Gerring Properties Inc., et al., Appellants,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-0032

Gerring Properties Inc., et al.,
Appellants,

vs.

Martin Gerring, et al.,
Respondents.

Filed December 21, 2020
Affirmed
Florey, Judge

Hennepin County District Court
File No. 27-CV-16-12570

Jason Steck, Edina, Minnesota (for appellants)

Dustan J. Cross, Mark S. Ullery, Gislason & Hunter, LLP, New Ulm, Minnesota (for
respondents)

Considered and decided by Florey, Presiding Judge; Hooten, Judge; and Gaïtas,
Judge.
U N P U B L I S H E D O P I N I O N
FLOREY, Judge
This is an appeal from judgment following a bench trial of the parties’ cross-claims
arising out of internal disputes as shareholders of a closely held corporation. Appellants
assert that the district court erred in (1) finding that respondents had been oppressed as
shareholders; (2) ordering dissolution without sufficient findings; (3) misvaluing

2
respondents’ shares; (4) ordering an all-cash buy-out within 60 days; (5) awarding attorney
fees based on bad faith and vexatious conduct; and (6) overvaluing the fee-award amount.
We affirm.
FACTS
Appellants Gerring Properties, Inc. (GP) and Quality Car Wash Operations, Ltd.
(QCW) (collectively the Comp anies or appellants) are Minnesota Chapter 302A
corporations. QCW operates a family owned car -wash facility in Wayzata, Minnesota,
leasing the land, building, and equipment from GP. The Gerring brothers and some of their
children, who for many years owne d and managed both corporations, now “accuse each
other of various improprieties spanning decades.” Respondents include one of the brothers,
Martin Gerring, and his wife, Lori-Ann Gerring.
The Companies have always been family owned and operated. From th e early
1980’s until approximately 1999, the Gerring brothers —Martin, Steven, and David —
operated the car wash together. When David later left the family business to operate a
separate car wash, Steven and Martin acquired David’s ownership interests. David
eventually returned to the family’s car wash. Since 2013, the three members of the board
of directors for both GP and QCW have been the three Gerring brothers.
The ownership shares in GP are currently divided equally between two shareholder
factions: (1) respondents Martin Gerring and Lori-Ann Gerring, and (2) Steven Gerring’s
three adult children, including Steven (Stevie) and Matthew . The ownership shares in
QCW are similarly divided between Martin on one hand, and Stevie and Matthew on the

3
other. Steven, who does not hold ownership in either company, is the president of GP and
QCW. Steven and his son Stevie are the officers of both GP and QWC.
Although the Companies have articles of incorporation and by -laws, the formal
processes outlined in the corporate documents have not been regularly followed. Issues
regarding management, direction , and operation of the businesses were often discussed
among the three brothers, and later Stevie, without formal board meetings. This history of
lack of compliance with formal corporate requirements and recordkeeping has created
tension between the family factions.
Tensions grew from a transaction involving respondents’ financial support of the
Gerring brothers’ mother, Virginia Gerring, as part of a reverse mortgage. In exchange for
the mortgage, Virginia transferred her 20 shares in GP equally to Lori -Ann and Steven’s
daughter. This transfer was memorialized in writing and signed by Virginia, Martin, Lori-
Ann, Steven, Stevie, and Matthew. Virginia’s transfer of 10 shares to Lori -Ann had the
effect of making the family factions hold equal shares of GP: Martin and Lori-Ann held 30
shares, and Stevie, Matthew, and Steven’s daughter held 30 shares.
The Gerring family factions also disagreed as to the best way to manage and finance
the Companies. David, Steven, and Stevie were interested in leveraging the Companies to
obtain loans as a means of obtaining capital. Martin and Lori-Ann were resistant to this
idea, preferring to finance improvements from income rather than taking on debt. Over

