United States District Court, N.D. Illinois, Eastern Division
TOM OHRSTROM, individually and derivatively on behalf of P.B. Ohrstrom and Sons, Inc., Plaintiff,
P.B. OHRSTROM & SONS, INC., MAXICROP U.S.A., INC., and LARS OHRSTROM, Defendants.
OPINION AND ORDER
L.ELLIS UNITED STATES DISTRICT JUDGE
with his brother's management of the company founded by
his father, Plaintiff Tom Ohrstrom (“Tom”) filed
this action on his own behalf and as a shareholder derivative
suit on behalf of P.B. Ohrstrom and Sons, Inc. (“P.B.
Ohrstrom”) against P.B. Ohrstrom, its wholly owned
subsidiary, Maxicrop U.S.A., Inc. (“Maxicrop”),
and his brother, Lars Ohrstrom (“Lars”). Tom
brings claims both individually and derivatively on behalf of
P.B. Ohrstrom against Lars claiming that Lars breached his
fiduciary duties to Tom and the company. Tom also brings
claims against P.B. Ohrstrom and, derivatively on behalf of
P.B. Ohrstrom, against Maxicrop under Section 12.56 of the
Illinois Business Corporation Act, 805 Ill. Comp. Stat.
5/12.56, seeking the dissolution of the companies and a
judicial sale of their assets. Lars, joined by P.B. Ohrstrom
and Maxicrop, has moved to dismiss the complaint for lack of
subject matter jurisdiction pursuant to Federal Rule of Civil
Procedure 12(b)(1) and for failure to state a claim pursuant
to Rule 12(b)(6). The Court finds that it has diversity
jurisdiction over the claims against Lars but not over those
against P.B. Ohrstrom or Maxicrop. And with respect to the
claims against Lars, Tom has sufficiently alleged the
required elements for both his direct and derivative breach
of fiduciary duty claims to proceed to discovery.
Ohrstrom is a closely held Illinois corporation with its
principal place of business in Elk Grove Village, Illinois.
It imports and distributes seaweed and seaweed extracts for
the feed, home and garden, horticultural, and agricultural
markets. Maxicrop, its wholly owned subsidiary, is similarly
incorporated in Illinois with its principal place of business
in Elk Grove Village. Per Bye Ohrstrom founded both P.B.
Ohrstrom and Maxicrop in the 1970s. On its 2015 consolidated
federal income tax return, P.B. Ohrstrom and Maxicrop
reported a combined total income of over $600, 000. In 2016,
they reported over $1, 300, 000 in total income. According to
QuickBooks, Maxicrop had sales of $3, 048, 450.73 in 2015,
$3, 195, 376.81 in 2016, and $3, 481, 085.29 in 2017. P.B.
Ohrstrom had sales of $1, 200, 303.43 in 2015, $1, 246,
713.21 in 2016, and $1, 767, 491.65 in 2017.
Tom owns 50% of P.B. Ohrstrom's shares. He lives in
California and is one of the directors of P.B. Ohrstrom.
Lars, the only other director of P.B. Ohrstrom, lives in
Illinois, and owns 25% of P.B. Ohrstrom's shares. The
remaining 25% of the shares are split evenly among Lea Kaylan
Ohrstrom, Jan Erik Ohrstrom, Jenny Marie Ohrstrom, Per
Kristian Ohrstrom, and Anna Liv Ohrstrom. Lars holds the
proxies for these five individuals' shares, meaning that
he holds 50% of the voting power. Maxicrop has had no
directors for over three years, with the P.B. Ohrstrom
directors failing for at least two consecutive annual meeting
dates to elect successor directors of Maxicrop.
has been president of P.B. Ohrstrom since November 1, 2015,
with his annual salary exceeding $75, 000. Lars maintains
corporate financial records in six locked file cabinets in
his office at P.B. Ohrstrom's headquarters. Tom has asked
for access to review these records, but Lars only gave Tom a
key to one of the six cabinets on May 16, 2017, after
learning that Tom was consulting with an attorney. The
cabinet to which Tom gained access only contains historical
financial information, such as old tax returns, and not
documents about the companies' current financial
condition. Tom did obtain access to QuickBooks in May or June
2017. This data similarly “lags months behind.”
Doc. 1 ¶ 22(b). Lars has instructed the companies'
accountants not to respond to Tom's requests for
information, leaving Tom without access to the companies'
accounting, payroll, and bonus payment records from December
1, 2012 to the present, and statements and receipts related
to Lars' purchases with his P.B. Ohrstrom business credit
card. Lars also has directed the companies' attorneys not
to provide Tom with current financial information. Tom made a
demand of P.B. Ohrstrom and Maxicrop to inspect their
corporate records on May 17, 2017, with little success.
September 12, 2017, at the P.B. Ohrstrom annual
shareholders' meeting, P.B. Ohrstrom's attorney
stated on the record that “We're deadlocked.
There's going to be no change of leadership right
now.” Id. ¶ 33. He further noted that
Lars and Tom did not trust each other. On November 18, 2017,
Tom called a special shareholders meeting to elect new
directors and, in turn, elect new officers to end Lars'
term as president of P.B. Ohrstrom. But Lars voted all his
own shares as well as those he held by proxy to reelect
himself as a director. With Tom as the only other director, a
deadlock resulted, allowing Lars to remain in office.
January 24, 2018, Tom made a demand on P.B. Ohrstrom's
board of directors for P.B. Ohrstrom to assert a derivative
claim against Lars for breach of fiduciary duty and against
Maxicrop. On February 5, 2018, P.B. Ohrstrom rejected the
motion to dismiss under Rule 12(b)(1) challenges the
Court's subject matter jurisdiction. Fed.R.Civ.P.
12(b)(1). The party asserting jurisdiction has the burden of
proof. United Phosphorus, Ltd. v. Angus Chem. Co.,
322 F.3d 942, 946 (7th Cir. 2003), overruled on other
grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845
(7th Cir. 2012). The standard of review for a Rule 12(b)(1)
motion to dismiss depends on the purpose of the motion.
Apex Digital, 572 F.3d at 443-44. If a defendant
challenges the sufficiency of the allegations regarding
subject matter jurisdiction (a facial challenge), the Court
must accept all well-pleaded factual allegations as true and
draw all reasonable inferences in the plaintiff's favor.
See id.; United Phosphorus, 322 F.3d at
946. If, however, the defendant denies or controverts the
truth of the jurisdictional allegations (a factual
challenge), the Court may look beyond the pleadings and view
any competent proof submitted by the parties to determine if
the plaintiff has established jurisdiction by a preponderance
of the evidence. See Apex Digital, 572 F.3d at 443-
44; Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d
536, 543 (7th Cir. 2006).
motion to dismiss under Rule 12(b)(6) challenges the
sufficiency of the complaint, not its merits. Fed.R.Civ.P.
12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510,
1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion
to dismiss, the Court accepts as true all well-pleaded facts
in the plaintiff's complaint and draws all reasonable
inferences from those facts in the plaintiff's favor.
AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th
Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint
must not only provide the defendant with fair notice of a
claim's basis but must also be facially plausible.
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S.
Subject Matter Jurisdiction
Defendants argue that the Court does not have subject matter
jurisdiction over Tom's claims. Diversity jurisdiction
exists in cases where the amount in controversy exceeds $75,
000 and the plaintiff and ...