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February 2024

GRSM Minnesota Team Secures Win in Shareholder Dispute After Two-Week Jury Trial

Gordon Rees Scully Mansukhani Minneapolis Partners David SchoolerSuzanne Jones, Senior Counsel Erin Conlin, and paralegal Elissa Becker prevailed in a shareholder dispute on behalf of their clients, a biotech company and its CEO, after a two-week jury trial in Washington County, Minnesota.

The biotech company, focusing on microbiology and immunology, creates unique oral care products that regulate oral bacteria, the root cause of dental disease. The technology is protected by numerous patents and has resulted in marketable products for both humans and animals. The plaintiff was an early investor and board member. After resigning as an advisor, the plaintiff claimed that he was entitled to an eight percent ownership of the company in Class A shares with anti-dilution protection in perpetuity. The plaintiff brought a "kitchen sink" complaint, alleging nine separate causes of action against the company on which he served as a board member, its CEO, and three additional related entities. The plaintiff was seeking approximately $500,000 in breach of contract damages, a declaratory judgment that he owned an additional eight percent interest in the entire company, and up to $5 million in alleged lost profits. The remedies sought by the plaintiff had the potential to cripple the company moving forward.

GRSM successfully defeated multiple claims at summary judgment. Additional claims and all but one defendant were dismissed as a result of pre-trial rulings, including a decision from the court on the first day of trial that all claims for monetary damages were excluded. The trial proceeded on the remaining claims against the single defendant with the plaintiff seeking the remedy of specific performance. After a two-week jury trial, the jury rejected the plaintiff’s breach of contract claim but nonetheless awarded the plaintiff a six percent interest in the company under a theory of promissory estoppel. The court rejected the jury’s advisory ruling on the equitable promissory estoppel claim, as inconsistent with the evidence and the jury’s verdict on breach of contract, and ruled in favor of the defendant on all substantive claims, holding that the defendant was the prevailing party.

This is the third trial win for the GRSM Minneapolis office in the last year.

Erin S. Conlin
Suzanne L. Jones
David A. Schooler