4
Martin’s objection, the Companies obtained a significant loan from Highland B ank (the
Highland loan).1
In September 2016, Martin an d Lori-Ann were terminated as employees of QCW.
Appellants asserted that Martin engaged in misconduct by failing to comply with orders
from the board of directors by (1) collecting employee tips in spite of a directive that Steven
alone could collect tips and by (2) failing to timely transfer a life -insurance policy issued
in favor of GP on Martin’s life and funded through company assets.
A bench trial was held on appellants’ claims for money damages based on
respondents’ alleged b reach of fiduciary dutie s and respondents’ counterclaims for
equitable relief based on shareholder oppression, breach of duties, and shareholder
deadlock. The district court found that, based on Martin’s history with the company as an
employee and longstanding shareholder, he ha d a rea sonable expectation of continued
employment, income, and access to the Companies’ financial records. While he continued
to receive a dividend for a payment of tax obligations from his interests, this payment was
not comparable to the compensation he had received through his salary, which was his
primary form of compensation.
The district court also determined that Martin engaged in conduct that directly
violated two directives from t he board of directors by collecting employee tips and by
failing to timely return a life-insurance policy. Although the court found that this conduct

1 While the district court found in a pretrial order that obtaining the loan fell within the
reasonable business discretion of the Companies, it also ordered that the Companies
provide Martin and Lori -Ann the financial re cords regarding the use of the loan funds.
Those financial records were never produced.

5
supported some cause for Martin’s termination, it also found that appellants’ motive for
this employment decision was improper. In particular, the court found that the primary
motivation for Martin’s termination was to force Lori-Ann to transfer her ownership shares
back to Virginia in order to make it easier for the other corporate officers to run the business
without Martin’s opposition. In making this determination, the district court relied on the
following evidence: (1) a list of demands which had been earlier presented to Martin and
notes prepared by Steven, both of wh ich refer to the “return” of the ownership shares ;
(2) Steven specifically raising the stock-transfer issue at the meeting terminating Martin’s
employment; and (3) David referring to the return of the ownership shares on two occasions
while testifying at trial. While appellants argued that David’s testimony was “a slip of the
tongue,” the district court found that this testimony further reflected that, in David’s mind,
the termination of Martin and failure to later reinsta te him was related to the ownership-
share issue. The district court concluded that “it [was] unfair and prejudicial to Martin’s
expectations as an employee/shareholder that his employment would be terminated for
purposes including forcing his wife to transfer shares in GP and to quell his objections and
input on business decisions.”
Because both parties admitted a shareholder deadlock, the district court determined
that a buy-out of respondents’ shares by appellants would be the most appropriate remedy
and provide respondents with value for their ownership interests. The district court’s order
provided that if a buy -out of respondents’ shares was not achieved, then the district court
would order dissolution and sale of the Companies.

6
With the consent of both parties , the district court appointed a special master to
provide a valuation of the Companies and assist in the buy-out process. Because the parties
were unable to agree on the value of the shares, they agreed on an independent neutral
appraisal. The special master and the independent appraiser were provided with
voluminous information submitted by both parties; conducted interviews of several
Gerring family members ; and viewed the car -wash property. The appraiser thereafter
issued his valuation reports, conclu ding that the fair-market values as of August 22, 2016
(the valuation date set by the court) were $1,150,000 for QCW and $1,696,899 for GP.
In his report, the special master adopted the independent appraiser’s valuations ,
finding them “well-reasoned, based on common valuation methodologies and custom and
practice, and persuasive.” The special master recommended that appellants pay
respondents the full value of their 50% ownership interests, plus int erest in cash, no later
than 60 days after the entry of the court’s order. The special master explained that this was
a reasonable timeframe and that allowing appellants to pay respondents in an incremental
fashion would place respondents at “significant risk for not achieving full value for their
shares and would be unfair and inequitable.”
The special master disagreed with the appellants’ contention that the district court
should apply a marketability discount to the buy-out price. In his report, the special master
quoted the following language from Advanced Comm c’ns Design, Inc. v. Follett , 615
N.W.2d 285, 292 in support of his conclusion : “Generally, ‘absent extraordinary
circumstances, fair value in a court-ordered buy-out pursuant to 302A.751 means a pro rata
share of the value of the corporation as a going concern without discount for lack of

