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Robinson v. Langenbach

Court of Appeals of Missouri, Eastern District, Third Division

April 23, 2019

JOAN L. ROBINSON, Respondent/Cross-Appellant,
v.
JOHN F. LANGENBACH, JUDY LANFRI f/k/a JUDY LONGBROOK, and PERMA-JACK COMPANY, Appellants/Cross-Respondents.

          Appeal from the Circuit Court of St. Louis County 12SL-CC02302-01 Honorable Kristine Allen Kerr

          Robin Ransom, J.

         Introduction

         In these consolidated appeals following a bifurcated civil suit for damages and equitable relief, John F. Langenbach ("Langenbach"), Judy Lanfri f/k/a/ Judy Longbrook ("Lanfri"), and Perma-Jack Company ("PJC") (together, "Appellants") appeal from both the trial court's entry of judgment pursuant to a jury verdict awarding damages to Joan L. Robinson's ("Robinson") on her claim for breach of fiduciary duty, and from the trial court's judgment after a bench trial awarding Robinson equitable relief on her claim of shareholder oppression. Likewise, Robinson appeals from the trial court's judgment determining the value of her stock in her shareholder oppression claim, and from the trial court's judgment granting Appellants' counterclaim for injunctive relief to remove signage bearing the PJC trademark from her property, denying pre-judgment interest on the stock award, and denying her request for attorneys' fees. We affirm.[1]

         Background

         This case is before this Court for the second time. We previously summarized the factual background as follows. In 1975, George Langenbach incorporated PJC, a franchisor of a foundation steel-piering system. Robinson, Langenbach, and Lanfri are George Langenbach's children. In 1988, Robinson, Langenbach, and Lanfri were named as the company's three directors and granted shares of the company in equal portions. Robinson v. Lagenbach, [2] 439 S.W.3d 853, 855 (Mo. App. E.D. 2014) ("Robinson I"). Before June 20, 2012, Robinson served as president and treasurer of PJC, and Langenbach served as vice president and secretary. Lanfri had no role in the day-to-day operations of PJC. Id. Differences developed among the parties concerning the management and direction of the company, and Langenbach asked Robinson to resign, but she refused. At a special meeting of the Board of Directors ("the Board") on June 20, 2012, Langenbach and Lanfri voted to remove Robinson as president and treasurer of PJC. Her employment was terminated on that date. Langenbach and Lanfri then voted to appoint Langenbach as president. The Board later appointed Langenbach's daughter Jessica Langenbach as secretary of PJC, and PJC later hired Langenbach's other daughter Alexis Langenbach on a part-time basis. Id.

         In Robinson I, Robinson sued the Appellants for breach of fiduciary duty and for dissolution of the company or other equitable relief based on shareholder oppression. The trial court granted the defendants' motion for summary judgment, and denied Robinson's motion for partial summary judgment without issuing findings of fact or conclusions of law. Id. at 855-56. On appeal, this Court held that, as a two-thirds majority of the Board, Langenbach and Lanfri had the authority to vote to remove Robinson as president and treasurer of PJC, and this authority was not impacted by the voting trust. However, we also held the trial court erred in granting summary judgment on the issues of shareholder oppression, breach of fiduciary duty by Langenbach and Lanfri as directors and controlling shareholders, and application of the business-judgment rule because there remained disputed issues of material fact. Id. at 858-61.

         Following remand, Robinson filed a Third Amended Petition for Equitable Relief and Damages against Appellants, asserting (1) shareholder oppression and (2) breach of the fiduciary duty owed by Langenbach and Lanfri, as Directors and shareholders in control of PJC, to Robinson, individually, as the minority shareholder, by terminating her employment with PJC.[3]With her Third Amended Petition, she filed a motion for separate trials to bifurcate her equitable action for shareholder oppression, which would be determined by the trial court, from the action for damages on the claim for breach of fiduciary duty, which would be determined by a jury. The trial court granted the motion for separate trials.

