The Minnesota Supreme Court recently ruled in a significant case involving shareholder rights and beneficial ownership. In a decision filed on August 5, 2026, the court reversed a previous ruling by the court of appeals, stating that Serene Warren, a beneficial owner of shares in ACOVA, Inc., has the standing to pursue her claims against the company and its controlling shareholders. This ruling is crucial as it clarifies the legal definitions of shareholders and beneficial owners in corporate law, impacting how similar cases may be handled in the future.
The case, identified by docket number A24-0450, arose from a dispute involving the Evenstad family, who were all beneficial owners of shares in Upsher-Smith Laboratories, Inc. (USL), a closely held pharmaceuticals company. The family included Serene Warren, her father Kenneth Evenstad, and her brother Mark Evenstad. The conflict began when the Evenstad family decided to sell part of USL and reorganize the remaining assets into a new company called ACOVA, Inc. Warren, who was a beneficial owner through several trusts, claimed that the sale and reorganization were conducted in a manner that was unfairly prejudicial to her interests as a shareholder.
Warren filed a lawsuit in 2018 against ACOVA, Mark Evenstad, Kenneth Evenstad, and the family trustee, Howard Rubin. Her claims included a request for a court-ordered buyout of her shares in ACOVA, based on Minnesota Statutes section 302A.751, which allows actions by shareholders against corporations. The case went through a lengthy trial process, with the district court initially ruling in favor of Warren on some claims but not on the buyout request.
However, during the proceedings, the Evenstad respondents raised a new argument, claiming that Warren lacked standing to bring her claims because she was a beneficial owner and not a registered shareholder as defined by the Minnesota Business Corporation Act. They cited a recent court of appeals decision, Demskie v. U.S. Bank National Ass’n, which suggested that only registered shareholders could initiate such actions. The district court did not address this standing issue, concluding that it was not necessary to resolve the case.
When the case reached the court of appeals, it ruled that Warren did not have standing under section 302A.751, agreeing with the Evenstad respondents that her status as a beneficial owner disqualified her from bringing a shareholder action. The court of appeals also determined that the issue of standing could not be waived and therefore could be raised at any time during the proceedings.
The Minnesota Supreme Court, however, disagreed with the court of appeals’ characterization of the issue. The court ruled that Warren had injury-in-fact standing, meaning she had a concrete stake in the outcome of the case due to the economic loss she suffered. The court emphasized that whether Warren was a shareholder under the statute did not affect her standing to sue, but rather the legal sufficiency of her claims. The court stated, “Because the appellant has injury-in-fact standing, whether she is a ‘shareholder’ for the purpose of her shareholder action does not implicate her standing to sue, but instead implicates the legal sufficiency of her claims.”
This ruling is significant as it clarifies that beneficial owners can have standing to bring claims under certain circumstances, even if they are not registered shareholders. The court also noted that the respondents forfeited their challenge to Warren’s claims by raising the standing issue too late in the proceedings, thereby reversing the court of appeals’ decision and remanding the case for further proceedings.
The impact of this ruling extends beyond this case, as it sets a precedent for how courts may interpret the rights of beneficial owners in corporate disputes. It highlights the importance of timely raising issues of standing and clarifies the legal definitions of shareholders and beneficial owners in Minnesota corporate law.
As for what’s next, the case has been sent back to the court of appeals for further proceedings to determine the next steps in Warren's claims against ACOVA and the Evenstad respondents. The ruling opens the door for Warren to potentially pursue her claims for a buyout of her shares, which could have significant financial implications for her and the company.