In the Matter of the Otto Bremer Trust.

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-0053

In the Matter of the Otto Bremer Trust.

Filed August 30, 2021
Affirmed
Smith, Tracy M., Judge

Ramsey County District Court
File No. 62-C9-61-315222

Keith Ellison, Attorney General, James W. Canaday, Deputy Attorney General, Carol R.
Washington, Katherine A. Moerke, Lindsey W. Lee, Assistant Attorneys General, St. Paul,
Minnesota; and

Christopher Burns, Special A ssistant Attorney General, He nson & Efron, Minneapolis,
Minnesota (for appellant State of Minnesota)

Michael V. Ciresi, Katie Cros by Lehmann, Matthew R. Kort e, Barry M. Landy, Ciresi
Conlin LLP, Minneapolis, Minn esota (for respondents Charlotte S. Johnson, Daniel C.
Reardon, and S. Brian Lipschultz)

Considered and decided by Florey, Pres iding Judge; Larkin, Judge; and Smith,
Tracy M., Judge.
NONPRECEDENTIAL OPINION
SMITH, TRACY M., Judge
In this action seeking removal of the trus tees of the charitable trust Otto Bremer
Trust,
1 appellant, the Minnesota Attorney Genera l, challenges the district court’s order

1 The trustees are Charlotte S. Johnson, Daniel C. Reardon, and S. Brian Lipschultz.

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granting in part and de nying in part the atto rney general’s petition for interim relief. The
attorney general argues that the district court (1) erred by applying the Dahlberg standard
instead of Minn. Stat. § 501C.0706(c) (2020) when addressing whether to grant interim
injunctive relief, (2) applied the wrong standard for removi ng a trustee as an interim
measure under section 501C.0706(c), and (3) should not have allowed respondent-trustees
to use trust assets to pay for litigation expenses while the litigation was ongoing. Because
the attorney general has not shown that the interim relief granted by the district court was
insufficient to protect the trust during the pendency of the action and because we otherwise
discern no abuse of discretion, we affirm.
FACTS
In 1944, Saint Paul banker Otto Bremer es tablished the trust as a charitable trust.
As a charitable trust, the trust is registered with the attorney general and files annual
informational filings as required by Minn. St at. § 501B.38 (2020). Since its creation, the
trust has been held and administered accord ing to the trust instrument and has been
continuously supervised by the Ramsey County District Court.
The trust instrument identif ies the charitable purposes of the trust, which include
alleviating poverty, establishing need-based scholarships to Minnesota colleges, promoting
public health, and other purposes. From 2012 to 2019, the trust distributed $367 million in
service of its charitable purposes.
To fund its charitable activities, Otto Bremer endowed the trust with assets,
including stock in the Otto Bremer Company, now Bremer Financial Corporation (BFC).
The assets of the trust curren tly fall into two general cate gories: (1) BFC assets, which
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represent about 90% of the trust estate, and (2) non-BFC assets consisting of securities and
investments, which make up the remaining 10% of the trust estate. According to the district
court, the value of the trust assets more than doubled in recent years, from approximately
$765 million in 2012 to approximately $2 billion at the time of the district court’s order.
The trust instrument permits the trustees to sell BFC stock “if, in the opinion of the
Trustee[s], it is necessary or proper to do so owing to un foreseen circumstances.” In
October 2019, the trustees sold part of the trust’s BFC stock to 19 investors. The trustees’
sale of BFC stock led to a flurry of litigation—BFC and its em ployee shareholders
separately sued the trustees, and some of the investors also sued BFC. Three months after
the October sale of stock, the attorney general launched an investigation into the trustees’
administration of the trust.
Following an eight-m onth investigation, the attorney general petitioned the district
court for removal of the trustees. The attorn ey general also file d an emergency petition
seeking interim relief pending a final decisi on on the merits of the removal action. The
district court’s decision on the interim-relief petition is the focus of this appeal.
In a memorandum accompanying its petition for interim relief, the attorney general
set forth the reasons asserted in support of the interim re lief it requested. Generally, the
attorney general asserted that the trustees have “engage d in a longstanding and presently
ongoing pattern of imprudent, self-intereste d, and otherwise unlawful behavior” that is
adverse to the trust and its charitable pu rposes. The petition enumerates 16 acts of
misconduct allegedly undertaken by the tr ustees. These acts include breaches of the
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trustees’ fiduciary duties, th e settlor’s intent, the trust in strument, and the Minnesota
statutes and common law governing trusts.
Based on these allegations, the attorney general requested interim relief under the
Minnesota Trust Code, Minn. Stat. §§ 501C .0101-.1304 (2020). The requested relief
included enjoining the trustees from committing a breach of trust; requiring the trustees to
account; appointing a special fiduciary to administer the trust; suspending or removing the
trustees; prohibiting, or requiri ng court approval of, all paymen ts of attorney fees out of
the trust property; and other relief.
The district court granted some interim relief but denied the attorney general’s
requests to remove the trustees and to prohibit the trustees from using tr ust assets to pay
their attorney fees.
The attorney general appeals.
DECISION
The attorney general makes three arguments challenging the district court’s decision
to deny some of the attorney general’s requests for interim relief. The first two arguments
assert that the district court committed lega l error in analyzing the matter—specifically,
(1) that the district court erroneously applied the common-law Dahlberg standard for
temporary injunctive relief rather than the st atutory standard under the Trust Code and
(2) that the district court applied the wrong le gal standard for remova l of a trustee as an
interim measure under the Trust Code. The attorney general’s third argument asserts that
the district court abused its discretion by not prohibiting the trustees from using trust assets
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to pay their litigation e xpenses during the pe ndency of this and other lawsuits alleging
trustee misconduct.
We review a district court’s exercise of its equitable jurisdiction over a charitable
trust under an abuse-of-discretion standard. In re Easton Fund , 680 N.W.2d 541, 547
(Minn. App. 2004). Generally, a district court abuses its di scretion when its decision is
based on an erroneous view of the law, Citizens State Bank v. Raven Trading Partners,
Inc., 786 N.W.2d 274, 278 (Minn. 2010), or when its decision is against the facts in the
record, City of North Oaks v. Sarpal, 797 N.W.2d 18, 24 (Minn. 2011).
I. Assertions of Legal Error

