French v. Chosin Few, Inc.

• Decision Date: 20 November 2001
• Docket Number: No. CIV1:00CV294.,CIV1:00CV294.
• Citation: 173 F.Supp.2d 451
• Parties: Roger L. FRENCH, Plaintiff, v. The CHOSIN FEW, INC., Defendant.
• Court: U.S. District Court — Western District of North Carolina

173 F.Supp.2d 451

Roger L. FRENCH, Plaintiff, v. The CHOSIN FEW, INC., Defendant.

No. CIV1:00CV294.

United States District Court, W.D. North Carolina, Asheville Division.

November 20, 2001.

COPYRIGHT MATERIAL OMITTED

T. Douglas Wilson, Jr., McGuire, Wood & Bissette, P.A., Asheville, NC, Isaac N. Northup, Elizabeth Ellen McConnell, Northup & McConnell, PLLC, Asheville, NC, Rosanna Sattler, Posternak, Blankstein & Lund, L.L.P., Boston, MA, for plaintiff.

Gary L. Beaver, Adams, Kleemeier, Hagan, Hannah & Fouts, Greensboro, NC, Gary C. Crossen, Foley, Hoag & Eliot, Boston, MA, for defendant.

MEMORANDUM AND ORDER

THORNBURG, District Judge.

THIS MATTER is before the Court on Defendant's motion to dismiss, Defendant's motion for summary judgment, and Plaintiff's motion for judgment on the pleadings. The Court will treat each of these motions separately, although some of the same issues are raised in each. For the reasons enumerated below, the Court will grant the Defendant's motions and deny the Plaintiff's motion.

I. FACTUAL HISTORY

In December 1950, a minuscule number of American soldiers in North Korea held at bay massive Chinese forces against all odds and at great sacrifice. The surviving veterans of the battle, which occurred in the Chosin Reservoir, are most aptly called The Chosin Few. Frank Kerr and Jack Hessman co-founded a non-profit corporation known as "The Chosin Few, Inc.," (CFI) in order to "unite the surviving war veterans of the Chosin Reservoir Campaign in an exclusive fraternity of honor to perpetuate the spirit of valor, sacrifice and duty exemplified by those who served in this epic campaign...." Exhibit 2, Articles of Organization, attached to Defendant's Motion for Summary Judgment, filed September 17, 2001 [Defendant's Motion]. The survivors, whose numbers decrease daily, celebrated their 50th reunion in December 2000.

Apparently, over a period of years, the members of the board of directors divided into two "factions," one supporting cofounder Frank Kerr (Kerr faction) and the other past president Richard Oly (Oly faction). This division between the two factions of CFI devolved into open hostility in the first half of 1997. Each faction called a meeting of the board of directors which the other faction did not attend. At those meetings, each faction purported to take action on behalf of CFI. The Kerr faction held its meeting in June of 1997 in Reno, Nevada. Among the actions taken at that meeting was a resolution giving the cofounders of CFI (Kerr and Hessman) authority to "contact legal council [sic], as required, in the event litigation is necessary to solve our Chosin Few problems." Exhibit 4, Board Minutes for June 26, 1997, attached to Defendant's Motion, at 6. The substantive provisions of the resolutions passed by the two factions at their respective "board meetings" in 1997 created a heated dispute over control of CFI.

The Plaintiff in this case represented the Kerr faction in their lawsuit against the Oly faction arising out of that dispute. He did so under the terms of a fee agreement entered into between himself and Ken Santor, purportedly as president of CFI, representing the Kerr faction board of directors. Plaintiff entered into this dispute after the Kerr faction dismissed their original law firm. That firm requested that each of the Kerr directors name themselves individually as plaintiffs and be personally responsible for payment of legal fees. The Kerr directors would not agree to those terms. As a result, the Kerr faction turned to the Plaintiff to represent them in that case. Plaintiff received the entire file from the previous law firm, as well as a portion of its retainer.