7
marketability.’” He also disagreed with respondents’ contention that the independent
appraiser should not have relied on the Nagel Appraisal in valuing GP. 2
Respondents moved the district court to adopt the special master’s conclusions and
recommendations. Appellants filed objections to the special master r eport and requested
an evidentiary hearing, which the district court granted. Appellants specifically argued,
and continue to argue on appeal, that the independent appraiser had “double counted” the
value of QCW, submitting an affidavit from a certified public accountant in support of that
contention. 3
Following the evidentiary hearing, the district court adopted the special master’s
valuation conclusions , including his conclusion that the QCW was not double counted .
The district court also adopted the special master’s opinion that 60 days from the court’s
order was reasonable time for appellants to pay respondents for the fair value of their
ownership interest in cash, plus 10% interest, the statutory interest rate. If appellants failed
to make the stated payment, the district court ordered that the Companies would be
dissolved, and the assets would be sold at the highest value.
The district court permitted respondents to request reimbursement of a portion of
their attorney fees. After reviewing respondents’ itemized attorney fees and the parties’

2 The “Nagel Appraisal” refers to an appraisal of the G P real estate performed by Nage l
Appraisal Inc. in April 2017. The independent appraiser relied on this appra isal when
making his valuation of GP, which the special master stated is “a common and reasonable
practice for appraisers to rely on prior, contemporaneous appraisals in conducting a
valuation.”
3 We observe that at the evidentiary hearing, the accountant acknowledged that he did not
have valuation credentials.

8
related submissions, the district court found t hat the respondents’ use of two attorneys
throughout the buy -out process resulted in excessive fees for work that could have been
done by one attorney. Because it would be unfair to shift this excessive cost to appellants,
the district court concluded tha t an overall 30% reduction in respondents’ requested
attorney fees was appropriate.
On appeal, appellants contend that the district court erred in finding shareholder
oppression, determining buy -out terms, ordering dissolution, valuing shares held by
respondents, and awarding attorney fees to respondents.
D E C I S I O N
I. The district court did not abuse its discretion in finding unfairly prejudicial
conduct warranting equitable relief under Minn. Stat. § 302A.751.

Appellants argue that the district court erred in finding unfairly prejudicial conduct
by appellants against respondents. A district court “may grant any equitable relief it deems
just and reasonable in the circumstances” if individuals in control of the corporation have
acted “in a manner un fairly prejudicial” toward another member or shareholder. Minn.
Stat. §302A.751, subd. 1(b)(3) (2018). Appellate courts generally review a district court’s
grant of equitable relief for abuse of discretion. Melrose Gates, LLC v. Moua, 875 N.W.2d
814, 819 (Minn. 2016). The circumstances meriting equitable relief under the statute
include where “the directors or those in control of the corporation have acted in a manner
unfairly prejudicial toward one or more shareholders in their capacities as shareholders or
directors of a corporation that is not a publicly held corporation, or as officers or employees
of a closely held corporation.” Id. The term “unfairly prejudicial” should be liberally

9
construed. U.S. Bank N.A. v. Cold Spring Granite Co ., 802 N.W.2d 3 63, 377-79 (Minn.
2011). Unfairly prejudicial conduct includes conduct which “frustrates the reasonable
expectations” of the shareholder. Id. at 377.
The reasonable expectations of closely held corporation shareholders include “a job,
salary, a significa nt place in management, and economic security for [the shareholder’s]
family.” Pedro v. Pedro, 489 N.W.2d 798, 802 (Minn. App. 1992); see also Gunderson v.
All. of Comput. Prof’l. , 628 N.W.2d 173, 189 (Minn. App. 2001) (noting that “[t]ypical
close-corporation shareholders commonly have an expectation of continuing employment
with the corporation” and “because of the unique characteristics of close corporations,
employment is often a vital component of a close -corporation shareholder’s return o n
investment and a principal source of income”).
In a closely held corporation, “ [a]n expectation of continuing employment is
reasonable . . . if continuing employment can be fairly characterized as part of the
shareholder’s investment.” Gunderson, 628 N. W.2d at 191 (quotation omitted) .
“Expectation of continuing employment,” however, “must also be balanced against the
controlling shareholder’s need for flexibility to run the business in a productive manner.”
Id. Thus, “an expectation of continuing empl oyment is not reasonable and oppression
liability does not arise when the shareholder-employee’s own misconduct or incompetence
causes the termination of employment.” Id. at 192.
Here, the district court found that Martin, as a long-time employee of the Companies
and long-standing shareholder, had “a reasonable expectation of continuing employment
from the companies.” It based this finding on the following facts: that Martin was both an

