Frank Brunckhorst III v. Bischoff

Background

The dispute concerns shares of Boar’s Head Provisions Company, Inc. that were held by the Barbara Brunckhorst 2010 Trust. The parties’ 1991 Shareholder’s Agreement restricted shareholders from transferring or placing shares in trust except through specified procedures. It allowed some transfers within designated shareholder groups and created a purchase process, called a waterfall, for shares that had to be offered for sale. The agreement also addressed what happened after the death of a shareholder or a trust beneficiary.

Barbara Brunckhorst established the Barbara 2010 Trust in 2010 and initially remained its beneficiary. She later signed documents that made the trust irrevocable, assigned her lifetime income interest, and directed the trust property at her death to an entity whose name is redacted in the opinion. The parties agreed that this entity was not a permitted transferee under the Shareholder’s Agreement. Barbara died on November 18, 2020, and the shares remained in the trust. Eric Bischoff and Frank Brunckhorst III each sent notices seeking to acquire shares under the agreement’s purchase process.

The court had previously resolved most of the ownership dispute but had not decided who was entitled to the shares held by the Barbara 2010 Trust. The parties later submitted cross-motions for summary judgment, which asks whether the undisputed record requires judgment for one side as a matter of law.

Issues and Analysis

The court first rejected Frank and Todd’s argument that its earlier decision had already determined that Barbara was not a beneficiary of the Barbara 2010 Trust when she died. The earlier decision had expressly left the issue unresolved, so the law-of-the-case doctrine did not control it.

The court then held that the Ancillary Documents could not remove Barbara’s status as a beneficiary for purposes of the Shareholder’s Agreement. The agreement broadly prohibited an attempted transfer, encumbrance, or placement of shares in trust unless permitted by the agreement, and it stated that a prohibited attempted disposition was void. The court reasoned that, assuming the Ancillary Documents would otherwise have divested Barbara of her beneficial interest, they violated those restrictions and were void ab initio—that is, legally invalid from the outset. They therefore had no legal effect on Barbara’s status.

Because Barbara remained a beneficiary when she died, the court concluded that she was a “Shareholder-Beneficiary” under the agreement. The shares consequently entered the agreement’s waterfall upon her death. The court relied on its earlier decision concerning the operation of that process and concluded that Eric was the only party who timely offered to purchase the shares.

The court also rejected Frank and Todd’s statute-of-limitations argument. Eric’s contract claim concerned the trustees’ alleged failure in 2021 to sell him the shares, not a request for a remedy based directly on Barbara’s execution of the Ancillary Documents in 2010. The court held that the passage of time could not give legal effect to documents that were void from the beginning or defeat Eric’s claim based on the later alleged failure to sell the shares.

Rulings

Judge John P. Cronan ordered that: (1) Frank and Todd’s motion for summary judgment was denied in its entirety; (2) Eric’s motion for summary judgment was granted on the second cause of action in the Third Amended Counterclaims and Crossclaims, for breach of contract against Todd, to the extent that claim concerned the 2010 Trust Shares; and (3) Eric’s motion for summary judgment was granted on Frank’s declaratory-judgment claim asserting that Frank had the right to purchase the 2010 Trust Shares.

The court did not enter the additional possible ruling for Todd at that time. Because Todd had not moved for summary judgment on Frank’s declaratory-judgment claim, the court directed Frank and Todd to show cause why summary judgment should not also be entered for Todd under Rule 56(f). The court stated that it would grant summary judgment for Todd on that issue if they filed no letter addressing it. The court also directed the parties to address next steps concerning Eric’s damages, the trustees’ equitable-offset defense, and whether an evidentiary hearing would be needed.