Unpublished Disposition, 846 F.2d 1383 (9th Cir. 1986)

No. 86-2452.

United States Court of Appeals, Ninth Circuit.

Before FERGUSON, LEAVY, Circuit Judges, and JAMES A. REDDEN,^***  District Judge.

MEMORANDUM^** 

FACTS AND PROCEEDINGS

In June of 1982, Clayton Kendall Miller III (Miller), an Arizona citizen, owned 1,100 shares of stock in Peavey Company (Peavey). Peavey is a Minnesota corporation with its principal place of business in Minneapolis, Minnesota. In May 1982, the Board of Directors of Peavey gave notice to its shareholders of a special meeting to be held on June 24, 1982. The purpose of the meeting was to consider a merger with a wholly owned subsidiary of ConAgra, Inc. (ConAgra).

At the June 24, 1982 meeting, Peavey's shareholders were offered a cash price of $30.00 per share or ConAgra stock worth $30.00 per share in exchange for consenting to the merger and tendering their Peavey stock. At that time, Peavey's stock was worth $26.00 per share on the New York Stock Exchange. Before the public announcement of the proposed merger, the stock was selling for approximately $17.00 per share.

Of the 2,552 Peavey shareholders, only Miller dissented from the merger. The merger took place on July 20, 1982.

If a shareholder dissents to a merger, 1951 Minn. Laws section 301.44(1) (repealed 1984)¹  provided that a written objection could be filed and a demand made for payment for all shares. Section 301.44(1)²  also provided that if a corporation and a shareholder could not agree on a fair cash value for the shares, the value is to be determined in accordance with 1951 Minn. Laws section 301.40. Section 301.40(2) (amended 1965) (repealed 1984) provided for the appointment of three disinterested appraisers to determine the fair cash value at the time of the merger.³ 

After it received Miller's objection, Peavey tried to negotiate a fair price for Miller's shares, but Miller refused to negotiate or to set a price. He claimed it was impossible to set a price because he did not know the true value of Peavey's assets. Then the parties disagreed about how to conduct the arbitration proceeding. Subsequently, Miller filed a complaint in the District of Arizona asking for a declaratory judgment pursuant to 28 U.S.C. § 2201 and Federal Rule of Civil Procedure 57 on what procedures were proper. The district court had diversity jurisdiction pursuant to 28 U.S.C. § 1332.

In his amended complaint, Miller requested the court to decide whether section 301.40(2): (1) allowed discovery prior to the arbitration proceeding, (2) required the corporation to pay for appraiser's expenses and other expenses, and (3) allowed the right to subpoena documents, to compel witnesses' attendance, to have witnesses testify under oath, and to cross examine witnesses, as well as other procedural rights. Both parties moved for summary judgment on the ground that there were no genuine issues of material fact as to the procedures required by section 301.40(2) to determine the fair cash value of a dissenter's shares in an arbitration proceeding.

On February 27, 1984, the district court entered its judgment declaring the procedures to be used and the rights of the parties pursuant to section 301.40(2). Miller did not appeal that judgment.

The arbitration panel delivered its confidential final report, Valuation as of 7/20/82 of Peavey Company by Court Appointed Arbitration Panel (March 31, 1986) (The Arbitrator's Report), to the district court on April 22, 1986. At a status conference before the district court on June 23, 1986, Miller objected to the panel's valuation of his stock. The panel had concluded unanimously that the fair cash value of Miller's shares at the time of the merger was $30.00 per share, the price Miller had been offered. Miller claimed the appraisal was not fair because it did not determine Peavey's net asset value. He asked the district court to remand the report to the panel and order it to use a different appraisal method.

On July 17, 1986, the district court concluded that the arbitration panel had complied with section 301.40(2) and its judgment of February 27, 1984, and ordered the matter dismissed. It did not examine the merits of the panel's determination of fair cash value. Miller appeals pro se from that order. We affirm.

DISCUSSION

After a court issues a declaratory judgment under 28 U.S.C. section 2201, 28 U.S.C. section 2202 provides that a district court may grant " [f]urther necessary or proper relief based on a declaratory judgment ... after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment."

The district court properly dismissed Miller's challenge of the panel's determination. It did not have jurisdiction to examine the merits of that determination. Section 301.40(2) provides that " [t]he determination of a majority of the appraisers in good faith made shall be binding on all demanding shareholders and the corporation [.]" (Emphasis added). Miller presents no evidence that the appraisers acted in bad faith when they determined the value of his stock.

The district court found that the appraisal proceeding which section 301.40(2) contemplated is a non-judicial compulsory arbitration proceeding, to be conducted in accordance with the procedures set forth in the Minnesota Uniform Arbitration Act, Minn.Stat.Ann. Secs. 572.08-30 (West 1988), which was adopted in 1957.⁴  Minnesota cases which interpret the Uniform Arbitration Act hold that when an issue is raised regarding the merits of an arbitrator's decision:

[A]n arbitrator, in the absence of any agreement limiting his authority, is the final judge of both law and fact, ... and his award will not be reviewed or set aside for mistake of either law or fact in the absence of fraud, mistake in applying his own theory, misconduct, or other disregard of duty. An award will not be set aside merely because the court thinks the arbitrators erred either as to the law or the facts.

Koranda v. Austin Mut. Ins. Co., 397 N.W.2d 357, 361 (Minn.App.1986) (quoting Cournoyer v. American Television and Radio Co., 249 Minn. 577, 580; 83 N.W.2d 409, 411 (1957); see also Eric A. Carlstrom v. Independent School Dist., 256 N.W.2d 479, 483 (Minn.1977).

Clearly, section 301.40(2) and Minnesota case law provided no jurisdiction to the district court to examine the merits of the arbitration panel's determination of the fair cash value of Miller's stock. The order of dismissal is AFFIRMED.