10
employee of the business before it was incorporated and a long -time shareholder, that the
shareholders of the Companies have “historically received disbursements from the profits
from the operation of the companies,” and that “income derived from employment and
compensation of officers and the shareholders as employees was the primary financial
benefit provided to shareholders.”
Although the district court found that Martin’s conduct supported some cause for
his termination, it also found that appellants’ motives in the terminations included improper
considerations. In p articular, the district court found that the primary motivations for
Martin’s termination were both to force transfer of Lori -Ann’s 10 shares of stock back to
Virginia (which would have resulted in respondents no longer holding a 50% ownership
interest) and to make it easier for the directors and officers of appellants to run the business
without opposition from Martin . The district court also considered that Martin had not
received any monetary benefit from his ownership interest in the Companies since his
termination. After weighing the circumstances and equities, the district court concluded
that “the mixed motivations supports a finding that the termination violated [Martin’s]
reasonable expectations as an employee in violation of Minn. Stat. § 302A.751.”
Because the district court made detailed findings of fact and conclusions of law
regarding the circumstances of Martin’s termination that are supported by the record,
including Martin’s own failure to comply with board directives and why his termination
constituted unfairly prejudicial conduct, the district court did not abuse its discretion in
finding unfairly prejudicial conduct. The district court also did not err in determining
unfairly prejudicial conduct based on Martin’s termination. Martin was not required to

11
plead wrongful termination in order to bring a claim for equitable relief for wrongful
termination. See Gunderson, 628 N.W.2d at 190.
Moreover, even if the district court did not find a basis for equitable relief based on
the a bove findings , it also found, and appellants do not challenge , the existence of a
shareholder deadlock, which is an entirely separate and permissible basis for awarding
equitable relief under Minn. Stat. § 302A.751, subd. 1(b)(4) (2018). Furthermore, the
parties agreed that, due to the deadlock, they needed the district court to exercise its
equitable powers to sever their relationship pursuant to Minn. Stat. § 302A.751.
We also conclude that the district court properly exercised its discretion in
considering instances of prejudicial conduct relevant to the equities between the parties
and not as derivative claims previously dismissed. The district court did not abuse its
discretion in considering appellants’ failure to provide financial documents in mak ing its
equitable determination of whether unfairly prejudicial conduct occurred because the court
had previously ordered that appellants provide specific financial documents to respondents
and appellants failed to do so. See Cold Spring Granite, 802 N.W.2d at 377-79 (stating the
term “unfairly prejudicial” should be liberally construed). Finally, because the record
reflects that heightened tension and financial disputes existed at the time respondents, as
shareholders, were making these requests, we conc lude that the district court properly
exercised its discretion in determining that appellants’ failure to hold shareholder meetings
was in bad faith and vexatious.

12
II. The district court did not abuse its discretion by ordering a buy -out of
respondents’ shares.

A court-ordered statutory buy-out is an equitable remedy. Minn. Stat. § 302A.751,
subd. 1 (describing relief as equitable), Berreman v. W. Publ’g Co., 615 N.W.2d 362, 373
(Minn. App. 2000), review denied (Minn. Sept. 26, 2000) (same). A district court “may
grant any equitable relief it [finds] just and reasonable in the circumstances” if individuals
in control of the corporation or LLC have acted “in a manner unfairly prejudicial” toward
another member or shareholder. Minn. Stat. § 302A.751, subd. 1(b)(3). The term “unfairly
prejudicial” should be liberally construed. Cold Spring Granite, 802 N.W.2d at 377-79.
District courts have “broad equitable powers in fashioning relief” for the buy-out of
shareholders in a closely held corporation. Pedro, 489 N.W.2d at 802 . Minn. Stat.
§ 302A.751, subd. 2 provides:
[T]he court may, upon motion of a corporation . . . order the
sale by . . . a defendant of all shares of the corporation held by
the . . . defendant to . . . the corpor ation . . . if the court
determines in its discretion that an order would be fair and
equitable to all parties under all of the circumstances of the
case.

