No. 20-2835 ___________________________

Gregory M. Shepard

Plaintiff - Appellant

v.

Employers Mutual Casualty Company; Bruce G. Kelley

Defendants - Appellees ____________

Appeal from United States District Court for the Southern District of Iowa - Central ____________

Submitted: April 13, 2021 Filed: May 19, 2021 ____________ Before GRUENDER, BENTON, and SHEPHERD, Circuit Judges. ____________ BENTON, Circuit Judge.

Gregory M. Shepard sued Employers Mutual Casualty Company and Bruce G. Kelley, asserting a claim for breach of fiduciary duty. The district court1 dismissed his complaint, ruling the claim was derivative in nature and he failed to

1 The Honorable John A. Jarvey, United States District Judge for the Southern District of Iowa. meet the filing requirements. See Fed. R. Civ. P. 12(b)(6). It alternatively determined that Employers Mutual and Kelley did not owe him fiduciary duties as a minority shareholder. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

Gregory Shepard was a minority shareholder of EMC Insurance Group, Inc., a property-and-casualty-insurance holding company. EMCI was spun-off from Employers Mutual and incorporated in Iowa in 1974. It became a publicly traded company in 1982. EMCI was controlled by Employers Mutual, which owned about 54% of its shares in 2019. Bruce Kelley was the CEO and a director of both EMCI and Employers Mutual.

Shepard alleges that Employers Mutual structured EMCI as a shell company, preventing it from becoming a valuable company or acting independently from Employers Mutual. EMCI’s board of directors had five positions—Kelley and four independent directors. EMCI had no employees; all of its officers simultaneously served as officers of Employers Mutual. All of EMCI’s business arose from, and was managed by, Employers Mutual. According to Shepard, a pooling agreement with Employers Mutual, in addition to other policies and practices, depressed EMCI’s value and share price, compared to peer public companies.

On November 15, 2018, Employers Mutual began a squeeze-out merger to purchase EMCI’s remaining shares.2 EMCI’s board formed a special committee of its independent directors to consider the purchase price. The special committee accepted Employers Mutual’s offer of $36 per share, an increase from an initial offer

2 A “squeeze-out merger occurs when Corporation A, which holds a controlling interest in Corporation B, uses its control to merge B into itself or into a wholly owned subsidiary.” Schreiber v. Burlington N., Inc., 472 U.S. 1, 3 n.1 (1985) (internal quotations omitted). “The minority shareholders in Corporation B are, in effect, forced to sell their stock.” Id.

-2- of $30 per share. The squeeze out was approved by a majority-of-the-minority vote (shareholders excluding Employers Mutual).

Shepard sued Employers Mutual and Kelley. He alleges that, “in the years leading up to the Squeeze-out,” they breached fiduciary duties owed to him as a minority shareholder of EMCI. These fiduciary duties, he asserts, were to enhance and promote EMCI’s business and value, and maximize its share price. He does not claim they breached their fiduciary duties during the squeeze out.

The district court granted Employers Mutual and Kelley’s 12(b)(6) motion to dismiss. Shepard v. Emps. Mut. Cas. Co., 476 F. Supp. 3d 862 (S.D. Iowa 2020). The court ruled that Shepard’s breach of fiduciary duty cl