Coury v. Moss

• Decision Date: 29 May 2008
• Docket Number: No. 07-30335.,07-30335.
• Citation: 529 F.3d 579
• Parties: A. Sam COURY, Dr., Plaintiff-Appellee, v. Sharon K. MOSS; Julie T. Landry; William C. Moss; Coury Moss, Inc.; and Moss Management Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

529 F.3d 579

A. Sam COURY, Dr., Plaintiff-Appellee, v. Sharon K. MOSS; Julie T. Landry; William C. Moss; Coury Moss, Inc.; and Moss Management Corporation, Defendants-Appellants.

No. 07-30335.

United States Court of Appeals, Fifth Circuit.

May 29, 2008.

James P. Lambert (argued), Lafayette, LA, Oscar E. Reed, Jr., Laborde Law Firm, Lafayette, LA, for Coury.

Edward C. Abell, Jr. (argued), Onebane Law Firm, James Huey Gibson, Neil Gregory Vincent, Charles M. Kreamer, Sr., Allen & Gooch, Lafayette, LA, Kenneth Alan Goodwin, Law Office of Kenneth A. Goodwin, New Orleans, LA, for Defendants-Appellants.

Appeals from the United States District Court for the Western District of Louisiana.

Before WIENER, BARKSDALE, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

This interlocutory appeal from a partial summary judgment in a shareholder derivative action is another chapter in the twenty-year family dispute¹ involving Coury-Moss, Inc. ("CMI"), a Louisiana closely held corporation doing business as Moss Motors, which operates franchise automobile dealerships in Lafayette, Louisiana.² The issue is whether the defendants can defeat the shareholder derivative action brought here by A. Sam Coury ("Coury") by having CMI purchase his shares at book value because he previously sold them to a third person without complying with CMI's right of first refusal as required by the Articles of Incorporation. The district court refused to dismiss the suit and granted partial summary judgment holding that Coury had not sold or transferred his stock to anyone. Pursuant to 28 U.S.C. § 1292(b), the district court stated that the judgment involves a controlling question of law and that an immediate appeal may materially advance the ultimate termination of the litigation, and we exercised our discretion to permit the defendants to appeal from that judgment. We affirm the partial summary judgment in favor of Coury for substantially the same reasons assigned by the district court.³

I. BACKGROUND FACTS

Coury, plaintiff and minority owner of CMI stock, brought this shareholder derivative action alleging "self-dealing" against his sister, Sharon Coury Moss (CMI president, stockholder, and board of directors member); Julie Landry (CMI head accountant, bookkeeper, and board member); William C. Moss (CMI general manager and son of Sharon Moss); CMI itself; and Moss Management Corporation, a Louisiana corporation (collectively, "Defendants").

On July 3, 1979, William J. Moss ("Bill Moss"), Sharon Moss's now deceased husband, and Coury executed CMI's Articles of Incorporation. By means of Article X, they agreed that "no shareholder may sell any [CMI] stock ... without first offering it to [CMI] on the basis of book value."⁴

On March 19, 1986, Coury filed a voluntary petition for bankruptcy. The assets of the bankruptcy estate included, by reference only, Coury's shares of CMI stock and his interest in pending litigation involving CMI. Since their issuance, the certificates representing Coury's shares have never left Coury's possession and their registration in Coury's name on the CMI records has never been changed. Recognizing that the bankruptcy trustee could cause the bankruptcy estate to sell these assets to a third person, Coury, on December 23, 1988, entered a written "Ratification and Agreement of Exchange" with Coury, Ltd., an Oklahoma limited partnership of which Coury is general partner, to exchange assets of Coury, Ltd., including land in Colorado, for the bankruptcy estate's "release of property in A. Sam Coury's name for A. Sam Coury ...." In return, Coury, as an individual, assigned to Coury, Ltd. the profits of his dental practice during his lifetime up to $100,000. The agreement further provided that Coury, Ltd. "was not to own or ever take possession of any of the exchanged property .... nor was it to acquire any ownership rights, ownership, or any of the incidents of ownership in any of the exchanged property." On February 1, 1989, the bankruptcy trustee, on behalf of the bankruptcy estate, and Coury, Ltd. executed a "Contract of Exchange" whereby the bankruptcy estate traded its interest in Coury's CMI stock and other assets to Coury, Ltd. in exchange for Coury, Ltd. conveying to the bankruptcy estate certain described Colorado land.

