No. 2022AP1958

cultures and strong local allegiance and support of local products collectively” to
the Brewery’s success. The Memorandum specifically notes the results of a
market survey showing “a high level of consumer interest” in, and preference for,
local beers, even at a higher price, “relative to the national brands.” Thus, the
plaintiff shareholders have been on notice from the start of the local focus and
nature of the Brewery’s operations and the importance of that local focus and
nature to cementing community connections and to fostering local allegiance and
commercial success.

¶62 In addition, the Memorandum states that Carey, as the founder, “is
dedicated to producing a quality beer, establishing a mutually beneficial
relationship with the [Brewery’s] customers and operating a profitable business for
the [Brewery’s] investors.” The complaint alleges that the Brewery under Carey’s
leadership has been profitable. The complaint does not allege that the Brewery
was formed for ultimate sale to an outside buyer. That Carey indicated her intent
to keep the Brewery locally owned is not inconsistent with her obligations as
stated in the Memorandum.

¶63 The complaint’s allegations about Carey’s focus on keeping the
Brewery locally owned fail to state a minority shareholder oppression claim for
the following additional reason. To the extent that remaining locally owned may
negatively affect the Brewery’s profits and, as a result, the value of the plaintiff
shareholders’ shares, any primary injury is to the Brewery.

Not party to Shareholders Agreement

¶64 The Shareholders Agreement provides, “The Corporation agrees to
require all future shareholders of the Corporation to execute this Agreement as a
precondition to the issuance of Shares of capital stock in the Corporation.” The

26
No. 2022AP1958

Private Placement Memorandum similarly states, “No one will be permitted to
become a shareholder of the Corporation unless he or she becomes a party to the
Shareholders Agreement.” The complaint alleges that, despite the plaintiff
shareholders’ expectations to the contrary, Carey, her daughter, her daughter’s
trust, and the ESOP are not parties to the Shareholders Agreement, and that all
other minority shareholders are subject to the “stock transfer restrictions” in the
Agreement. The complaint points to the specific restriction that the Brewery has
the right of first refusal, meaning it has the option to match the price offered by a
third party to whom a shareholder wishes to sell shares. The complaint alleges
that, as a result, Carey “is free to sell her shares to whomever she chooses at
whatever price she can negotiate.”

¶65 The plaintiff shareholders do not explain how the fact that Carey, her
daughter, her daughter’s trust, and the ESOP are not bound by this restriction
injures them. Rather, even if all four were bound by the right of first refusal
restriction, under the Shareholders Agreement, Carey as the controlling
shareholder and sole director of the Brewery could choose for the Brewery not to
exercise that right and all four could still sell their shares at whatever prices they
chose. Thus, this allegation fails to state a claim of minority shareholder
oppression.13

13
Moreover, as to the ESOP, the complaint fails to state a claim of minority shareholder
oppression as to this issue because the complaint alleges that there is a separate shareholders
agreement between the Brewery and the ESOP that imposes restrictions on share transfers. The
complaint does not allege that the ESOP is subject to restrictions different from those in the
Shareholders Agreement to which the ESOP is not a party.

27
No. 2022AP1958

Proposed amendments to Shareholders Agreement and other documents

¶66 The complaint alleges that Carey proposed specific “oppressive
changes” to the Shareholders Agreement that would “dilute” and “devalue” the
plaintiff shareholders’ shares, increase the value of Carey’s controlling shares,
and consolidate Carey and her family’s control of the Brewery. However, the
complaint also alleges that an amendment to the Shareholders Agreement requires
a unanimous vote of the shareholders, and does not allege that the proposed
amendments were adopted. Thus, this set of allegations regarding objectionable
proposed amendments that are not in effect and which the plaintiff shareholders
can keep from coming into effect fails to state a claim of minority shareholder
oppression.

¶67 Similarly, the complaint alleges that Carey and the Brewery
proposed to amend the articles of incorporation and other corporate documents to
increase the number of authorized shares and authorize a stock split, but the
complaint does not allege that these proposals were adopted.

Refusal to follow Bylaws

¶68 The complaint generally alleges that Carey and the Brewery
repeatedly refused to follow the Bylaws regarding notice of shareholder meetings,
agendas, and voting on issues, and refused to allow minority shareholders to vote
“on corporate issues.” However, the complaint also alleges that Carey always held
a majority of the voting shares, such that her vote on corporate issues, which as
explained above require majority votes, controlled. The complaint does not allege
that Carey and the Brewery acted unilaterally on issues requiring unanimous votes,
or on issues that are not within Carey’s authority as the sole director and president.

