Bristow v. Mourot

• Decision Date: 29 August 2007
• Docket Number: No. CA 06-1419.,CA 06-1419.
• Parties: David BRISTOW and Cliff Ferren, Appellants, v. Randy MOUROT, Appellee.
• Court: Arkansas Court of Appeals

260 S.W.3d 733 99 Ark.App. 386 David BRISTOW and Cliff Ferren, Appellants,
v.
Randy MOUROT, Appellee. No. CA 06-1419. Court of Appeals of Arkansas. August 29, 2007.

Dover Dixon Horne, PLLC, by: Thomas S. Stone and Nona M. Robinson, Little Rock, AR, for appellants.

Friday, Eldredge & Clark, LLP, by: Kevin A. Crass and Jamie Huffman Jones, Little Rock, AR, for appellee Randall Mourot.

DAVID M. GLOVER, Judge.

The trial court, sitting as fact-finder, ruled that appellee Randy Mourot did not violate the Arkansas Securities Act and therefore owed no damages to appellants. We affirm.¹

In 1997, Mourot decided to sell his company, Mail Contractors of America. He asked several members of his management team, including appellants, to assist him with presentations for prospective buyers. In return, he promised them a "transaction bonus" equivalent to a year's salary when the company sold.

After several presentations were made, Mourot decided to sell to Code, Hennessey, & Simmons, a Chicago company. He told his managers that Code Hennessey wanted to maintain continuity of management and that key management personnel

260 S.W.3d 734

would have the opportunity to invest in the company. In early 1998, representatives from Code Hennessey came to Arkansas to discuss the investment opportunity. Attendees, including appellants, were informed that they could invest in a holding company, Contract Mail Holding, Inc. (CMH) and that they could obtain personal loans from CMH. Code Hennessey representatives answered questions about the investment and, although Mourot attended the meeting, he did not say much, according to appellant Ferren.

After the meeting, Mourot wrote a memo to his managers and addressed them as "Potential Equity Investors." The memo stated that he had asked attorney Paul Bishop, who was representing him in the sale of the company, to review the investment and loan documents on the managers' behalf, although the managers were free to have their personal attorneys review the documents. The memo also addressed a tax question and a loan question regarding the managers' investments; answered two questions about the managers' transaction bonuses; and stated the following:

I need to know your plans for investing by the end of this week or sooner if you can.

I need to know:

— Dollar amount of investment

— Loan Amount (max of 50% of investment amount)

— Actual name investment to be held in (for example mine: Randall G. Mourot)

— Whether to withhold 401(k) percentage from transaction bonus or not

— Amount to be withheld for Federal and State taxes

Appellants provided this information to Mourot, who said he passed it along to Bishop.

After the memo was written, appellants and other members of the management team met with attorney Bishop. There is no indication that Mourot was present at this meeting. Bishop informed the managers of the minimum terms they could expect to receive for their investments, and he promised to try to negotiate better terms from Code Hennessey. As a result of those negotiations, appellant Bristow agreed to invest $75,000 in CMH, and appellant Ferren agreed to invest $40,000. They planned to use their transaction bonuses from Mourot to pay for most if not all of their investments. However, because they would not obtain those bonuses until the sale closed, Mourot agreed to provide them with short-term loans. Therefore, appellants made their investment checks out to Mourot, who purchased the CMH stock for them.

After the sale closed on March 20, 1998, appellants were employed by CMH and apparently made additional investments in the company. However, they were fired in 2000. When they inquired about the return of their investments, CMH sent a check for $18,567.29 to Bristow and $955 to Ferren, despite the fact that Bristow had invested $123,756 and Ferren $93,643.24. As a result, appellants sued CMH for violating the Arkansas Securities Act.² They also sued Mourot, claiming that he acted as CMH's agent in selling the investments. CMH consented to judgment in the above amounts, but the case against Mourot went to trial. The sole issue was whether he was liable under the Arkansas Securities Act as an agent who materially aided in the sale of the investments. The circuit judge, after hearing testimony and receiving trial briefs, entered judgment in favor of Mourot. Appellants now appeal from that ruling.

260 S.W.3d 735

Our standard of review is well established. In an appeal from a bench trial, we do not reverse unless the trial court's finding is clearly erroneous. First Nat'l Bank v. Garner, 86 Ark.App. 213, 167 S.W.3d 664 (2004). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is...