Under the statute, absent an agreement by the parties, the district court can set the
payment terms. Id. In determining the equitable remedy:
[T]he court shall take into consideration the duty which all
shareholders in a closely held corporation owe one another to
act in an honest, fair and reasonable manner in the operation of
the corporation and the reasonable expectations of all
shareholders as they exist at the inception and develop during
the course of the shareholders’ relationship with the
corporation and with each other.

Id., subd. 3(a).

13
Appellants argue that the district court incorrectly applied the holdings of Advanced
Commc’n Design, Inc. v. Follett to the facts of the case by requiring the buy -out to occur
within 60 days, which they claim was objectively impossible, and by not applying a
marketability discount to the purchase price of respondents’ shares.
In Follett, the supreme court held that, absent extraordinary circumstances, “fair
value” in a court-ordered buy-out pursuant to section 302A.751 “means a pro rata share of
the value of the corporation as a going concern without discount for lack of marketability.”
615 N.W.2d at 292. Noting that the overarching policy is “to ensure the buy-out is fair and
equitable to all parties,” Minn. State. § 302A.751, subd. 2, the supreme court indicated the
factors that should be considered in determining whether extraordinary circumstances
exist. Id. These factors include: (1) whether the buying or selling shareholder has acted in
a manner that is unfairly oppressive to the other or has reduced the value of the corporation;
(2) whether the oppressed shareholder has additional remedies such as those available
pursuant to Minn. Stat. § 302A.467; or (3) whether any condition of the buy-out, including
price, would be unfair to the remaining shareholders because i t would be unduly
burdensome on the corporation. Id. at 292-93.
In Follett, the district court accepted the appraised value of the company but rejected
the appraisal report’s recommendation for a marketability discount factor of 55%. Id. at
293. The reviewing appellate court determined the district court’s rejection of the
marketability discount was unfair to the remaining shareholder -appellants because it
resulted in respondents’ ownership interest being valued at a price more than five times the
total net worth of the corporation as of the valuation date. Id. Accordingly, the supreme

14
court remanded the case for a determination of the appropriate percentage marketability
discount. Id.
Here, while appellants contend that extraordinary circumstances exist because the
terms of the buy-out that the district court imposed were impossible for appellants to meet,
neither the record nor the district court’s finding support this contention. At the evidentiary
hearing held in relation to respondents’ motion for an order adopting the special master’s
report, the special master testified that he did not find the existence of extraordinary
circumstances warranting the application of a marketability discount based on his own
application of the facts to the Follett factors. The specific factors considered by the special
master included: (1) the district court’s determination that appellants acted unfairly towards
respondents and (2) appellants’ requested remedy of the option to purchase respondents’
shares. The district court noted that the fact that appellants requested the option to purchase
respondents’ shares distinguishes the present case from Follett, where the remedy of a buy-
out option was forced upon the other party. In his report, the special master explained that
he believed 60 days was a “reasonable time,” and that “allowing [ appellants] to pay
[respondents] in any incremental fashion, regardless of the interest rate applied, would
place [respondents] at significant risk for not achieving full value for their shares and would
be unfair and inequitable to [respondents].”
Overall, because the special master’s report was based on his extensive investigation
into the parties’ situation and businesses, and because the special master included the
details of his process in reaching his conclusions in the report, it was reasonable for the
district court to adopt his recommendations. Further, the district court did not find

15
extraordinary circumstances in its own analysis of the Follett factors. Accordingly, the
district court did not abuse its discretion in not applying a marketability discount to the
purchase price of respondents’ shares or in requiring the buy -out be completed within 60
days.
III The district court did not abuse its d iscretion in ordering dissolution of the
Companies.

Appellants also argue that the district court abused its discretion by ordering
dissolution of the Companies in the absence of sufficient findings. Minn. Stat. § 302A.751,
subd. 3b provides:
In deci ding whether to order dissolution, the court shall
consider whether lesser relief suggested by one or more
parties, such as any form of equitable relief, a buy -out, or a
partial liquidation, would be adequate to permanently relieve
the circumstances established under subdivision 1, clause (b)
or (c). Lesser relief may be ordered in any case where it would
be appropriate under all the facts and circumstances of the case.