28
No. 2022AP1958

Thus, the complaint’s allegations about the refusal to follow the Bylaws fail to
state a claim of minority shareholder oppression.

II. Securities Fraud Claim

¶69 The plaintiff shareholders allege that Carey and the Brewery
misrepresented and failed to disclose material facts when the Brewery and the
ESOP purchased some of the plaintiff shareholders’ voting shares in 2019, in
violation of WIS. STAT. § 551.501(2). That statute provides that:

It is unlawful for a person, in connection with the
offer, sale, or purchase of a security, directly or indirectly,
to do any of the following:

….

(2) To make an untrue statement of a material fact
or to omit to state a material fact necessary in order to make
the statement made, in light of the circumstances under
which they were made, not misleading.

Sec. 551.501(2); see also WIS. STAT. § 551.509(2) (providing for civil liability for
the sale of a security in violation of § 551.501(2)). To summarize the analysis that
follows, the crux of the securities fraud claim is that, as a result of the alleged
misrepresentations and omissions, the Brewery and the ESOP offered a purchase
price that was allegedly below the shares’ fair market value. The allegations as to
the purchase of Eichhoff’s and Speers’ shares fail to state a claim because there is
no allegation that Carey and the Brewery made any representation that the
purchase price was based on the shares’ fair market value. The allegations as to
the purchase of Runyan’s shares fail to state a claim because the purchase
agreement explicitly provides that the price would be at or below fair market
value.

29
No. 2022AP1958

¶70 Recall that in 1993 the plaintiff shareholders purchased voting and
non-voting shares in the Brewery for $10 per share. According to the 2019 stock
purchase agreements, the Brewery and the ESOP purchased some of the plaintiff
shareholders’ voting shares for $2,071 per share. The Brewery purchased some of
Eichhoff’s and Speer’s voting shares, and the ESOP purchased some of Runyan’s
voting shares.

¶71 The Brewery argues that Runyan’s securities fraud claim must be
dismissed because Carey and the Brewery did not purchase Runyan’s shares; the
ESOP, which did purchase Runyan’s shares, is not a defendant; and the complaint
does not allege that Carey or the Brewery controlled the ESOP’s purchase of
Runyan’s shares. The plaintiff shareholders argue that the complaint sufficiently
alleges that the terms of the purchase were controlled by Carey and the Brewery.
Specifically, the plaintiff shareholders rely on the allegation in the complaint that
“[t]he Brewery, at Carey’s direction, unilaterally determines when and whether
voting shares it purchases from shareholders will be assigned to the ESOP or
retained as treasury stock.” We assume without deciding that this allegation
suffices, and we proceed to address the issue of whether the complaint states a
securities fraud claim as to all three plaintiff shareholders.

A. Additional background

¶72 As stated, the complaint alleges that Carey and the Brewery made
untrue statements of material fact to the plaintiff shareholders or omitted material
facts that Carey and the Brewery were required to disclose. Specifically, the
complaint alleges as follows.

¶73 Carey and the Brewery set the purchase price of the shares at a
discount based on a 2017 ESOP valuation, and disclosed the per share valuation

30
No. 2022AP1958

figure but not the valuation report despite the report having been requested by the
plaintiff shareholders. The 2017 ESOP valuation, and the purchase price for the
plaintiff shareholders’ shares based on the valuation, were below fair market value
in 2019. The requested ESOP valuation reports for the years 2017-20, which the
plaintiff shareholders ultimately received in 2021, show that Carey and the
Brewery provided inaccurate data and projections to artificially depress the value
of the shares. Carey and the Brewery possessed facts, which they did not disclose,
showing that the ESOP valuation “was most certainly far below fair market
value.” Specifically, Carey and the Brewery failed to disclose that “some time
ago” Carey had received a third party offer of $100 million for 10% of Carey’s
shares in the Brewery, based on which Carey knew or should have known that the
2017 ESOP valuation was below fair market value.14 As a result of Carey’s and
the Brewery’s misrepresentations and omissions, the plaintiff shareholders sold
their shares “at a value less than they would have” had they received true and
complete information.