We begin with the attorney general’s assert ions of legal error. We first briefly lay
out the statutory framework to explain the attorney general’s arguments.
The attorney general petitioned the district court to remove the trustees pursuant to
section 501C.0706 of the Minnesota Trust Code . Paragraph (b) of that section sets forth
four bases on which a district court may remove a trustee, one of which is that the trustee
has committed a “serious breach of trust.” Minn. Stat. § 501C.0706(b)(1). Paragraph (c) of
that same section provides for interim relief during a trustee-removal action. It provides
that, “[p]ending a final decision on a petition to remove a trustee, or in lieu of or in addition
to removing a trustee, the court may order such appropriate relief under section 501C.1001,
paragraph (b), as may be necessary to protect the trust property or the interests of the
beneficiaries.” Minn. Stat. § 501C.0706(c). S ection 501C.1001(b), in turn, authorizes a
court “[t]o remedy a breach of trust that has occurred or may occur” in part by suspending
a trustee, removing a trustee “as provided in section 501C.0706,” enjoining the trustee from
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committing a breach of trust, ordering a trustee to account, reducing or denying
compensation to the trustee, or ordering “any other appropriate relief.” Minn. Stat.
§ 501C.1001(b).
The attorney general asserts that the district court committed two legal errors when
applying these statutes. First, the attorney general argues that the district court erred by
applying the Dahlberg analysis for granting temporary injunctions, rather than the statutory
standard laid out in section 501C.0706(c). The Dahlberg analysis is a five-factor test
directing courts to consider (1) the parties’ relationships, (2) the relative harm to the parties
of granting or denying temporary relief, (3 ) the likelihood of success on the merits,
(4) public policy, and (5) the administra tive burden in enforcing injunctive relief. See
Dahlberg Bros. v. Ford Motor Co. , 137 N.W.2d 314, 321-22 (Minn. 1965). The attorney
general argues that the Dahlberg analysis is inapplicable when temporary injunctive relief
is explicitly authorized by statute and that, instead, a district court should analyze whether
the statutory prerequisites have been demo nstrated and the inj unction would fulfill the
legislative purposes behind the statute. See Wadena Implement Co. v. Deere & Co. , 480
N.W.2d 383, 389 (Minn. App. 1992), review denied (Minn. Mar. 26, 1992). The statutory
prerequisite here, set forth in section 501C.0706 (c), is that relief is “necessary to protect
the trust property or the interests of the bene ficiaries.” The attorney general asks us to
remand this matter for the district court “to reevaluate all of the remedies requested by the
Attorney General within the appropriate framework.”
Second, the attorney general argues that the district court committed legal error by
analyzing whether the trustees had committed a “serious brea ch of trust.” The attorney
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general argues that, while a “serious breach of trust” is one of the bases for permanent
removal of a trustee under s ection 501C.0706(b), removal of a trustee is authorized as
interim relief under section 50 1C.0706(c) and that provision do es not require a “serious
breach of trust” but rather authorizes removal when “necessary to protect the trust property
or the interests of the beneficiaries.” Minn. Stat. § 501C.0706(c).
Both of the attorney general’s argument s of legal error may be reduced to the
assertion that the appropriate standard for a district court to apply when deciding whether
to impose interim relief, including the remova l of a trustee, is whether the relief is
“necessary to protect the trust property or the interests of the beneficiaries.” Under that
standard, the attorney genera l suggests, the district cour t should have done more—
including removing the trustees.
In its order granting in part and denying in part interim relief, the district court began
its analysis by reciting the statutory sta ndard under section 501C.0706(c)—namely,
whether relief is “necessary to protect th e trust property or the interests of the
beneficiaries.” The district court then performed its analysis, denied the requested removal
of the trustees, and imposed other interim me asures. The district court determined that
those interim measures were appropriate to “pro tect the assets of the Trust, compel full
transparency of the Trustee[s’] administrati on, and ensure the c ontinued philanthropic
activities of the Trust.”
If the district court acted within its discre tion in determining that the relief that it
ordered will “protect the trust property or th e interests of the bene ficiaries,” Minn. Stat.
§ 501C.0706(c), any legal error asserted by the attorney general is harmless. See Minn. R.
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Civ. P. 61 (requiring harmless error to be ignored). If the trust property and beneficiary
interests are already adequately protect ed, the statutory standard under section
501C.0706(c) is met—there would be no reason to remand for consideration of additional
protections. Thus, rather than start with analysis of the district court’s alleged legal errors,
we turn to the question whether the district court abused its discretion by determining that,
with the interim measures imposed by the district court, the trust property and interests of
the beneficiaries will be protected pending final resolution of this case.2
In its order, the district court imposed a number of interim measures to protect the
trust. It enjoined the trustees from making certain investments; directed that the trustees’
compensation would revert immediately to an earlier amount approved by the district court
in a previous order; suspended the annual fee to be paid to the trustees based on the market
value of the trust’s non-BFC holdings; prohibited the trustees from selling additional BFC
stock without obtaining prior court approval; prohibited the trustees from using trust-office
resources, including office space, equipment, and staff time, for non-trust purposes without
court approval; prohibited the trustees from making any new investments in private equity
funds or hedge funds absent court order or written approval from the attorney general;
required the trustees to engage the services of a human-services professional and to report