         Appellants pleaded multiple affirmative defenses, including, as relevant on appeal, that (1) Robinson failed to allege the elements of shareholder oppression; (2) her allegations were barred by the business judgment rule because Langenbach and Lanfri both acted with the honest belief that their actions were in the best interest of PJC; (3) Langenbach and Lanfri had the authority to terminate Robinson's employment whenever in their judgment the best interests of PJC would be served; and (4) she had no right to continued employment based on her status as a shareholder, but rather, as determined in Robinson I, Langenbach and Lanfri had the authority to terminate her. As well, Appellants filed a counterclaim for injunctive relief, alleging Robinson had refused to remove a Perma-Jack sign from the former location of PJC headquarters at 9052 Watson Road, Crestwood, Missouri ("the Watson Property"), which was owned by NANAPA, LLC, a limited liability company owned and managed by Robinson. Appellants asserted this refusal constituted an infringement on PJC's trademark and false designation of origin under 15 U.S.C. § 1051 et seq. and Section 417.010 et seq., in that Robinson's continued use of the sign caused confusion for PJC's clients and customers and damaged the reputation and image of PJC in the community.

         Before the February 2017 jury trial on the breach-of-fiduciary-duty claim, Appellants filed a motion in limine to preclude Robinson from arguing or introducing evidence that, as relevant to this appeal, the salaries paid to Langenbach and his daughters, Jessica and Alexis, were too high or should be different. The trial court denied the motion in limine on this ground. The parties proceeded to trial on Robinson's claim for breach of fiduciary duty by Langenbach and Lanfri against her as a stockholder. At the close of Robinson's evidence, Appellants moved for a Directed Verdict, which the trial court denied.

         At the close of trial, the jury was instructed to find in favor of Robinson if it believed:

First, defendants John Langenbach and Judy Lanfri removed plaintiff Joan Robinson from Perma-Jack Company; and
Second, defendants John Langenbach and Judy Lanfri did not believe, in good faith, that their removal of plaintiff Joan Robinson was in the best interests of the company; and
Third, plaintiff Joan Robinson was thereby damaged.

         The jury returned a verdict in favor of Robinson and against Langenbach and Lanfri, and it awarded her $390, 000.00. On February 16, 2017, the trial court entered judgment in accordance with the jury verdict.

         Appellants filed a motion to dismiss, vacate, or set aside the judgment and a motion for judgment notwithstanding the verdict ("JNOV"), and they also moved for a new trial, asserting that the trial court erred in admitting certain evidence and that the jury's verdict was against the weight of the evidence. Robinson opposed the motions, and the trial court denied Appellants' motions.

         On October 26 and November 1, 2017, the trial court held a bench trial on Robinson's equitable claim for shareholder oppression, and on Appellants' equitable claim requesting Robinson remove a sign bearing the PJC trademark from the Watson property. The trial court issued a Memorandum, Order and Judgment on February 13, 2018, concluding Appellants' termination of Robinson constituted shareholder oppression, and their actions were not shielded by the business judgment rule because the actions were not conducted in good faith. For its remedy, the trial court ordered Langenbach and Lanfri to purchase Robinson's shares of PJC stock for $59, 000.00, plus post-judgment interest at the rate of 9% per annum from the date of the February 13, 2018 judgment; however, the trial court denied Robinson's request for attorneys' fees and for equitable relief to compensate her for PJC's indemnification of Langenbach and Lanfri's attorneys' fees. On Appellants' counterclaim, the trial court ordered Robinson to remove within 30 days any signage bearing the PJC trademark. Robinson moved to amend the judgment to include pre-judgment interest at the rate of 9% per annum from the date of June 20, 2012, the date of Robinson's termination. The trial court denied Robinson's request for pre-judgment interest.

         Appellants appealed, arguing the trial court erred in denying their motion for directed verdict and their motion for JNOV after the February 2017 jury verdict, because they were entitled to judgment as a matter of law on their affirmative defenses that Robinson's status as a shareholder provided no fiduciary-rooted right to continued employment; the trial court abused its discretion in admitting evidence of the salaries of Langenbach, Jessica Langenbach, and Alexis Langenbach; and the trial court erred in finding shareholder oppression after the October/November 2017 bench trial.[4]

         Likewise, Robinson appealed, arguing the trial court erred in determining the value of her shares of PJC stock by applying both a marketability discount and a minority discount; the trial court abused its discretion in using June 20, 2012, as the valuation date for the PJC stock; the trial court erred in failing to award her pre-judgment interest; the trial court erred in denying Robinson equitable relief for PJC's indemnification of Appellants' defense costs and in denying her request for attorneys' fees; and, finally, the trial court erred in ordering her to remove signage bearing the PJC trademark. These appeals were consolidated before this Court.