B. Analysis

¶74 Because the stock purchase agreements for the purchase of
Eichhoff’s and Speer’s shares contain the same language, and that language is
different from the language in the agreement for the purchase of Runyan’s shares,

14
The complaint alleges that the most recent ESOP valuation values the Brewery at
between $92.8 million and $113 million. However, the brief does not explain how the most
recent ESOP valuation is relevant when the complaint alleges that the 2019 purchase price for
plaintiff shareholders’ shares was set at a discount based on the 2017 ESOP valuation. Moreover,
the complaint alleges that Carey and the Brewery provided the 2017 ESOP valuation (which the
complaint does not identify) to the plaintiff shareholders.

31
No. 2022AP1958

we will address first the Eichhoff and Speer transactions and then the Runyan
transaction.

Eichhoff and Speer Transactions

¶75 The Eichhoff and Speer stock purchase agreements state in pertinent
part:

WHEREAS, the Seller is the owner of record of
shares of voting stock of New Glarus (“the Stock”); and

WHEREAS, the Seller desires to sell to New
Glarus, and New Glarus desires to purchase from the Seller
… shares of such Stock (the “New Glarus Shares”);

NOW, THEREFORE, in consideration of the
mutual covenants and promises contained herein, and
subject to and on the terms and conditions herein set forth,
the parties agree as follows:

….

1.2 In payment for the New Glarus Shares, New
Glarus shall pay to the Seller at the Closing, $2,071.00 per
share, for the total sum of ….

….

REPRESENTATIONS AND WARRANTIES OF NEW
GLARUS

New Glarus hereby represents and warrants to
Seller as follows:

5.1 To the full extent required by the New Glarus
Brewing Company Shareholders Agreement, New Glarus
authorizes the sale of the New Glarus Shares to New
Glarus.

As the circuit court notes, there is in the stock purchase agreements no language
regarding the calculation of the purchase price and no reference to fair market
value.

32
No. 2022AP1958

¶76 We assume as fact for purposes of this appeal, as we must on a
motion to dismiss, the complaint’s allegations that Carey and the Brewery knew
that the 2017 ESOP valuation understated the Brewery’s fair market value and set
a purchase price below the shares’ fair market value, and knowingly withheld
information so showing. However, the complaint does not allege that Carey and
the Brewery represented to Eichhoff and Speer that the purchase price was based
on the fair market value of the Brewery or the shares. And, as the circuit court
noted, there is no language in the stock purchase agreements signed by Eichhoff
and Speer regarding the calculation of fair market value or tying that calculation to
the purchase price. That is, there is no language in the stock purchase agreements,
and no allegation in the complaint, stating that Carey and the Brewery represented
to Eichhoff and Speer that the purchase price was pegged to fair market value.
Thus, any misrepresentation or omission regarding fair market value was not
material because there was no alleged or demonstrated representation that the
purchase price was based on fair market value.

Runyan Transaction

¶77 The Runyan stock purchase agreement states in pertinent part:

WHEREAS, the Seller is the owner of record of
shares of voting stock of New Glarus (“the Stock”); and

WHEREAS, the Seller desires to sell to the ESOP
Trust, and the ESOP Trust desires to purchase from the
Seller … shares of voting Stock (the “ESOP Shares”);

NOW, THEREFORE, in consideration of the
mutual covenants and promises contained herein, and
subject to and on the terms and conditions herein set forth,
the parties agree as follows:

….

33
No. 2022AP1958

1.2 In payment for the ESOP Shares, the ESOP
Trust shall pay to the Seller at the Closing $2,071.00 per
share, for the total sum of ….

1.3 The parties intend that the ESOP Trust not pay
more than adequate consideration as of the Closing date, as
defined in Section 3(18) of the Employer Retirement
Income Security Act of 1974, as amended (the “Act”)[15] or
Section 2510.3-18 of the Department of Labor Proposed
Regulations. Accordingly, the share price for the shares
being purchased pursuant to this Agreement is based upon
the fair market value of the Stock as determined by an
appraisal of New Glarus by Capital Valuation Group, Inc.

.…

REPRESENTATIONS AND WARRANTIES OF NEW
GLARUS

New Glarus hereby represents and warrants to
Seller and ESOP Trust as follows:

5.1 To the full extent required by the New Glarus
Brewing Company Shareholders Agreement, New Glarus
authorizes the sale of the ESOP Stock from Seller to the
ESOP Trust.

