The Minnesota Court of Appeals on Tuesday upheld the removal of Brian Lipschultz as a trustee of the Otto Bremer Trust.
The three-judge appellate panel ruled in In the Matter of the Otto Bremer Trust that a district court did not abuse its discretion by removing a trustee of a charitable trust whose actions have constituted a serious breach of trust or whose repeated improprieties prove that removal is in the best interest of the charitable trust and its beneficiaries.
It determined that Lipschultz, one of three trustees, engaged in numerous breaches that demonstrated that removal was in the best interest of the trust.
It is the latest development in a saga that has spanned the last few years. In 2019, Bremer Financial Corp and seven of its directors sued the three other directors—trustees of the Otto Bremer Trust—to stop a planned sale of the bank. However, the trust said that it had a clear right to sell its Bremer Financial Corp. holdings. Minnesota Attorney General Keith Ellison got involved, asking the district court to oust the three trustees over the attempted sale.
The three trustees were Lipschultz, Daniel Reardon, and Charlotte Johnson. There was a 20-day bench trial. The district court granted the Attorney General Office’s petition to remove Lipschultz, finding that his conduct warranted removal under Minnesota statute. However, it did not remove Reardon or Johnson. Lipschultz appealed.
Lipschultz did not deny most of the factual findings, admitting that he used trust assets for non-Trust purposes “probably from the first day [he] arrived at the Otto Bremer Trust” in 2012. This included misusing staff time, postage, and computer resources.
He also attempted to engineer the sale of Bremer Financial Corporation, crafting a plan to replace the Bremer board through a calculated sale of the trust’s nonvoting shared in Bremer. The trustees sold 7% of the trust’s holdings to 11 separate investors. However, Bremer Financial Corporation refused to register the conveyed shares to the investors. Investors filed suit against Bremer for not registering the shares. Bremer shareholders sued the trustees. Bremer filed suit against the trustees. Regarding the massive litigation, Lipschultz claimed that the trust could weather the legal fees.
The court of appeals determined that, while Lipschultz’s self-dealing had a small monetary cost, the actions still breached the duty of loyalty. The court also concluded that Lipschultz’s inappropriate attitude—which translated from mere hostility into vindictive acts of administration—demonstrated that Lipschultz put his own interests before the trust’s.
“Lipschultz’s persistent improprieties support the district court’s determination that his removal serves the best interests of the beneficiaries and the Trust,” the court wrote. “Lipschultz continually breached his duties to the Trust’s beneficiaries. Lipschultz caused the Trust to incur unnecessary expenses, injured the Trust’s charitable reputation, refused to disclose information to the AGO and eliminated a relationship with at least one beneficiary.” The court of appeals affirmed the district court’s holding as to Lipschultz.