The district court found that because appellants failed to exercise the option to
purchase respondents’ shares within the parameters ordered by the court , and because the
record did not support that additional time would be reasonably likely to achieve the buy -
out, dissolution was the only reasonable way for respondents to obtain value for their
ownership interests. The court also considered lesser forms of equitable relief including
buy-out of respondents’ shares, buy-out of the other shareholders by respondents, a limited
auction, alternative buy-out terms proposed by appellants, and liquidation. However, the
district court found these options to be unfeasible, noting that appellants failed to exercise
their buy -out option and presented no evidence that they would be presently able to

16
exercise that option. Although some of the shareholders continued to receive benefit
through their employment at the Companies, the court found that this b enefit did not
outweigh the impact of the shareholder deadlock and prejudicial conduct towards
respondents. Because the district court did not find a reasonable alternative, it determined
that dissolution was the only option that would both provide respondents value for their
shares and compensate all shareholders for their ownership interests.
While appellants argue that the district court failed to comply with In re Lakeland
Dev. Corp ., 152 N.W.2d 758 (Minn. 1967), the findings of that court on shareholder
deadlock were different than the district court’s findings in the present case. The issue in
Lakeland was whether the district court erred in ordering the involuntary dissolution of a
company when it did not make a finding of a permanently irreconcilable deadlock. Id. at
764. The lack of this specific finding was determined to be an error, and the case was
remanded to the district court to make specific determinations into the “potential deadlock-
breaking rights” claimed by one of the parties. Id. Unlike the court in Lakeland, the district
court here made specific findings of irreconcilable shareholder deadlock and concluded
that dissolution was the only reasonable option availabl e to ensure respondents received
value for their ownership interests in the Companies.
Because appellants failed to exercise the option to buy -out respondents’ share, and
because the district court considered but did not find any lesser, reasonable forms of
equitable relief before ordering dissolution, the district court did not abuse its discretion.

17
IV. The district court did not abuse its discretion in its valuation of respondents’
shares.

Appellants argue that the district court erred by adopting the special master’s
valuation of the Companies. Appellants cite the standard of review for valuation by the
commissioner of revenue in a tax appeal. In that context, valuation is reviewed for cl ear
error. See Minn. Energy Res. Corp. v. Comm’r of Revenue , 886 N.W.2d 786, 792 (Minn.
2016) (“With respect to the tax court’s valuation of the property, we defer to the tax court’s
determination unless it clearly misvalued the property or failed to explain its reasoning.”).
However, here the issue is valuation of shares of a closely held business in a buy-out under
Minn. Stat. § 302A.751, subd. 2. Under that subdivision, “[i] f the parties are unable to
agree on fair value within 40 days of entry of the order, the court shall determine the fair
value of the shares under the provisions of section 302A.473, subdivision 7.”
The referenced subdivision provides, “[t]he court shall determine. . . the fair value
of the shares, taking into account any and all factors the court finds relevant, computed by
any method or combination of methods that the court, in its discretion, sees fit to use,
whether or not used by the corporation or by a dissenter.” Based on this statute, the
supreme court has concluded that the proper standard of review for a district court’s
determination of valuation in a buy-out is abuse of discretion. Advanced Commc’n Design,
615 N.W.2d at 2 90 (“If the court determines that or dering a buy-out is fair and equitable
to all parties under the circumstances, it also has broad discretion both in the process and
the ultimate determination of the ‘fair value’ of the shares to be sold.”) . As stated
previously by this court, “the district court has broad discretion and authority to determine

18
the fair value of the shares in whatever way it deems appropriate.” Peoplenet Commc’ns
Corp. v. Baillon Ventures, 781 N.W.2d 584, 586 (Minn. App. 2010).
Appellants object to the valuation findings a nd recommendations of the special
master. Specifically, appellants argue that the valuation analysis performed by the
independent appraiser “double-counted” the going-concern valuation of QCW. However,
the district court adopted the special master’s repo rt, which thoroughly ana lyzed the
approach taken by the appraiser, and after making two calculation corrections, concluded
that the appraiser’s valuations were “well -reasoned, based on common valuation
methodologies and custom and practice, and persuasive. ” The appraiser testified that he
did not double count the value of QCW and explained the approach he took in his valuation.
The special master also testified that he continued to believe that the appraiser’s valuations
were sound and reflected thoughtful application of accepted standards for business
valuations.
After hearing arguments and reviewing the parties’ submissions, t he district court
adopted the special master’s report, which explained in detail bo th the process and
information upon which he relied. Based on the extensive record regarding the special
master’s reasoning and analysis in composing his report, and further explained and
validated by his testimony, the district court did not abuse its di scretion in adopting the
valuation of the Companies from the special master’s report. See Peoplenet, 781 N.W.2d
at 586.

