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9-year battle over control of family business comes to end

Building a successful family business and passing it down to one's heirs is the dream of many Minnesotans. Unfortunately, even those who are successful in step one of this process can fail to prepare for the complications that might arise in step two. When a business owner transfers a family business to adult children, there is much that can go terribly wrong.

A high-profile case was discussed in yesterday's Star Tribune that involved a nine-year interfamilial dispute stemming from a family business's transition from its first generation to the second.

This case involved MICO Inc., a brake manufacturer based in Mankato, Minnesota. An entrepreneur bought the business in 1960, and when he died in 2004 he left the very successful company to two of his four sons. His other two sons were on the board of directors at the time of his death.

Soon after the company transitioned to the brothers, one of the two began to be pushed out of the company by the other, and by the board of directors, according to a lawsuit that the ejected brother filed in 2006.

He ultimately won his lawsuit, and was awarded a total of $21.8 million--a mix of compensatory and punitive damages as well as the sale of his shares in the company.

The details of this lawsuit are quite complicated, involving multiple phases of business litigation. Whenever business disputes pit family members against each other, the effects can be heartbreaking. However, these types of disputes are not all that uncommon, as about two of three family businesses do not survive the transition to the second generation, according to a faculty member of the University of St. Thomas who was interviewed by the Star Tribune.

In some cases, these sibling rivalries can be avoided. Business owners who plan to pass a business interest on to heirs should include an intentional and direct succession plan as a part of their comprehensive estate plan to guide this process. Skilled estate planning and business and commercial law attorneys can guide this process. It is also wise for heirs of family businesses to seek legal representation should disputes arise.

Source: Star Tribune, "Lawsuit over control of family-owned MICO ends with $21.8M award," David Phelps, March 31, 2013

  • Our law firm in Minneapolis represents business owners and individuals in estate planning as well as civil litigation. For more information about our practice, please visit our Business Law and Civil Litigation page.

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