It was a case of modern-day piracy, in which a minority investor attempted to steal credit for patented technology and take control of a company. However, Foley & Mansfield Minneapolis partner Lisa Lamm Bachman, assisted by attorney Tessa Mansfield, successfully defended our client in this highly convoluted and contentious closely-held shareholder dispute, fraught with false representations and bad faith on the part of the plaintiff.
After literally years of dealing with plaintiff’s false assertions and continued demands, a series of compromises were made, with the parties entering into a confidential settlement agreement providing the plaintiff with substantial equity in the company and allowing him to assume a leadership role. This was in exchange for promised access to millionaire investors, a release of his claims, his promised connections with large manufacturers, and an end to the distractions he had caused for the company.
Fast-forward to the matter at hand – with the plaintiff seeking to enforce this settlement agreement and seeking reinstatement as the CEO of the company, despite the fact that the shareholders voted in favor of his removal due to breach of alleged fiduciary duties, among other factors.
In defending the matter, our client, as well as the company’s corporate lawyer who had documented the transaction, asserted that the settlement agreement had been mutually rescinded at the plaintiff’s request. At the time, the plaintiff was undergoing a contentious divorce and did not want his ex-wife to discover that he had received additional shares in the company that could have been considered marital property.
Bachman was able to effectively discredit the plaintiff on the stand, demonstrating numerous contradictions in testimony provided to the court, during depositions, and in statements made during his divorce proceedings and to state auditors.
After a three-day bench trial, the judge issued his ruling from the bench dismissing all of plaintiff’s claims against our client in their entirety. In doing so, the court found that the plaintiff lacked any credibility and the evidence demonstrated that he had engaged in unconscionable conduct which operated to bar any equitable relief. The judge went so far as to state that in his many years both on the bench and as a practicing trial attorney, he had never seen a less credible witness than the plaintiff. The court also determined that the evidence demonstrated the settlement agreement had been mutually rescinded by the parties.
While the burden of proof for rescission is “clear and convincing,” the court found that in this case, rescission of the settlement agreement was proved “beyond a reasonable doubt.” The ruling also awarded our client $50,000 for his counterclaim against the plaintiff for plaintiff’s conversion of sale proceeds for the sale of our client’s personal shares of company stock. Our client will also be allowed to make application for an award of attorneys’ fees and costs incurred in the defense of this matter.
