Brumley v. Leam Invs., Inc.
| Decision Date | 16 February 2012 |
| Docket Number | CIVIL NO. 09-1078 |
| Parties | KENNETH BRUMLEY v. LEAM INVESTMENTS, INC., ET AL. |
| Court | U.S. District Court — Western District of Louisiana |
Pending before the Court is the Motion for Summary Judgement filed by Leam Investments, Inc. ("Leam"), Ronald E. Brumley ("Ronald") and Luann Brumley Holst ("Luann"), collectively, "the defendants." [rec. doc. 51]. Plaintiff, Kenneth Brumley ("Kenneth") has filed Opposition, to which the defendants have filed a Reply. [rec. docs. 55 and 59]. Oral argument on the Motion was held and the Motion was taken under advisement.
For the reasons which follow, the defendants' Motion for Summary Judgement [rec. doc. 51] is GRANTED. Accordingly, this lawsuit is dismissed with prejudice.
Leam is a family run Louisiana corporation, which was incorporated in 1974 by Ralph Brumley ("Ralph") and Helen Brumley ("Helen"), parents of Kenneth, Ronald, Luann and Frank Brumley ("Frank"). Leam Drilling Systems, Inc. ("Leam Drilling"), is a wholly owned subsidiary of Leam.
Ralph died in April, 2007. Prior to Ralph's death, Leam's stock was owned as follows: The Ralph Brumley Revocable Trust ("Ralph Trust"), 4,464 shares; The Helen BrumleyRevocable Trust ("Helen Trust"), 4,464 shares; Frank, Ronald, Luann and Kenneth, 150 shares each. The co-trustees of the Ralph Trust were Helen and Kerry Douglas ("Douglas"), a lawyer from Bolivar, Missouri.
In 1983, all shareholders entered into a Buy-Sell Agreement applicable to all sales, assignments and transfers of Leam stock; the Buy-Sell Agreement is inapplicable, however, to inter vivos or testamentary transfers to descendants. [rec. doc. 51-1, Ex. A-5, ¶ 1]. The Buy-Sell Agreement was executed "to restrict the transfer of shares of Leam. . . ." [Id. at preamble].1 While the Buy-Sell Agreement does not prohibit the sale or transfer of Leam stock to third persons outside the Brumley family, it is clear that the intent of the Buy-Sell Agreement was to allow the family member shareholders the first right to purchase Leam stock so as to maintain the ownership of the stock within the family.
The Buy-Sell Agreement provides that prior to disposing of any shares, by sale, assignment or transfer to a non-descendant, the selling shareholder must give notice to Leam. [Id. at ¶ 3]. For a period of thirty days, Leam then has the option to buy "any or all of the shares". [Id. at ¶ 4 preamble and 4(a)]. In the event that Leam elects not to acquire all of the shares, Leam must send an "Option Notice" to "each of the shareholders who may have the right . . . to purchase, pursuant to the terms of this Agreement, any or all of the shares owned by the selling shareholder. . . ." [Id. at ¶ 4].
The preferential right of each shareholder "who ha[s] the right to purchase" may be exercised pursuant to subparagraph (b) as follows: "for a period of fifteen (15) days as to any and all shares that Leam has not theretofore elected to acquire . . . as mutually agreed by such shareholders, or in the absence of any agreement by each such shareholder in the proportion which the number of shares then owned by each such shareholder bears to the aggregate number of shares owned by all such shareholders." [Id. at ¶ 4(b) (emphasis added)].
"Thereafter, for a period of ten (10) days, as to any or all of the shares that Leam or the shareholders have not theretofore elected to acquire, the preferential right to purchase shall be exercisable by the shareholders who have exercised in full such right as provided in the preceding subparagraph (b) as mutually agreed by such shareholders or otherwise in the proportion which the number of shares then owned by each such shareholder bears to the aggregate number of shares owned by all such shareholders (not including any shares owned as a result of the exercise or election to exercise the right to purchase provided in the preceding subparagraph (b) hereof)." [Id. at ¶ 4(c) (emphasis added)].
"Thereafter, for a period of five (5) days Leam shall have the preferential right to purchase any remaining shares as to which the election to acquire has not heretofore been made." [Id. at ¶ 4(d)].
These rights to purchase are exercised "by giving notice to the selling shareholder . . . stating the number of shares and the purchase price . . ." with a copy of the notice "transmitted to Leam." [Id. at ¶ 4 postscript].
The Buy-Sell Agreement further provides that "[a]ny proposed transfer, sale or other disposition of any shares with respect to which a shareholder's notice of disposition shall have been given and as to which the rights to acquire such shares shall not have been exercised in full as herein provided may be completed at any time within, but not after, ninety (90) days following the expiration of the sixty (60) day period during which Leam and/or any shareholders may exercise the right to acquire such shares." [Id. at ¶ 7].
