374 F.2d 390 (5th Cir. 1967), 21931, Glazer v. Glazer

Docket Nº:21931.
Citation:374 F.2d 390
Party Name:Guilford GLAZER, Appellant, v. Jerome S. GLAZER and Louis A. Glazer, Appellees. Jerome S. GLAZER and Louis A. Glazer, Appellants, v. Guilford GLAZER, Appellee.
Case Date:January 10, 1967
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 390

374 F.2d 390 (5th Cir. 1967)

Guilford GLAZER, Appellant,

v.

Jerome S. GLAZER and Louis A. Glazer, Appellees.

Jerome S. GLAZER and Louis A. Glazer, Appellants,

v.

Guilford GLAZER, Appellee.

No. 21931.

United States Court of Appeals, Fifth Circuit.

January 10, 1967

Rehearing Denied May 2, 1967.

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R. Emmett Kerrigan, New Orleans, La., for appellant. Deutsch, Kerrigan & Stiles, Rene H. Himel, Jr., Bernard Marcus, New Orleans, La., of counsel.

Harold R. Ainsworth, New Orleans, La., James C. McKay, Alfred H. Moses, Edward J. Grenier, Jr., Washington, D.C., for appellees-appellants. Covington & Burling, Washington, D.C., of counsel.

Before JONES, WISDOM, and GEWIN, Circuit Judges.

WISDOM, Circuit Judge:

This action results from brothers fighting among themselves for the family's business enterprises. Guilford Glazer seeks damages for breach of nontract against his two brothers, Jerome and Louis, for stripping him of office, salaries, and bonuses in eighteen family corporations. The two younger brothers admit the expulsion, but they deny any liability for damages. The jury awarded the plaintiff $1,900,000 in damages. The trial judge-- without giving any reasons for his decision-- gave the judgment to the defendants notwithstanding this verdict. The plaintiff appeals the judgment n.o.v. The defendants cross-appeal conditional orders denying them a new trial or a remittitur. We reverse the judgment n.o.v. and remand for a remittitur and, if the plaintiff refuses, we require a new trial limited to the issue of damages.

I.

BACKGROUND

The plaintiff's claim in this action rests upon an agreement the three brothers entered into December 30, 1957. 1

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The contract, an unusual one, does not fit into the mold of an employment contract or agreement for control. The plaintiff asserts that this contract, read as a whole, protects him his directorships and offices in the Glazer family corporations. The defendants construe the agreement as specifically reserving for them the voting power to do what they did. The trial court decided, correctly, we think, that a jury could find the agreement ambiguous and admitted extensive extrinsic evidence to aid in its construction.

The father of the Glazer brothers conducted a small scrap metal business in Knoxville, Tennessee, before World War II. Guilford Glazer, the plaintiff, and his brother Louis worked with their father in this business until his death in 1939. Guilford and Louis and their brother Jerome all served in the war During their absence, their mother, Ida B. Glazer, and a brother-in-law, I. B. Cohen, carried on the business.

Guilford was the first brother to return from the war. He organized the Glazer Steel Corporation to take over the old scrap business and to expand into other fields. The corporation issued shares to Jerome and Louis on their return. The allocation was Guilford-- 30 per cent; Jerome and Louis-- each 25 per cent; and I. B. Cohen-- 20 per cent. The Glazer Steel board of directors included the three brothers, their mother, Mrs. Ida Glazer, brother-in-law Cohen, and an uncle named Harry Busch. Guilford was president and chairman of the board of Glazer Steel; Louis was vice-president and secretary; Jerome was the treasurer.

Glazer Steel enjoyed spectacular growth and success in the years immediately following the war. However, the

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recession of 1949-1950 sharply reduced the profits of the company. To increase its earnings, Glazer Steel in 1949 opened a New Orleans branch that eventually became the headquarters of the company. Moreover, the brothers, largely under Guilford's leadership, formed about twenty more corporations between 1949 and 1957 to engage in other businesses-- real estate development, construction, television broadcasting, machinery leasing, and insurance. The brothers' proportionate holdings in these additional corporations, with several important exceptions, were similar to those in Glazer Steel. Other members of the family, and occasionally outside business associates, received shares in a few of the new companies. 2 At the time of Guilford's expulsion from the management, the

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Glazer family corporations had attained an aggregate net worth of well over five million dollars.