         1. Appeal No. ED106781

         Appellants' Points I and II

         In Appellants' first and second points on appeal, they argue the trial court erred in denying their motion for directed verdict and JNOV because they were entitled to judgment as a matter of law on their affirmative defense that Robinson's status as a shareholder did not entitle her to continued employment nor did her shareholding interest give rise to a fiduciary-based right to employment. We disagree.

         Our review here is limited to whether Robinson made a submissible case. Delacroix v. Doncasters, Inc., 407 S.W.3d 13, 26 (Mo. App. E.D. 2013) (en banc). To make a submissible case, each element of a plaintiff's case must be supported by substantial evidence. Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. banc 2010). Substantial evidence is evidence that, if true, would allow the trier of fact to reasonably decide the case. Williams v. Trans States Airlines, Inc., 281 S.W.3d 854, 866 (Mo. App. E.D. 2009). We consider the evidence and all reasonable inferences in the light most favorable to the plaintiff, and we disregard all contrary evidence and inferences. Keveney, 304 S.W.3d at 104. We will reverse a jury's verdict only if there is a "complete absence of probative facts to support the jury's conclusion." Id.

         Robinson here alleged a breach of the fiduciary duty owed by Langenbach and Lanfri, as Directors and shareholders in control of PJC, to Robinson, individually, as the minority shareholder, by terminating her employment with PJC. To prevail on a claim of breach of fiduciary duty, a plaintiff must show: (1) the existence of a fiduciary duty; (2) a breach of that fiduciary duty; (3) causation; and (4) harm. Brown v. Brown, 530 S.W.3d 35, 41 (Mo. App. E.D. 2017). Whether a fiduciary duty exists between parties is a question of law, and whether a breach of that duty occurred is a question for the fact-finder to decide. Western Blue Print Co. v. Roberts, 367 S.W.3d 7, 15 (Mo. banc 2012). Thus, here, Robinson had to produce evidence that Appellants owed her a fiduciary duty, they breached that duty, and the breach caused her harm.

         The parties agree that officers and directors of a corporation have a fiduciary relationship with both the corporation and with the stockholders, which requires them "to exercise the utmost good faith in the discharge of the duties arising out of their trust, and to act for the corporation and its stockholders, giving all the benefit of their best judgment." Waters v. G & B Feeds, Inc., 306 S.W.3d 138, 146 (Mo. App. S.D. 2010) (citation omitted). Further, officers of a closely held corporation owe an even higher degree of fiduciary duty to shareholders than do their counterparts at public corporations. Id. at 146-47. Thus, substantial evidence supported a finding of a fiduciary duty by Langenbach and Lanfri to Robinson. Likewise, there is no question that the Board's termination of Robinson as president and treasurer of PJC caused her harm. The question for this Court on appeal is whether Langenbach and Lanfri breached their fiduciary duty to Robinson as a shareholder by terminating her employment.

         Implicit in Langenbach and Lanfri's fiduciary duty to PJC and its stockholders, including Robinson, was to run PJC in accordance with its bylaws. See Western Blue Print Co., 367 S.W.3d at 15 (fiduciary duty of officers and directors is to exercise good faith "when using the powers conferred upon them"); Gieselmann v. Stegeman, 443 S.W.2d 127, 136 (Mo. 1969) (company vice-president and shareholder violated fiduciary duty to other shareholders by not exercising powers conferred upon him in good faith and by seeking to personally profit at expense of other shareholders). Here, Article IV, Section 2 of PJC's bylaws provided that "[a]ny officer or agent appointed by the Board of Directors may be removed by the Board of Directors whenever in the judgment of the Board the best interests of the corporation will be served thereby."[5] Accordingly, the Board has a fiduciary duty to the corporation and the shareholders, including Robinson, to apply the bylaws, which in turn mandate that any removal of an officer must be predicated upon the Board's judgment that the removal will serve the best interests of the corporation. Whether a breach of an established fiduciary duty occurred is a question of fact for the jury to decide. See Western Blue Print Co., 367 S.W.3d at 15. Therefore, there was no error in the trial court's decision denying the motion for direct verdict and submitting this issue to the jury.

         Further, we note that although Langenbach and Lanfri's fiduciary duty was to all shareholders, because Robinson was uniquely harmed by her termination, her individual suit could proceed. Nickell v. Shanahan, 439 S.W.3d 223, 227 (Mo. banc 2014) ("[i]ndividual actions are permitted, and provide the logical remedy, if the injury is to the shareholders themselves directly, and not to the corporation") (citation omitted); see also Gieselmann, 443 S.W.2d at 131 (shareholders could maintain individual suit against directors or officers where they asserted wrongdoers seized control of corporation from complaining stockholders by fraud).

