Farlow v. Adams
| Citation | 474 So.2d 53 |
| Decision Date | 21 June 1985 |
| Docket Number | S.F. C |
| Court | Supreme Court of Alabama |
| Parties | Carl P. FARLOW;arter; P.W. Green; R.M. Bragdon; J.P. Doughty; John M. Harbert III; Allen Post; William R. Eagan; C.C. Fargason, Jr.; J.A. Bragan; & W.E. Snow, Individually, and as members of the Board of Directors of American Cast Iron Pipe Co., et al. v. Leland C. ADAMS, Jr., et al. Leland C. ADAMS, Jr., et al. v. Carl P. FARLOW, et al. 83-494 and 83-543. |
A.J. Noble, Jr., Robert G. Tate, and F.A. Flowers III of Thomas, Taliaferro, Forman, Burr & Murray, Birmingham, for appellants.
W. Eugene Rutledge of Rutledge, Fay & Kelly, and Robert L. Wiggins, Jr. of Wiggins & Quinn, Birmingham, for appellees.
These cases were consolidated on appeal. At issue is the termination from employment of the entire Board of Operatives of the American Cast Iron Pipe Company (ACIPCO).
ACIPCO is a Georgia corporation with its principal place of business in Jefferson County, Alabama. The members of the Board of Operatives were employed in the company's Birmingham plant at the time of their discharge. All shares of common stock in ACIPCO are held in trust for the benefit of ACIPCO employees according to the provisions contained in the will of John J. Eagan. 1 Under the terms of the trust, the Board of Operatives, which consists of twelve elected ACIPCO employees, is charged, along with the Board of Management, with the duties of trustees. Two members of the Board of Operatives are elected to serve on the Board of Directors.
The Board of Management consists of the corporate officers of ACIPCO. The Board of Management also constitutes the Executive Committee of the Board of Directors.
According to the trust agreement, dividends are paid to the Board of Management and the Board of Operatives as the The Board of Operatives and the Board of Management have disagreed for several years over their respective roles, and the disputes have centered on the desire of the Operatives to establish a stronger voice in company decisions. The disputes culminated in February 1983, when the Operatives employed a private accounting firm to make an investigation of ACIPCO's books. The audit focused on the extra compensation plan of the company, which was developed by Management to apportion company profits among employees as a bonus. This plan became a substitute for the payment of dividends over which the Operatives, as trustees, would have had a vote.
trustees of the employees, and the dividends are invested by the trustees to insure that each employee is provided an income which, together with the wage or salary, will insure a living wage to all employees.
The Operatives' accountants found that as a result of certain accounting principles used by the Board of Management, ACIPCO employees had been deprived of over $24,000,000 in extra compensation over a twenty-year period. In particular, the report indicated that the accounting principles and decisions utilized by the Board of Management resulted in improper charges made against income, based primarily on the following: (1) utilization of inconsistent methods of inventory; (2) deductions from the extra compensation plan to compensate the company for federal income taxes not actually paid; (3) improper deduction of letters of credit; and (4) failure to properly adjust income used for extra compensation computation purposes after a tax audit. These accounting principles were generally characterized by the accountants as not being in accordance with generally accepted accounting principles or as being inconsistent with the company's own accounting practices.
On March 31, 1983, the Operatives' attorney forwarded to the Board of Management a copy of the accountants' report, along with a letter to the Board of Management asking for repayment and rearrangement of the power structure so that the Operatives would be on an equal footing with the Board of Management.
Thereafter on April 10, 1983, the Board of Operatives initiated and held a public meeting away from the ACIPCO premises and invited all ACIPCO employees. Members of the public, including the news media, were permitted to attend. At this meeting, statements and a report were given by the Operatives' attorney and accountants. The letter of March 31, 1983, from the Operatives' attorney was also read at the meeting.
Later, after further correspondence and one meeting between the Board of Operatives and the Board of Management, the company attorney requested that the Operatives place and submit their oral proposals in written form.
On May 10, 1983, the Operatives' attorney complied with the request and submitted the proposals in a letter. As a "short term solution," the Operatives proposed, among other things, the immediate seating of a Board of Directors composed of five members of the Board of Operatives plus two nominees by that group, and five members of the Board of Management, plus two nominees of that group.
Without further contact or correspondence between the Board of Operatives and the Board of Management or their attorneys, a special meeting of the Board of Directors of ACIPCO was held on May 16, 1983. At this time, the Board of Directors issued a resolution terminating all members of the Board of Operatives as employees of the company. This resolution also directed that a special election be called to fill the vacancies created on the Board of Operatives. In addition, the Board of Directors determined that the Operatives had violated their oath required by the Eagan Plan; 2 had caused turmoil among the employees The Operatives filed suit, seeking their reinstatement as employees of ACIPCO, contending that they were wrongfully discharged. In addition, the Operatives sought an award of attorneys' fees.
and disruption in the company's operations; had falsely accused the officers and directors of mismanagement, of depriving the employees of bonus benefits, of wrongful control of company funds and facilities, and of a lack of good faith in their dealings with the Board of Operatives; and, further, that they were attempting to usurp the prerogatives of management in violation of the terms of the Eagan Trust.
After reviewing the evidence, the trial court found that the Operatives were not employees at will and, therefore, could only be discharged for cause. The trial judge, sitting as the trier of fact, heard ore tenus evidence and found as follows:
Because the evidence indicated that the Operatives were not terminated for reasons related to their jobs or duties as employees, but for their actions as members of the Board of Operatives, the lower court reinstated the Operatives as employees of ACIPCO and as members of the Board of Operatives. The lower court also determined, however, that the Operatives were not entitled to attorneys' fees. We affirm the trial court's order reinstating the Board of Operatives as employees of ACIPCO but reverse the judgment of the trial court insofar as that judgment refused to award attorneys' fees, for the reasons hereinafter stated.
The Board of Management contends that because the Operatives were not employed under contract for a definite term, the trial court erroneously reinstated the Operatives as employees of ACIPCO. We disagree.
Concededly, at common law, an employment contract of indefinite duration is terminable at will by either party with or without justification or cause and without legal liability. Hinrichs v. Tranquilaire Hospital, 352 So.2d 1130 (Ala.1977). The principle announced in Tranquilaire has been criticized as being unsound, but we need not discuss it here because we think it is inapplicable in this case. The case at hand involves a unique situation where employment contract principles are not exclusively applicable, and neither are principles of law concerning trusts exclusively applicable. ACIPCO's unique corporate structure is such that this Court is presented with a case of first impression which requires us to harmonize these two areas of the law involving the rights of employees.
This Court has previously considered the rights of ACIPCO employees in Duff v. American Cast Iron Pipe Company, 362 So.2d 886 (Ala.1978); and Smith v. American Here, however, the Operatives were not fired because of a violation of a plant rule, but because of their efforts as trustees of the Eagan Trust to correct what they considered was a wrongful use of ACIPCO funds and their diversion from the beneficiaries of the trust.
Cast Iron Pipe Company, 370 So.2d 283 (Ala.1979). In both Smith and Duff, this Court held that "[i]n the ACIPCO community a contractual precondition to discharge is that the employee be found to have violated one or more of the established plant rules." 362 So.2d at 888; 370 So.2d at 287. (Emphasis added.)
The evidence supports the trial court's finding that the employees were discharged without cause. Mr. Farlow, the president of ACIPCO, was questioned regarding the Operatives' performance as employees; he responded as follows:
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