Once in a while, a big result comes from a small firm. That was the case last year when the two-man Chamberlain Law Firm, based in Wayzata, got a successful outcome in a minority shareholder lawsuit that changed the shape of state law.
A 40-year legal veteran, Paul Chamberlain began his practice representing a variety of clients, but after about 10 years, he found that he better understood business clients. He still enjoys representing entrepreneurs, many of whom have been with him for 30 years or more.
“When I started practicing, it was he who has the gold makes the rules,” said Chamberlain. “There were protections built into the law over the years that were augmented by appellate court decisions to make minority shareholders more equivalent when it comes to rights, making them more similar to a partner in a partnership. They can’t get steamrolled.”
That momentum in how minority shareholders are treated paid off in a recent case. Chamberlain began representing his client John Drewitz in the mid-1990s in connection with Drewitz’s promotion to a general manager position and negotiation of a shareholder agreement with his employer, Motorwerks Inc., which owns the Walser group of car dealers. Drewitz was previously part owner of BMW Motorwerks in Bloomington until he was let go in 1998.
He rejected a severance payment and initiated a minority shareholder suit in 2004, eventually leading to two trials, three appeals to the state Court of Appeals, a state Supreme Court ruling on an issue of first impression, and a series of at least 10 opposing attorneys from four different large Twin Cities law firms representing Motorwerks. In the end, Chamberlain and his partner Ryan Kuhlmann obtained a $7.9 million judgment on behalf of Drewitz for unpaid shareholder dividends and interest.
But the story wasn’t over. During post-verdict litigation, one of the defendants in the case transferred all of the corporation’s assets in an effort to keep the plaintiffs from collecting the judgment. After another two years, including another appeal, Chamberlain got a recovery for his client.
“I thought it would be a reasonably short case,” said Chamberlain. “It’s gone on for a dozen years.”
As a result of the Drewitz case, Minnesota law now includes Supreme Court precedent protecting the interests of minority shareholders, including every shareholder’s right to receive his share of distributions as long as he remains a shareholder. It also contains the right to receive a tender which conforms to the terms of a written shareholder agreement. Chamberlain’s work also created Minnesota case law protecting creditor-claimants from asset-shifting intended to defeat the creditor’s claim.
“There are probably going to be developments in the law that cover different factual circumstances that no one can anticipate,” said Chamberlain. “That’s why trial judges get quite a bit of discretion in protecting minority shareholders.”