In 1955 the Glazers' brother-in-law, I. B. Cohen, withdrew from all the family corporations in which he had an interest, and the companies repurchased his stock. 3 As a result, Guilford's interest in Glazer Steel increased to 38.12 per cent; Jerome's and Louis's each became 30.94 per cent. At the time of Guilford's expulsion, the brothers were the sole shareholders (directly or indirectly) of Glazer Steel and about fifteen other family corporations. They held control of five additional family corporations that had one or more outside shareholders.

The three brothers drew income from their corporations chiefly in the form of salaries and bonuses. In the late 1950's, virtually all these salaries and bonuses were paid by Glazer Steel. In the early 1950's, several of their other corporations, including two with outside shareholders at that time, had also paid salaries to the brothers. Glazer Steel generally paid salaries and bonuses in close proportion to the brothers' stockholdings in the corporation. Thus Guilford received about 17 per cent more salary and bonuses than his brothers before his expulsion.

The decade before Guilford's expulsion was marked by frequent disputes among the Glazer brothers. The major causes of dissension were (1) Guilford's retention of sole ownership of several corporations, particularly those responsible for his Oak Ridge, Tennessee shopping center; (2) the diversion of Guilford's time from the daily operation of Glazer Steel to the development of other family corporations and enterprises owned solely by him; (3) the use of Glazer Steel facilities, personnel, and supplies by other family corporations and Guilford's own companies for purportedly inadequate and tardy compensation.

The brothers made numerous attempts in the late 1950's to resolve their differences. The conflicts among them, particularly between Guilford and Jerome, reached a peak in 1957. Jerome suggested that the brothers separate their business interests. Nonetheless, the brothers continued efforts toward reconciliation.

December 30, 1957, they entered into the agreement that forms the basis of this case. 4 On the same date, the brothers and twenty-two family corporations (five of them wholly-owned by Guilford) entered into a written release of all past claims against one another. 5 This mutual

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release professed 'to carry out the intents and purposes' of the December 30, 1957, agreement by cancelling the various debts and set-offs among the parties.

The December 30 agreement and the contemporary mutual release failed to end the disputes among the Glazer brothers. Jerome and Louis complained that Guilford reneged on a promise to give them a share in Ark Bowling Lanes, a bowling alley in the Oak Ridge shopping center. They charge that Glazer Steel was not properly reimbursed for its facilities, personnel, and supplies in the construction of this bowling alley. They were affronted by Guilford's announcement early in 1958 that he was moving to California and taking the headquarters and records of Glazer Steel with him.

In March 1959 the brothers resumed negotiations to separate their business interests. A representative of Jerome and Louis threatened Guilford with removal from office if he did not agree to sell his interests to the defendants. In May 1959, in light of this threat, Guilford requested that his brothers sign a new shareholders' agreement. He proposed a conventional ten-year control and employment agreement, with restrictive-transfer and first-refusal repurchase provisions. Jerome and Louis refused to sign this agreement. June 3, 1959, Guilford wrote the defendants a letter suggesting still another agreement 'to remove opportunity for future disputes.' Negotiations continued over the summer with no success.

The last act of this corporate drama unfolded in the autumn of 1959. Jerome and Louis called a shareholders' meeting of Glazer Steel Corporation for September 25, 1959. September 15 Guilford offered yet another proposal for a new agreement, this time suggesting that Jerome become president of Glazer Steel, that salaries of the brothers be equalized, and that major transactions in the future receive unanimous consent of the three brothers. Guilford's proposal stated his belief that the December 1957 agreement was still valid. September 18 the brothers assembled as the board of directors of Glazer Steel in a special meeting called by Guilford. The brothers unanimously agreed not to transact any business at this meeting but to continue their negotiations. Rapprochement eluded them. The September 25 Glazer Steel shareholders' meeting, called by Jerome and Louis, set the stage for Guilford's ouster. The by-laws were amended to accelerate the next annual meeting of the company to the first Wednesday in October, twelve days later. Guilford vainly protested that this amendment was part of a plan to expel him as quickly as possible from the management of the company. He reiterated his rights under the December 1957 agreement.

October 7, 1959, in accordance with the amended by-laws, the Glazer Steel Corporation held its accelerated annual meeting. Guilford again urged that his right to office was protected under the December 1957 agreement. It was to no avail. The defendants, voting the majority of the stock, elected a slate of directors that excluded Guilford....

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