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Miniat v. Ed Miniat

October 31, 2002

KEVIN E. MINIAT, PLAINTIFF-APPELLANT,
v.
ED MINIAT, INC., AND SOUTH CHICAGO PACKING CO., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 01 C 2256--Robert W. Gettleman, Judge.

Before Flaum, Chief Judge, and Cudahy and Kanne, Circuit Judges.

The opinion of the court was delivered by: Flaum, Chief Judge

ARGUED SEPTEMBER 4, 2002

Ed Miniat, Inc., ("EMI") and South Chicago Packing Co. ("SCPC") are family-owned businesses specializing in meat-processing and distribution. In this diversity suit, Kevin Miniat ("Kevin"), a shareholder in both EMI and SCPC, seeks a declaratory judgment announcing the invalidity of elections held in 2000 to select the companies' respective boards of directors. The district court granted summary judgment for the defendants, and Kevin appeals. We affirm.

I. BACKGROUND

Edmund Miniat, Sr., and his sons Ronald Miniat ("Ron") and Edmund Miniat, Jr., ("Ed Jr.") formed EMI in 1958 and acquired SCPC in 1972. In 1994 Ron and Ed Jr. became sole and equal shareholders of both companies. They later gave 6.5% of the shares to Ron's son David Miniat ("David"), the companies' president.

In 1996 Ron, Ed Jr., and David entered into agreements that imposed restrictions on the voting of EMI and SCPC shares. One of the express purposes of these shareholder agreements was to "maintain continuity in the management, policies, ownership and control of the Corporation." To this end Section 2.3.1(ii) of the agreements *fn1 provides:

A Shareholder . . . hereby agrees to vote his Shares in favor of . . . the election of a Board comprised of a majority of "involved directors," which shall include the President of the Corporation and which may include other management employees having significant business and management expertise deemed uniquely valuable to the Corporation's business (which for purposes hereof shall be deemed to include Edmund M. Miniat, Jr. and Ronald M. Miniat).

After the shareholder agreements were executed, Ed Jr. gifted all of his shares in equal amounts to his two daughters and his son Kevin (the plaintiff in this case). Kevin and his sisters then signed an adoption agreement binding them to the terms of the shareholder agreements.

In April 2000 a shareholders' meeting was held to elect SCPC's board of directors. At Kevin's insistence the vote was originally taken without the use of a preprinted ballot. SCPC declared this first vote invalid under Section 2.3.1(ii), however, because it did not result in the election of David, the President. A second vote was therefore conducted using a preprinted ballot prepared by SCPC's counsel, Sachnoff & Weaver, Ltd. ("Sachnoff"). The ballot contained the following instructions:

Shareholder must cast one-sixth (1/6) of his votes . . . for the President of the Corporation, David J. Miniat. Shareholder must cast at least one-half (1/2) of his votes . . . for candidates who qualify as "involved directors." "Involved director" means a management employee having significant business and management expertise deemed uniquely valuable to the Corporation's business. "Involved directors" include Edmund M. Miniat, Jr. and Ronald M. Miniat. Shareholder may cast his remaining votes for any one or more candidates.

The second vote resulted in the election of David and three other "involved directors," including Ron and Ed Jr.

Later the same day, a shareholders' meeting was held to elect EMI's board of directors. This time Kevin objected to the use of the preprinted ballot and specifically to the provision requiring shareholders to cast 1/6 of their votes for the President. In response EMI agreed to postpone the vote pending an interpretation of Section 2.3.1(ii) by EMI's counsel, Sachnoff. Sachnoff's opinion later corroborated EMI's and SCPC's construction of Section 2.3.1(ii)-namely, that it requires each shareholder to cast his or her votes in a manner that ensures that the resulting board is comprised of a majority of "involved directors," including the President.

Another meeting was held in June 2000 to elect EMI's board. All of the shareholders, including Kevin, used the preprinted ballots prepared by Sachnoff. The vote resulted in the election of David and three other "involved ...


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