Campbell v. Ford Industries, Inc.

• Decision Date: 10 September 1973
• Citation: 266 Or. 479,513 P.2d 1153
• Parties: , Blue Sky L. Rep. P 71,122 H. Albert CAMPBELL, Jr., Appellant, v. FORD INDUSTRIES, INC., et al., Respondents.
• Court: Oregon Supreme Court

Page 1153

513 P.2d 1153

266 Or. 479, Blue Sky L. Rep. P 71,122

H. Albert CAMPBELL, Jr., Appellant, v. FORD INDUSTRIES, INC., et al., Respondents.

Supreme Court of Oregon, In Banc.

Argued and Submitted July 11, 1973.

Decided Sept. 10, 1973.

Charles Robinowitz, Portland, argued the cause and filed the briefs for appellant.

James H. Clarke, Portland, argued the cause for respondents. With him on the brief were Dezendorf, Spears, Lubersky & Campbell and Wayne Hilliard, and Richard H. Williams, Portland.

TONGUE, Justice.

This is an action for damages alleged to have resulted from the discharge of plaintiff as an employee of defendant Ford Industries, Inc., as a part of an alleged fraudulent scheme by defendants to force plaintiff to sell his stock as a minority stockholder in that corporation. The damages sought by plaintiff's complaint include loss of earnings and retirement benefits as an employee, loss of plaintiff's professional reputation as a mechanical engineer, and punitive damages.

Plaintiff appeals from an adverse judgment following the entry of an order sustaining defendants' demurrer to plaintiff's complaint for failure to allege facts sufficient to constitute a cause of action. ¹ Plaintiff's primary contentions are:

1. 'The Oregon Securities Law (ORS 59.135) does not allow any person, either directly or indirectly, in connection with the purchase or sale of a security, to employ any device or artifice to defraud another, and this device may include the termination of one's employment where it is a part of an overall scheme to force another to sell his securities at a depressed price.'

2. 'Majority stockholders * * * have a fiduciary duty to minority stockholders preventing them from using their control of the corporation to take unfair advantage of a minority stockholder by firing him from his job in order to force him to sell his stock at depressed prices.'

3. Plaintiff should not be denied relief because he was damaged as an employee, and not as a stockholder, in defendants' attempt to 'squeeze him out' as a stockholder.

Defendants, in turn, contend that plaintiff's complaint does not state a cause of action because:

1. ORS 59.135 has no application because plaintiff's complaint does not allege any injury to plaintiff's investment interest as a stockholder.

2. The only injury allegedly sustained was an injury to plaintiff's interest as an employee and defendant had an absolute right to terminate plaintiff's employment without cause, even for an allegedly improper motive and unaffected by any fiduciary duty owed to plaintiff as a stockholder.

In Baker v. Commercial Body Builders, Or., 96 Adv.Sh. 1012, 507 P.2d 387 (1973), decided after this action was filed and after the trial court sustained defendants' demurrer to plaintiff's amended complaint, this court discussed (at 1028--1031, 507 P.2d at 395) the remedies available to a minority stockholder subjected to 'oppressive' conduct in the form of a 'squeeze out' attempt by the majority stockholders of a 'close corporation.' In that decision we pointed out (at 1030--1031, 507 P.2d at 396) that although ORS 57.595 provides that in such a case a circuit court has power to liquidate the assets and business of a corporation, other alternative equitable relief may also be available including '(a)n award of damages to minority stockholders as compensation for any injury sustained by them as a result of 'oppressive' conduct by the majority in control of the corporation,' citing our previous decision in Browning v. C & C Plywood Corp., 248 Or. 574, 587, 434 P.2d 339 (1967).

In Baker, under quite different facts, we affirmed the findings of the trial court which denied relief to the plaintiff, a minority stockholder, despite allegations in plaintiff's complaint that the 'oppressive' conduct in that case included discharge of the plaintiff. In so holding we pointed out (at 1032 of 96 Adv.Sh., at 396 of 507 P.2d), among other things, that although the plaintiff in that case '* * * could not be properly excluded from 'corporate participation' as a stockholder, it is an entirely different question whether it was 'oppressive' to terminate his salary as an employee * * *.' In that case, however, there was testimony that the reason for plaintiff's discharge was 'unsatisfactory work performance,' rather than as a part of any 'oppressive conduct' to coerce him into selling his stock.

Upon examination of plaintiff's amended complaint we believe that it alleges facts which, if proved, constitute 'oppressive' conduct within the meaning of ORS 57.595 so as to entitle the minority stockholders of defendant Ford Industries, Inc., including plaintiff, to some relief. The more difficult question is whether such relief would include the protection of plaintiff's employment and the award of damages for termination of such employment, including damages for impairment of plaintiff's interest as an employee, rather than damages for impairment of plaintiff's investment interest as a stockholder.

In seeking to resolve this question we must consider what has normally been recognized to be the unqualified right of an employer to discharge an employee for any reason and regardless of cause or motive, in the absence of limitations on their right imposed by provisions of statute or contract. On the other hand, we must also consider what we have recognized to be the fiduciary duties imposed upon the majority of the stockholders of such a corporation to its minority stockholders, as well as the provisions of ORS 57.595 relating to 'oppressive' conduct by those in control of a corporation and those of ORS 59.135 relating to fraudulent schemes and practices in connection with the purchase of any security.

Defendants have cited Webster v. Schauble, 65 Wash.2d 849, 400 P.2d 292 (1965), in which the court held (at 294) that a stockholder-employee had no cause of action against the controlling stockholders for the termination of his employment. In that case, plaintiff had purchased his stock with a loan he could not pay when defendants fired him. The court held as follows, under quite different facts:

'* * * There being no contract of employment for a specific period, the employer had the right to discharge Webster at any time with or without cause. * * *

'* * *

'We can appreciate the desire of the trial court to mitigate to some extent the effects of this seemingly arbitrary and ruthless act by the Schaubles in closing down this corporation. * * * but as a salaried employee he seems to us to be without a remedy * * *.'

We do not agree, however, that a minority stockholder who is also an employee and who is threatened with discharge unless, as a part of an otherwise 'oppressive' or 'fraudulent' course of conduct, he sells his stock at a price below its actual value is 'without a remedy,' particularly where, as in this case, it appears that he did not acquire his stock on the open market, but under a company stock option plan which may have related to his contract of employment. We believe, however, that any such remedy does not include an action at law for damages to the interest of the employee, as such.

The damages demanded by the plaintiff in this case are limited to an award of damages for loss of earnings and retirement benefits as an employee and for damage to his 'professional reputation' in the occupation in which he was employed, all of which relate solely to plaintiff's interest as an employee. Such a demand for damages is particularly incongruous where, as in this case, plaintiff seeks to allege a cause of action for violation of the provisions of the Oregon Securities Law relating to the purchase or sale of securities.

For these reasons we hold that the trial court did not err in sustaining defendants' demurrer to plaintiff's amended complaint. Upon the sustaining of defendants' demurrer plaintiff declined to plead further and did not request leave to file an amended complaint. Neither has plaintiff made any such request in this court.

Affirmed.

1 Plaintiff's amended...