Prior to Ralph's April 2007 death, Leam's board consisted of all six members of the Brumley family: Ralph, Helen, Frank, Ronald, Luann and Kenneth. At the annual shareholder meeting held on September 4, 2007, after Ralph's death, Leam's shareholders voted to reduce the size of the board to three directors, electing Helen, Ron and Luann to the three board positions.2 Because the majority of Leam's voting stock was owned by the Helen Trust and the Ralph Trust, the deciding votes were cast by Helen as trustee of the Helen Trust and Helen and Douglas, as co-trustees of the Ralph Trust. [rec. doc. 51-1, Ex. A-9]. Effective February 1, 2009, Helen resigned from Leam's board. Since then, the board has consisted of only Ronald and Luann.
On January 17, 2008, Ronald offered to purchase the 4,464 shares of preferred stock held by the Ralph Trust. [rec. doc. 51-2, Ex. A-13, pg. 24]. A Notice of Intent to sell the shares was sent by co-trustees Helen and Douglas to Leam by letter dated January 31, 2008. .
At a special board meeting held on February 2, 2008, the board, then compromised of Ronald, Helen and Luann, unanimously adopted a resolution "that the corporation shall not exercise its option to purchase the Trust Shares", finding it not in the best interest of Leam to purchase the shares. [Id. at pg. 25]. The board further resolved that "in the event some, but not all, of the shareholders exercise their right to purchase their proportionate portion of the Trust shares, the Corporation shall cause a second notice to be sent to the shareholders who have exercised such option, providing such shareholders with the option to elect to purchase the portion of the Trust Shares as to which other shareholders did not exercise their option." [Id. at pg. 26 (emphasis added)]. Leam further resolved that Ronald, as President of Leam "if necessary, send to the shareholders the second notice specified in the Buy-Sell Agreement if less than all the shareholders exercise their right to purchase the Trust Shares. . . ."[Id. (emphasis added)].
An Option Notice, attaching a copy of the Buy-Sell Agreement, was sent to Kenneth with a copy to his attorney, Helen as trustee of the Helen Trust, Ronald, Frank and Luann on February 5, 2008. [rec. doc. 51-2, Ex. A-13, pg. 1-4]. The Option Notice stated that Leam had the first option to purchase the shares in the Ralph Trust, but that Leam would not exercise its option. The Option Notice further stated that, pursuant to ¶ 4(b) of the Buy-Sell Agreement, "unless agreed otherwise by all of the shareholders, each shareholder may purchase a number of shares equal to the proportion which the number of shares then owned by each shareholder bears to the aggregate number of shares owned by all such shareholders." [Id. at pg. 2(emphasis added)].
The pro rata number of shares that each shareholder could buy was set forth in a chart included in the Option Notice which specified that Kenneth could buy 132 shares. [Id.]. The Notice further stated that "[i]n the event that some, but not all, of the shareholders elect to purchase their proportionate share of the Trust Shares, the Corporation must send a second notice to those shareholders who elected to purchase in the first option period, who will, for a period of ten days after the receipt of the notice, have a preferential right to purchase, on a pro rata basis, any of the Trust Shares that the shareholders did not elect to acquire in connection with issuance of the first notice." [Id. (emphasis added)].
Moreover, the Option Notice provided that "[i]f, after both of the notices have been sent, the shareholders have not elected to purchase all of the Trust Shares, the Corporation has, for a period of five (5) days, the right to purchase any remaining shares." [Id. at 3]. Finally, the Option Notice provided that, "If the Corporation and the shareholders elect not to purchase the Trust Shares, in accordance with the Buy-Sell Agreement, the Trust may sell the Trust Shares to Ronald E. Brumley within the time periods specified in the Buy-Sell Agreement." [Id.].
None of Leam's shareholders, elected to exercise their right to purchase any of the shares in the Ralph Trust under the Buy-Sell Agreement. ]. Accordingly, effective February 28, 2008, apparently, and in accordance with the terms of his January 17, 2008 Offer3 , Ronald purchased all of the 4,464 preferred shares from the RalphTrust, making him the majority shareholder owning 4,614 shares. [rec. doc. 51-2, Ex. A-14].
On May 19, 2008, Ronald made an offer to Helen, as trustee of the Helen Trust, to purchase 3,314 shares of preferred stock held by the Helen Trust. [rec. doc. 51-2, Ex. A-15]. By letter dated May 19, 2008, a Notice of Intent to sell the shares was sent by Helen as trustee of the Helen trust to Leam. [rec. doc. 51-2, Ex. A-16].
As was the case with the sale of the shares in the Ralph Trust, at a special board meeting held on May 25, 2008, the board, then compromised of Ronald, Helen...
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