On February 6, 1989, the bankruptcy trustee filed a notice of intent with the bankruptcy court to inform all creditors and interested parties of the transfers contemplated in the foregoing described "Contract of Exchange" and to give them an opportunity to file an objection. After being so notified, CMI, on March 14, 1989, filed an objection and offered a lesser bid limited only to Coury's CMI shares and interest in pending CMI-related litigation. The bankruptcy trustee informed CMI of his refusal to sell the CMI stock and litigious rights separately from the other assets involved and his intention to proceed to an in globo sale. On May 17, 1989, the bankruptcy court held a hearing, at which attorneys for CMI, Coury, and Coury, Ltd. appeared. After the hearing, the court authorized the bankruptcy trustee to complete the proposed transaction or to accept any other bid in excess of $17,100 (the cash equivalent of the assets offered in exchange by Coury, Ltd.). CMI's attorney requested an opportunity to confer with her client, and the bankruptcy trustee agreed to hold the transaction open until 5:00 p.m., stating that he would then accept the highest bid for all of the property offered, including the CMI shares. CMI did not file any additional bid within the allotted time or anytime thereafter.⁵ On May 19, 1989 the bankruptcy trustee, Coury, Ltd., and Coury entered into an "Addendum to Contract for Exchange" whereby, as additional consideration for the contract of exchange, Coury, Ltd. conveyed additional described real property in Colorado to the bankruptcy estate. Coury also conveyed to the bankruptcy estate an additional payment of $6,083.55. The final executed exchange of property and assets between the bankruptcy estate, Coury, Ltd., and Coury took place on June 7, 1989. Three days later, on June 10, 1989, Coury, Ltd. and Coury executed a document entitled, "Reaffirmation of Release and Redemption Agreement," which again made clear that "Coury, Ltd. in accordance with its December 23, 1988 agreement with A. Sam Coury, individually, hereby renounces, assigns, abandons, gives, and sets over, any interest it may have, ever had, or may have in any of the 14 items of property listed above [including Coury's CMI stock] to A. Sam Coury, individually for his sole benefit, use, and absolute ownership."

CMI did not contend during the bankruptcy proceedings in 1989 that the exchange of assets between the bankruptcy estate and Coury, Ltd. (for the benefit of Coury individually) amounted to a default by Coury upon his obligation not to sell his stock to a third person without offering it to CMI for first refusal. Subsequently, in the extensive CMI-related state court litigation, however, Bill Moss, and later Sharon Moss, repeatedly sought unsuccessfully to use defensively the argument that Coury had forfeited his right of actions against CMI based on his defaulting on his obligation under Article X of the Articles of Incorporation. Despite the consistent rejection of this argument in slightly different forms and contexts by the state courts, after Coury filed this shareholder derivative action in federal court in 2006, the defendants moved to dismiss it on the ground that Coury is legally precluded from claiming to be a CMI shareholder because of his alleged default under Article X's first-refusal clause. Because the motion included evidence outside of the pleadings, the district court treated it as a motion for summary judgment. In response, Coury filed a motion for partial summary judgment seeking a judicial declaration that the defense raised in the motion to dismiss fails as a matter of law. The district court found that under the undisputed facts reflected by the record, Coury had not sold or transferred his stock to anyone so as to place himself in default of his obligation under the Articles of Incorporation. Accordingly, the district court rejected the defendants' motion to dismiss and granted Coury's motion for partial summary judgment striking that particular defense. For the reasons assigned earlier in this opinion, we permitted the defendants' interlocutory appeal from the partial summary judgment.

II. STANDARD OF REVIEW

This court reviews a district court's grant of summary judgment de novo, applying the same standards as the district court: A party is entitled to summary judgment only if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). On a motion for summary judgment, the court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in its favor. See Hockman v. Westward Commc'ns, LLC, 407 F.3d 317, 325 (5th Cir.2004). In reviewing the evidence, the court must therefore "refrain from making credibility determinations or weighing the evidence." Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir.2007).

III. ANALYSIS

It is undisputed that Louisiana's substantive law governs our decision because Louisiana is the forum state in this diversity-based shareholder derivative action, see Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and Louisiana's own law is the proper choice of law under the facts and its conflicts of law rules.⁶

Under Louisiana law, articles of incorporation are a contract between the corporation and its shareholders. Brennan's House of Printing, Inc. v. Brennan, 924 So.2d 1067, 1072 (La.App. 5th Cir. 2006) (c...