15
The United States Code, Employee Retirement Income Security Program, Protection
of Employee Benefit Rights, Title 29, § 1002(18) provides:

The term “adequate consideration” when used in part 4
of subtitle B [29 U.S.C. §§ 1101 et seq.] means (A) in the case of
a security for which there is a generally recognized market,
either (i) the price of the security prevailing on a national
securities exchange which is registered under section 6 of the
Securities Exchange Act of 1934 [15 U.S.C. § 78f], or (ii) if the
security is not traded on such a national securities exchange, a
price not less favorable to the plan than the offering price for the
security as established by the current bid and asked prices quoted
by persons independent of the issuer and of any party in interest;
and (B) in the case of an asset other than a security for which
there is a generally recognized market, the fair market value of
the asset as determined in good faith by the trustee or named
fiduciary pursuant to the terms of the plan and in accordance
with regulations promulgated by the Secretary.

29 U.S.C. § 1002(18) (2022). All references to the U.S.C. are to the 2022 version.

34
No. 2022AP1958

¶78 Pertinent here, the Runyan stock purchase agreement differs from
the Eichhoff and Speer stock purchase agreements by including Section 1.3.
Section 1.3 provides that the purchase price for Runyan’s shares is related to a fair
market determination (“based upon the fair market value of the Stock as
determined by an appraisal of New Glarus by Capital Valuation Group, Inc.”).
Section 1.3 also provides that the parties intended that the ESOP Trust “not pay
more than adequate consideration” for the shares. The federal statute referenced
in Section 1.3 defines “adequate consideration” differently depending on whether
there is a “generally recognized market” for the shares. 29 U.S.C. § 1002(18).

¶79 As explained in ¶57 above, the Private Placement Memorandum
provided to the plaintiff shareholders in 1993 states in at least three places that no
public market for the sale of the Brewery shares exists or will ever develop. And
the complaint does not allege that a public market had developed or existed at the
time that the ESOP purchased Runyan’s shares. Thus, the definition of adequate
consideration that applies here is the definition that applies to “an asset other than
a security for which there is a generally recognized market.” 29 U.S.C.
§ 1002(18). That provision defines adequate consideration as “the fair market
value of the asset as determined in good faith by the trustee or named fiduciary
pursuant to the terms of the plan.” 29 U.S.C. § 1002(18).

¶80 Apparently consistent with this statutory provision, the stock
purchase agreement provides that the purchase price is based on “the fair market
value of the Stock as determined by an appraisal of New Glarus by Capital
Valuation Group, Inc.” Also apparently referring to this provision, the complaint
alleges that Carey and the Brewery set a purchase price below the shares’ fair
market value—and, therefore, below “adequate consideration”—and knowingly
withheld information so showing.

35
No. 2022AP1958

¶81 However, this allegation disregards the concomitant stated intention
of the parties that the ESOP will “not pay more than,” meaning will pay equal to
or less than, “adequate consideration.” In other words, even if the Brewery’s fair
market value was higher than the purchase price for Runyan’s shares, as alleged in
the complaint, the parties intended only that the purchase price be equal to or less
than that value. As alleged in the complaint, the purchase price was less than
market value. Thus, the allegations in the complaint that the purchase price was
knowingly set by Carey and the Brewery at less than fair market value do not
establish any claim for relief because the stock purchase agreement reflected
Runyan’s agreement that the purchase price could be less than fair market value
and, more specifically, could be the amount stated in the stock purchase
agreement. Accordingly, the securities fraud claim fails to state a claim.16

III. Carey’s Arguments

¶82 Our conclusions that the complaint fails to state claims of minority
shareholder oppression or securities fraud dispose of this appeal. However, for the
sake of completeness, we briefly summarize the parties’ arguments regarding the
primary issue that only Carey raises, focusing on the relief sought in the
complaint. Carey argues, and the circuit court concluded, that the complaint must
be dismissed because it seeks relief that WIS. STAT. § 180.1430 does not authorize.

16
To support their securities fraud claim as to all three transactions, the plaintiff
shareholders cite isolated language from three federal court opinions. However, those cases are
neither helpful nor persuasive in guiding our analysis of the representations and omissions alleged
here. See Kohler v. Kohler, 319 F.2d 634, 63-40, (7th Cir. 1963) abrogation recognized by Sec.
& Exch. Comm’n v. Jakubowski, 150 F.3d 675, 681 (7th Cir. 1998) (rejecting after a court trial a
securities fraud claim based on omitted information about the accounting treatment of pension
costs); Friedman v. Rayovac Corp., 295 F. Supp. 2d 957, 982 (W.D. Wis. 2003) (addressing
disclosure of information to correct representations that were made).

36
No. 2022AP1958

Specifically, Carey argues that the statute authorizes the court to order dissolution
only and the complaint states that it does not seek dissolution; in addition, Carey
argues that dissolution is not available against her.

