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After five years of contentious litigation, a Hennepin County judge concluded this week Serene Warren is entitled to less than a quarter of the $228 million she sought from the $1 billion sale of her family's pharmaceutical company, Upsher-Smith Laboratories.

In his 354-page order, Hennepin County Judge Edward Wahl scolded Warren for pursuing what he called "this tragic litigation," noting that the family could have settled the case years ago in ways that would have been fair to all.

"The tragedy of this case is now compounded by the duty the court has to explain its decision in detail in a public forum," Wahl said in the order, which he filed late Monday night. "The court takes no satisfaction in having to lay out in this detailed fashion what likely would have been better for all the principal players had it been resolved by private negotiation."

The case involves the Evenstad family, which became one of Minnesota's richest through the efforts of Ken Evenstad and his son, Mark, who turned a nearly defunct drug business into a pharmaceutical powerhouse based in Maple Grove.

Wahl said relations turned "toxic" after Ken and his wife, Grace, gave Mark Evenstad an extra 1.5% of their stock in 2014 as a reward for quadrupling the value of the company in a decade as CEO. The gift upset the balance between Mark Evenstad and his sister, Warren, who previously each owned 25% of the business.

Though Warren never worked for the company as an adult, and contributed nothing to Upsher-Smith's success, Wahl said Warren developed a sense of "entitlement" about what she thought her parents owed her.

Wahl noted Ken and Grace Evenstad disinherited Warren after she demanded the sale of Upsher-Smith in 2017 as a path toward her own "financial independence." Wahl also pointed out Warren's decision to cut off most communication with her family after 2016 — even though her father had a terminal illness that led to his 2020 death — a decision that could have affected her inheritance.

Said attorney Chris Madel, who represents the Evenstad family: "Mark's affection for his parents is without limits, and he's grateful that the court recognized Ken and Grace's generosity and accomplishments. I just wish Serene felt the same about her parents."

Through the course of her life, according to the ruling, Warren received more than $328 million "from the generosity of her parents."

"If Serene is disappointed that she may not wind up with a substantial inheritance on top of her hundreds of millions in shareholder distributions, she made decisions over the past six years that have consequences," Wahl said in his order.

Wahl said Warren failed to take advantage of her family's several "good-faith" efforts to settle the dispute, noting she could have sold her stake in the business for as much as $150 million on better terms than her relatives were taking for themselves.

After those efforts failed, the other three shareholders redeemed their shares in a deal worth $167.7 million. Warren did not take part in that transaction, which the judge agreed was "unfairly prejudicial."

Wahl ordered the family's remaining corporate entity, Acova Inc., to pay $41.6 million to $54.6 million to "match" that deal and give Warren her fair share of the money made from selling the remaining assets of Upsher-Smith that were not part of the 2017 transaction. The ultimate price will depend on the amount of cash Acova has to pay the judgment.

Upsher-Smith sold its generic pharmaceutical business in 2017 for about $1 billion to a Japanese company.
Upsher-Smith sold its generic pharmaceutical business in 2017 for about $1 billion to a Japanese company.

Star Tribune File

Despite the dispute, Warren continued to receive money from her family, including $119 million in 2017 from the sale of Upsher-Smith and an extra $71 million in additional distributions from asset sales since 2018.

"The Court's Order makes clear that Serene Warren's choices, with the help of her husband Chris Warren and professional financial and legal advisors, resulted in her receiving a fraction of what ACOVA offered to pay her prior to litigation," said attorney Janel Dressen, who represented Acova.

Wahl said Warren might not have accepted the family's settlement offers because she didn't trust them to fairly value the business, but he said Warren and her husband, Chris, were poorly equipped to challenge other family members on financial decisions,

Warren testified she has been a stay-at-home mom since at least 1994, while her husband, Chris Warren, testified he hasn't earned a paycheck since 2004.

Wahl said Warren's parents and her brother "exemplify the characteristics of many successful, driven corporate executives" who work hard and accumulate the kind of knowledge that helps them make "tough business decisions."

"Serene and Chris, on the other hand, chose a different path," Wahl said, adding "As a consequence of their life choices, Serene did not have the business experience and related skills and knowledge that Ken, Grace and Mark possessed when decision times critical to this litigation arose between 2016 and 2019."

When Warren first sued her family in 2018, the case centered on $75 million in bonuses paid to Ken and Mark Evenstad. Warren argued the bonuses were improper because they unfairly diluted the company's remaining capital, reducing the value of her stake in the business.

Wahl said he can understand why the bonuses "rankled" Warren, but he did not agree it amounted to "inappropriate self-dealing."

The judge noted Upsher-Smith commissioned a study to examine the bonuses, which found Mark and Ken were "historically underpaid" and deserved at least $25 million to make up for their relatively small salaries throughout the years. The rest of the bonus money came from their successful, and quick, sale of the generic drug business in 2017.

"It is unfortunate that the family relationships and dynamics have driven emotions, motivations and actions that affected their relationships as shareholders," Wahl wrote. "In this court's view, those emotions … led these parties to fund this massive, unrelenting litigation."

Wahl also denied Warren's request that her late father's estate restore $100 million to a trust fund originally set up on behalf of Warren and her brother. Her parents liquidated the fund in order to pay her proposed settlement.

Wahl also found Howard Rubin, the attorney who advised the Evenstad family on the trust disbursements, did not violate his fiduciary duties, as Warren claimed.

Though Warren is the only party to the case to be awarded money, Wahl took the unusual step of denying her request for attorneys' fees as the "prevailing party" in the litigation. Instead, he said each party would have to pay their own legal expenses, estimated to run in the millions of dollars.

Attorney Thomas Swigert, who represented Warren, was noncommittal when asked about the possibility of an appeal. But he said he was gratified Wahl awarded at least $41 million for Warren's claims of unfair compensation.

"While some of the Court's factual findings were not as balanced as we believe the evidence showed, and we disagree with a number of them, we are pleased with the Court's finding that Ms. Warren was treated unfairly," Swigert said. "We also are considering our options and next steps."

Read the order:

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