         Likewise, the trial court did not err in denying JNOV on the issue of whether Appellants were entitled to their affirmative defenses that Robinson's status as a shareholder did not entitle her to continued employment or that her shareholder interest did not give rise to a fiduciary-based right to employment. These affirmative defenses mistake the issue. Robinson's right to present to the jury her claim of breach of fiduciary duty was not based in her right to continued employment due to her status as a shareholder. Rather, her claim is based in the Board's failure to comply with the bylaws, which, under controlling Missouri law, they have a fiduciary duty to the corporation and to the shareholders, including Robinson, to follow. We need not, therefore, address Appellants' argument whether to apply the case law of a minority of non-Missouri jurisdictions that a plaintiff's shareholder status does not give rise to a fiduciary-based right to employment for shareholders who are also at-will employees, see, e.g., Ingle v. Glamore Motor Sales, Inc., 535 N.E.2d 1311, 1312-13 (N.Y. App. 1989); and whether to apply the case law of a majority of non-Missouri jurisdictions that the fiduciary duty of majority shareholders towards minority shareholders regarding termination from employment stems from their duty to protect the investment of the minority shareholders, see, e.g., Hollis v. Hill, 232 F.3d 460, 470-71 (5th Cir. 2000). The outcome here is not decided by the issues raised in the cases cited by Appellants.

         The Board did not have an unfettered right to terminate Robinson, [6] but they could only terminate her in accordance with their fiduciary duty to follow PJC's bylaws, and whether they did so is a question of fact for the jury to decide. See Western Blue Print Co., 367 S.W.3d at 15; see also Robinson I, 439 S.W.3d at 860 (reversing for further proceedings after holding that the question of whether Board's action violated its fiduciary duty to Robinson as minority shareholder required factual and credibility determinations by fact-finder). PJC's bylaws stated that any officer could be removed by the Board of Directors "whenever in the judgment of the Board the best interests of the corporation shall be served thereby." Robinson presented evidence at trial in support of her assertion that Langenbach and Lanfri did not believe in good faith that the best interest of PJC would be served by her termination, and the jury believed her evidence, as is their right. "The jury is the sole judge of credibility of witnesses and the weight and value of their testimony and may believe or disbelieve any portion of that testimony." Keveney, 304 S.W.3d at 105 (citation omitted). On review, we consider the evidence in the light most favorable to the verdict and will not reverse unless there is a "complete absence of probative facts to support the jury's conclusion." Id. at 104. Under our standard of review, Robinson made a submissible case, and thus the trial court did not err in denying Appellants' motion for JNOV.

         Appellants' Points I and II are denied.

         Appellants' Point III

         In their third point on appeal, Appellants argue the trial court abused its discretion in admitting evidence of the salaries of Langenbach, Jessica Langenbach, and Alexis Langenbach after Robinson's termination because they were not relevant to Robinson's claims but served only to prejudice and inflame the jury. We disagree.

         A trial court has broad discretion in deciding whether to admit or deny evidence at trial, and we review merely for an abuse of that broad discretion, giving great deference to the trial court's evidentiary rulings. Williams, 281 S.W.3d at 872. An abuse of discretion occurs when the ruling is so against the logic of the circumstances, and is so arbitrary and unreasonable as to shock the sense of justice and indicate a lack of careful consideration. Id. Our review is for prejudice, not mere error, and we will reverse only if the appellant demonstrates that the error was so prejudicial as to deprive him or her of a fair trial and there was a reasonable probability the trial court's ruling affected the outcome of the trial. Id.; see also State v. Anderson, 76 S.W.3d 275, 277 (Mo. banc 2002).

         Evidence must be both logically and legally relevant to be admissible. Wilson v. Union Pac. R.R. Co., 509 S.W.3d 862, 874 (Mo. App. E.D. 2017). "Evidence is logically relevant if it tends to make the existence of a material fact more or less probable than it would be without the evidence." Id. Likewise, evidence is legally relevant when the probative value of the evidence outweighs its costs, such as unfair prejudice, confusion of the issues, misleading the jury, undue delay, waste of time, or cumulativeness. Id.; Anderson, ...


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