Some Iowa Volkswagen drivers may be eligible for compensation

Carmakers Volkswagen and Audi have come to a settlement that requires them to refund and buy back or fix cars of more than 3,600 car owners in Iowa. The vehicles that sparked the lawsuit were equipped with software that falsified emission test results. While Volkswagen marketed the vehicles as environmentally friendly, they emitted harmful nitrogen oxide at rates up to 40 times the legal limit, Iowa Attorney General Tom Miller said.

The companies, as part of the $15 billion settlement, must send affected vehicle owners a restitution payment that Miller thinks will range between $5,000 and $10,000, depending on the vehicle’s value as of September 2015, before news of the illegal software was reported. Volkswagen also must pay $2.7 billion for programs throughout the country to reduce nitrogen oxide emissions, commit another $2 billion to producing zero-emission vehicles and pay $570 million to states for violations of consumer protection laws.

Because the settlement still requires a federal judge’s approval, the recall program may not begin for several months, Miller’s office said.

If you have been affected by negligent business practices or have been accused of such, you may be ordered to resolve outside of court. The lawyers of Arenson Law Group, PC can aid in the negotiation of settlements outside of court if you call at (319) 363-8199 as soon as possible.

Arenson Law Group, PC, helps with purchase of Ford and Lincoln Dealership

Jim Arenson of Arenson Law Group, PC, is excited to announce that we represented Jim Rydell and Matt Halbur in their purchase of the Ford and Lincoln dealership in Independence, Iowa on July 1, 2015. We are honored to have had the opportunity to represent these individuals in this acquisition.

Dealership buyers Jim Rydell and Matt Halbur pose with seller John Butler.
Arenson Law Group, PC represented buyers Jim Rydell, left, and Matt Halbur, center, in their purchase of the dealership from seller John Butler, right.
Dealership buyers Jim Rydell and Matt Halbur pose with seller John Butler.
From left to right, Controller Teron Meinders, buyers Jim Rydell and Matt Halbur, and sellers Richard Krempges and John Butler.

CASE UPDATE: Trial Court Limits the Definition of “Oppression” for Minority Shareholders

Last summer, the Iowa Supreme Court decided Baur v. Baur Farms. In that case, the court helped define “oppression” in relation to minority/majority shareholder relationships. Issue 13.4 of the Dealer Law Review pointed out that this case provided lessons for closely-held corporations; it encourages closely-held auto dealerships to evaluate relationships with minority shareholders and take a close look at the requirements of their bylaws. The supreme court emphasized that oppression is defined by the minority shareholder’s “reasonable expectations.” This expansive definition was worrisome for closely-held corporations as set out by the supreme court. The case was remanded to the trial court for further fact finding.

In this case, the minority shareholder repeatedly attempted to sell his stock to the other shareholders, but the others declined to purchase the stock. The minority shareholder also received no return on his investment in the form of dividends or otherwise. The Iowa Supreme Court saw these two factors as oppressive conduct. However, the trial court looked in depth at the facts of this case to determine that there was, in fact, no oppression involved.

One of the major issues that the trial court faced was to determine whether the minority shareholder’s expectations were in fact reasonable in this case. As a minority shareholder, reasonable expectations are limited. Generally, a minority shareholder will not participate in business management and the stock value will be less than the majority shares simply because of this lack of control. In addition, dividends are often absent from closely-held corporations—because this case involved a closely-held farm, there would likely never be any dividends.

The trial court pointed out that the minority shareholder’s expectations in this case are further limited by the fact that he acquired his shares by gift and inheritance. The inheritance was motivated by the desire for the land to stay in the family, not simply as a gift of monetary value. The trial court concluded that this factor makes the minority shareholder’s desire to sell that much more unreasonable. In addition, the minority shareholder in this case was limited by the bylaws of the corporation. The bylaws provided a specific method to value the stocks and included a specified right of first refusal to the corporation. The court also concluded that the minority shareholder should have made its expectations known to the other shareholders in order for those expectations to be reasonable. The minority shareholder here did not do so; he neither expressed a desire to change the bylaws nor requested dividends.

Further, the minority shareholder’s expectations differed significantly from the other minority shareholders. Even if the court granted the buy-out price that this minority shareholder calculated, it did not include the required discount for selling a minority share. As such, the buy out, if granted, would have been oppressive to the other shareholders.

In addition to the two lessons articulated in Dealer Law Review 13.4, auto dealers should also be aware that the definition of oppression may be based on the expectations of the minority shareholder, but those expectations are limited. Based on the trial court decision in this case, the court will look extensively into the facts and determine if those expectations are reasonable based on the role of a minority shareholder. If you have questions about this case or the role that minority shareholders play in your auto dealership, contact experienced business and auto dealer counsel today.

**Arenson Law Group, PC would like to thank Roger A. McEowen of the Iowa State University Center for Agricultural Law and Taxation for his valued input on this case update.

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