¶83 WISCONSIN STAT. 180.1430 provides:

180.1430 Grounds for judicial dissolution. The circuit
court … may dissolve a corporation in a proceeding:

….

(2) By a shareholder, if any of the following is
established:

….

(b) That the directors or those in control of the
corporation have acted, are acting or will act in a manner
that is illegal, oppressive or fraudulent.

¶84 The complaint asks that the circuit court order, in the exercise of the
court’s “equitable powers,” that Carey and the Brewery acquire the minority
shareholders’ shares at fair value, the appointment of an independent Board of
Directors, and that all non-voting shares be reclassified as voting shares. The
complaint expressly states that it does not seek dissolution of the Brewery.

¶85 Carey argues that dissolution is the only permissible relief for
oppression and that the statute’s use of the word “may” means only that the court
may choose not to order dissolution even when the shareholders make the required
showing, citing Dickman v. Vollmer, 2007 WI App 141, ¶27 303 Wis. 2d 241,
736 N.W.2d 202 (“[D]issolution does not automatically result even upon proper
proof. Dissolution is discretionary.”); see also Jorgenson, 218 Wis. 2d at 783
n.11 (reversing summary judgment dismissing the plaintiffs’ minority
shareholders oppression claim based on the existence of material disputed facts
and noting that the court’s decision “should not be read as requiring the court to

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No. 2022AP1958

grant dissolution if the [plaintiffs] establish oppressive conduct …. We do not
decide whether or under what circumstances a trial court must dissolve a
corporation if a statutory ground is established”); cf. WIS. STAT. § 180.1833(2)(a)
(authorizing remedies other than dissolution as a remedy for oppressive conduct in
a statutory close corporation), and WIS. STAT. § 181.1430(2)(a) and (b) (requiring
the court to consider “[w]hether there are reasonable alternatives to dissolution”
and whether “dissolution is the best way of protecting the interests of members”
before dissolving a nonstock corporation).17 Carey concludes that, because the
statute authorizes only dissolution upon a showing of shareholder oppression or
fraud and the complaint affirmatively states that it does not seek dissolution, the
complaint fails to state a claim for relief.

¶86 The minority shareholders counter that Wisconsin courts have
implicitly acknowledged the availability under the statute of alternative, less
drastic forms of relief to meet the needs of a particular case, precisely because of
the use of the word “may” and the court’s broad discretionary authority in what is
an equitable proceeding, citing Northern Air Services Inc., v. Link,
No. 2008AP2897, unpublished slip op. ¶24 (WI App Jan. 18, 2012) (stating that
“dissolution … is one of many potential remedies for oppression …. The circuit
court could have required [the defendants] to turn over complete ownership in the
company to [the plaintiff], or fashioned some other equitable remedy.”). See also
Gull v. Van Epps, 185 Wis. 2d 609, 626-27, 517 N.W.2d 531 (Ct. App. 1994)
(actions under the judicial dissolution statute are proceedings in equity); Mulder v.
Mittelstadt, 120 Wis. 2d 103, 116, 352 N.W.2d 223 (Ct. App. 1984) (In an

17
The cited statutes do not apply here because the Brewery is neither a statutory close
corporation nor a nonstock corporation.

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No. 2022AP1958

equitable proceeding, “[i]f the customary forms of relief do not fit the case, or a
form of relief more equitable to the parties than those ordinarily applied can be
devised, no reason is perceived why it may not be granted”). In addition, the
minority shareholders argue that, regardless of how the statute is interpreted, the
relief requested in a complaint may not be considered to determine whether the
complaint states a claim.

¶87 We need not, and do not, resolve these disputes given our conclusion
that the complaint’s factual allegations, separate from the request for relief, do not
state a claim. See Barrows v. American Fam. Ins. Co., 2014 WI App 11, ¶9, 352
Wis. 2d 436, 842 N.W.2d 508 (2013) (“An appellate court need not address every
issue raised by the parties when one issue is dispositive.”).18

CONCLUSION

¶88 For the reasons stated, we conclude that the circuit court properly
dismissed the complaint alleging claims of minority shareholder oppression and
securities fraud for failure to state a claim for which relief may be granted.

By the Court.—Order affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

18
For the same reason, we do not reach the ancillary issues argued by Carey regarding
whether the plaintiff shareholders are barred from now seeking dissolution and whether
dissolution is available against Carey.

39