Frank U. WETMORE, Plaintiff-Appellant,
v.
Heard Jan. 9, 2007.
Decided Jan. 12, 2007.
Before , Circuit Judge, , Senior Circuit Judge, and SHADUR, Senior District Judge.
Of the Northern District of Illinois, sitting by designation.
SHADUR, Senior District Judge.
This diversity action was brought in the United States District Court for the District of Maine in
Massachusetts citizenship. Wetmore’s complaint alleges that Macdonald Page committed professional
Wetmore has filed a timely appeal challenging the dismissal.
As taught in such cases as :
We review a Rule 12(b)(6) dismissal de novo, considering all well-pleaded facts in the complaint to be
support of his claim which would entitle him to relief.” To that end, in addition to the acceptance of all
fairly incorporated into it, and (ii) matters susceptible to judicial notice.
Maine-based close corporation whose chief business is processing live shellfish. As one of the two
owners, Wetmore held 300 voting and 150 non-voting shares of Company stock, while the remaining
served as President of the Company and managed its daily operations, including production,
follows. In the event of a deadlock, the directors shall hire an accountant at MacDonald Page & Co.,
South Portland, Maine, to determine the value of the outstanding shares. Once the value is reported to
the directors by the accountant, the directors shall call a meeting, each shareholder shall have the right to
buy out the other shareholder(s)’ interest, at a price equal to or greater than the price determined by the
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
to sell at a fair price. Once Macdonald Page rendered its negligent undervaluation of the Company, it
was too late-indeed, impossible-for Wetmore to choose to exercise that equally absolute right.
Wetmore’s allegations thus offer far more than “pure speculation or conjecture” as to Macdonald Page’s
improper valuation being a substantial factor in Wetmore’s asserted loss.
It should be added that Wetmore’s injury was entirely foreseeable. What Macdonald Page’s alleged
misfeasance imposed on Wetmore was precisely the type of bind that shareholders in a close corporation
seek to avoid when they include buy-sell provisions in their agreements. Protections afforded by buy-
sell provisions that set a bidding floor are fully meaningful only if the initial valuation of the company is
performed accurately. Otherwise, as here, the distortion of that base valuation skews the entire process.
“Shareholder’s and Officer’s Agreement” dated February 1, 1994, paragraph 11.5.5….
To argue that Wetmore’s loss was not foreseeable would be disingenuous, given that plain language
confirming Macdonald Page’s duty to the Company’s shareholders.
In its decision the district court also reasoned that if Macdonald Page’s valuation had been higher, there
is no guaranty that Ms. Holden would have made an offer. We too lack an unclouded crystal ball to tell
proof that remain unresolved, but those will require a more developed record-they simply are not before
us at the Rule 12(b)(6) stage.
CONCLUSION
For the reasons that have been stated here we REVERSE the district court’s dismissal of Wetmore’s
complaint and REMAND for further proceedings consistent with this opinion.
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
to sell at a fair price. Once Macdonald Page rendered its negligent undervaluation of the Company, it
was too late-indeed, impossible-for Wetmore to choose to exercise that equally absolute right.
Wetmore’s allegations thus offer far more than “pure speculation or conjecture” as to Macdonald Page’s
improper valuation being a substantial factor in Wetmore’s asserted loss.
It should be added that Wetmore’s injury was entirely foreseeable. What Macdonald Page’s alleged
misfeasance imposed on Wetmore was precisely the type of bind that shareholders in a close corporation
seek to avoid when they include buy-sell provisions in their agreements. Protections afforded by buy-
sell provisions that set a bidding floor are fully meaningful only if the initial valuation of the company is
performed accurately. Otherwise, as here, the distortion of that base valuation skews the entire process.
“Shareholder’s and Officer’s Agreement” dated February 1, 1994, paragraph 11.5.5….
To argue that Wetmore’s loss was not foreseeable would be disingenuous, given that plain language
confirming Macdonald Page’s duty to the Company’s shareholders.
In its decision the district court also reasoned that if Macdonald Page’s valuation had been higher, there
is no guaranty that Ms. Holden would have made an offer. We too lack an unclouded crystal ball to tell
proof that remain unresolved, but those will require a more developed record-they simply are not before
us at the Rule 12(b)(6) stage.
CONCLUSION
For the reasons that have been stated here we REVERSE the district court’s dismissal of Wetmore’s
complaint and REMAND for further proceedings consistent with this opinion.