2 In turning to this question, we do not mean to imply that the district court committed legal
error. As noted above, the district court reco gnized the statutory standard for interim
remedies set forth in section 501C.0706(c). And, with respect to Dahlberg, the district court
questioned whether the Dahlberg factors were applicable in this context but stated that it
found the Dahlberg principles “instructive” as a “guide” in analyzing the petition for
interim relief.
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back to the court; and required the trustees to identify and complete training regarding the
fiduciary duties of trustees of charitable trusts and report back to the court.
The district court in its order explained that there are also external protections
already in place for the trust estate. The district court observed that the trust is regulated in
multiple capacities by four separate government entities: as a charitable trust, by the district
court and the attorney general; as a bank holding company, by the Federal Reserve; and as
a private foundation, by the Internal Revenue Service. As a charitable trust, the trust has
filed annual accounts with the district court and at least every five years has filed detailed
petitions seeking and obtaining review and approval of the trustees’ administration of the
trust. There are annual audits of the trust, and the trust also files reports, on demand and on
a regular basis, with the Federal Reserve and annual Form 990 PF tax returns with the IRS.
Citing these already-existing pr otective measures, the district court reasoned that, even
without granting the specific injunctive relief requested by the attorney general, protections
exist to minimize the potential ha rm to the trust property and to protect the public trust
beneficiaries.
Because we address it in the next section, we leave aside for the moment the attorney
general’s argument that the district cour t abused its discretion by not prohibiting the
trustees from using trust assets to pay their attorney fees . Apart from that issue, we
conclude that the attorney general has not demo nstrated that the dist rict court abused its
discretion by concluding that the trust is sufficiently protected by the interim measures and
external safeguards already in place. Sp ecifically, the attorn ey general has not
demonstrated that, despite those measures and safeguards, the district court must remove
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the trustees on an interim basis, before the petition to permanently remove the trustees is
determined, in order to protect the trust. We therefore conclude that, even if the attorney
general were correct in its assertions of legal error by the district c ourt, any such errors
would be harmless and that no remand is needed for the district court to reevaluate the
attorney general’s petition for interim relief.
II. Attorney Fees