19
V. The district court did not abuse its discretion by awarding attorney fees under
Minn. Stat. § 302A.751.

A court, in its discretio n, may award reasonable expenses, including attorney fees,
if the court finds that a party to a proceeding brought under Minn. Stat. § 302A.751 “has
acted arbitrarily, vexatiously, or otherwise not in good faith.” Minn. Stat. § 302A.751,
subd. 4 (2018). If the court has made findings of vexatious or bad-faith conduct, its award
of fees will not be reversed absent an abuse of discretion. Pedro, 489 N.W.2d at 804.
Appellants contend that the district court made “fatal errors of law” in awarding
attorney f ees to respondents. However, the district court made specific findings that
appellants acted arbitrarily, vexatiously, and in bad faith. That evidence relied on by the
court included appellants’ “conduct during litigation, including their failure to hold annual
shareholder meetings, failure to comply with the Court’s Order requiring provision of
financial records, and [their] use of Highland Bank loan proceeds evidence [d] bad faith
and vexatious conduct that unfairly imposed additional financial burdens” on respondents.
In addition, the district court concluded that appellants’ pursuit of claims against
respondents seeking monetary damages against Martin for theft of tips and for excessive
compensation were pursued “with minimal, if any, factual support.” Thus, the court
concluded these claims were “pursued vexatiously and in bad faith.”
Because the district court found several instances of bad faith and vexatious conduct
by appellants, and because those findings and conclusions are supported by the record, the
court had discretion to award attorney fees. See Becker v. Alloy Hardfacing & Eng’g Co.,

20
401 N.W.2d 655, 661 (Minn. 1987) . The district court did not abuse its discretion in
awarding attorney fees to respondents.
VI. The district court did not abuse its discretion in determining the amount of
attorney fees it awarded to respondents.

Appellants challenge the amount of the district court’s attorney -fee award. We
review the district court’s award for an abuse of discretion. Carlson v. SALA Archi tects,
Inc., 732 N.W.2d 324, 331 (Minn. App. 2007), review denied (Minn. Aug. 21, 2007).
Appellate courts also “generally review a district court’s award of costs and disbursements
for an abuse of discretion.” Dukowitz v. Hannon Sec. Servs., 841 N.W.2d 147, 155 (Minn.
2014). A district court abuses its discretion “when its decision is against logic and facts on
the record.” Posey v. Fossen , 707 N.W.2d 712, 714 (Minn. App. 2006). The party
challenging the district court’s exercise of discretion bears the burden of proof. Id.
Here the district court made detailed findings regarding respondents’ request for an
award of attorney fees. The court found respondents’ attorney fees to be excessive where
they had chosen to use two attorneys when one attorne y could have performed the work .
Consequently, the court found that shifting those additional costs to appellants would not
be appropriate. Following its review of the individual entries on the respondents’ itemized
attorney fees invoices, the court concluded that “an overall 30% reduction in [respondents’]
requested attorney fees” was appropriate “to ensure that the asserted amounts are
reasonable and necessary and not excessive or duplicative .” The district court further
found that additional attorney fees to respondents related to the dissolution and sale of the
Companies were not warranted under Minn. Stat. § 302A.751, subd. 4, because “the factual

21
predicate for the award of attorney fees” under that statute was not “sufficiently connected
to the dissol ution and sale proceedings to warrant continued award of attorney fees” to
respondents.
Because the district court made specific findings and conclusions after a thorough
review of respondents’ individual entries of their attorney fees, eliminated excessive fees,
and awarded attorney fees based on that review and correction , there was no abuse of
discretion in the amount of attorney fees awarded to respondents.
Affirmed.