We turn to the attorney general’s argumen t regarding attorney fees. The attorney
general argues that, “under any standard,” the district court abused its discretion by not
prohibiting the trustees from using trust assets to pay their legal fees to defend against this
enforcement action or any othe r action alleging trustee miscon duct. The attorney general
argues that the decision not to bar the use of trust assets to pay attorney fees is an abuse of
discretion because the expenses to defend the trustees’ conduct will not confer a benefit on
the trust.
The decision of whether attorn ey fees will be chargeable to a trust lies within the
sound discretion of the district court. In re Tr. Created by Boss , 487 N.W.2d 256, 262
(Minn. App. 1992), review denied (Minn. Aug. 11, 1992). Generally, a trustee defending
in good faith a challenge to the trustee’s administration of the trust is entitled to reasonable
attorney fees paid out of the trust. See In re Tr. Created by Hill , 499 N.W.2d 475, 494
(Minn. App. 1993), review denied (Minn. July 15, 1993). A district court may deny a
trustee’s claim for attorney fees paid out of the trust when the trustee acts in bad faith or is
guilty of fraud. In re Tr. of Freeman, 75 N.W.2d 906, 910 (Minn. 1956).
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We are not persuaded that the district court abused its discretion by not prohibiting
the use of trust assets to pay the trustees’ a ttorney fees pending final resolution of this or
other matters. First, as outlined in the previous section, the district court imposed interim
measures and relied on other safeguards alrea dy in place to protect the trust during the
pendency of litigation. Second, the attorney general does not point to any Minnesota
caselaw holding that a district court is required to stop attorney fees from being paid out
of trust assets in a trustee-misconduct case.
Instead, the attorney general offers as guidance the California case of People ex rel.
Harris v. Shine , 224 Cal. Rptr. 3d 380 (C al. Ct. App. 2017). In Shine, the California
appellate court considered whether a trustee was entitled to have interim attorney fees paid
by the trust to defend himself against a re moval petition brought by the state attorney
general. Id. at 382. Shine moved the district cour t for advanced fees from the trust for
defense against the petition, and the district court granted his request. Id. The Shine court
reversed the district court’s decision and remanded for reconsideration. Id. In so doing, the
appellate court recognized that, under California law, “a probate court has the discretion to
award interim fees in some circumstances.” Id. at 391. In the ordinary case, the court
explained, “where the trust instrument is sile nt on interim fees,” the court should “first
assess the probability that th e trustee will ultimately be entitled to reimbursement of
attorney fees and then balance the relative harms to all interests involved in the litigation.”
Id. at 392. The court observed that the tria l court had “made an express finding that the
People had demonstrated a ‘strong case’ in support of the removal and discharge petition”
and that Shine had submitted no evidence to counter the allegations against him. Id. The
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court also expressed its view, which the attorney general here highlights, that “an award of
pendente lite fees will seldom be justified where, as here, the trust is silent on interim fees
and the trustee’s misconduct is at issue.” Id.
The attorney general relies on Shine for the proposition that a district court abuses
its discretion by allowing a trustee to use trust assets to defend against a public enforcement
action when the trust instrument is silent as to attorney fees. Even leaving aside whether
the trust instrument here is silent as to a ttorney fees—an issue that the parties dispute—
Shine simply does not stand for the proposition th at the interim use of trust assets to pay
attorney fees in an enforcement against a trustee is always an abuse of discretion. Rather,
Shine holds that a probability of success on the merits of the enforcement action and the
relative harms to all interests in the litigation ar e factors for a district court to consider in
exercising its discretion. Id. at 392. In Shine, the state district court found that the state had
made a strong case. Id. In contrast, here, the district court made no such finding; rather, it
stated that “the extensive factual disputes in the record at this early stage, makes it difficult
to conclude preliminarily whet her the evidence will ultimately establish that removal of
the Trustees is mandated for a ‘serious breach of trust’ as required by Minn. Stat.
§ 501C.0706(b)(1).” We are not persuaded that Shine supports reversal here.
In its order, the district court expressed th at there are a number of issues raised that
cause it concern, including “t he issue of increasing and perhaps duplicative trustee
compensation, investment strategies and other issues impacting the workplace environment
more generally.” The district court concluded that the interim relief that it ordered is
“appropriate to better protect the integrity of the Trust, provide interim limitations on
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trustee compensation, and bring more transparency and accountability to the administration
of the Trust going forward un til the evidence has been fully developed and considered.”
We discern no abuse of discretion in the district court’s determination.
Affirmed.