That litigation eventually found its way into this Court. The case proceeded to trial in November 1998, but an agreement was reached between the parties during trial and in January 1999, the undersigned issued a Consent Judgment designed to resolve the impasse by having an election for vacant positions on the board of directors. See, Exhibit 11, Consent Judgment, filed January 7, 1999, in Civil Action 1:98cv59, attached to Defendant's Motion. Pivotal to the election was the three member nominating committee to which Harry Hogan, representing the Kerr faction, and Howard Mason, representing the Oly faction, were appointed. These individuals were to select a third member and the committee would then propose a slate of candidates. Id., at 3. Unfortunately, each faction then embarked on a campaign to insure this third member would be sympathetic to their cause. As a result, Hogan and Mason were unable to agree on the third member and no election ever occurred. Furthermore, the Kerr faction attempted to take control of CFI's financial assets and change the delivery of mail directed to the corporation. These actions resulted in additional litigation concerning an administrative postal dispute and an interpleader action being filed in the Superior Court of Buncombe County, North Carolina. The Kerr faction also sought publication of material in The Chosin Few News Digest which was in contravention of the Consent Judgment. The attempts to publish the News Digest led to an intervention in the interpleader action for injunctive relief by a group known as the "Members in Good Standing." The interpleader action was removed to this Court and consolidated with the original lawsuit (collectively the "underlying litigation"). Over one year after the January 7, 1999, Consent Judgment, none of the parties had effected any portion of the provisions thereof, further litigation had spawned, and the board of directors had completely failed to function.

As a result of this complete breakdown of the original Consent Judgment, this Court issued an order that members of the Kerr faction appear on March 27, 2000, and show cause why they should not be held in contempt of court for their action. Exhibit 35, Order filed February 24, 2000, in Consolidated Civil Actions 1:98cv59 and 1:99cv267, attached to Defendant's Motion. Although he did not appear at this hearing, Frank Kerr filed an affidavit in which he asserted that he, Santor, and their faction of the board of directors had acted in accordance with the advice of the Plaintiff when they took the steps outlined above in violation of the terms of the Consent Judgment. The Plaintiff did not appear at this hearing. Kerr was purged of contempt, largely on the basis of his testimony that he had acted on Plaintiff's legal advice.

At that hearing, this Court was prepared to dissolve CFI based on the total deadlock that had gripped its leadership. However, General Ray Davis, USMC-Ret., a Congressional Medal of Honor recipient for his service during the Chosin Reservoir Campaign, along with other Medal of Honor recipients, offered their assistance in bringing CFI back to life. Based on this offer of assistance, an order was fashioned whereby three Medal of Honor winners formed a nominating committee to appoint an interim board of directors. Exhibit 45, Order filed May 3, 2000, in the Consolidated Civil Actions, attached to Defendant's Motion. This interim board was given full power to oversee the operations of CFI, including making decisions about the retention of and payment to counsel out of CFI funds, until regular elections could be held and a new board of directors established. Id., at 8-13.

Prior to this resolution, the Plaintiff became personally involved in a dispute over some of the assets of CFI. As a part of the show cause Order filed February 24, 2000, this Court ordered that all attorneys involved in the underlying litigation file a statement of the assets of CFI and that no fees be paid to attorneys out of any funds even "arguably" belonging to CFI. Id., at 5. Despite this order, the Plaintiff accepted $7,400 from membership dues collected by Kerr. Plaintiff did not disclose the existence of these funds, nor did he willingly return the money to CFI even after being ordered to do so by this Court. Although he eventually submitted a check to the escrow account established to collect CFI's assets, Plaintiff attempted to convey the check with a restrictive endorsement and an attorney's lien on the funds. This Court was forced to issue an order nullifying this attempted lien on the funds. As a part of that order, the Court specifically directed that any decision to pay the Plaintiff's claim for attorney's fees was delegated to the interim board of directors. See Exhibit 43, Order filed April 14, 2000, in the Consolidated Civil Actions, attached to Defendant's Motion.

In June 2000, the Plaintiff submitted a claim for attorney's fees to the interim board. Prior to their decision on Plaintiff's claim, he filed an action in Massachusetts state court against CFI for those fees. CFI's interim board denied the claim in August of 2000. After considerable procedural wrangling-during which Plaintiff's conduct was, as this Court has already described, "outrageous" — the case was removed to the United States District Court for the District of Massachusetts and then transferred to this District. Exhibit 52, Order filed November 21, 2000, in the Consolidated Civil Actions, attached to Defendant's Motion, at 4. Defendant filed an answer and counterclaim. Plaintiff has filed a motion for judgment on the pleadings. Defendant has filed a motion to dismiss Count Three of the complaint for failure to state a claim and for summary judgment on all three counts of the complaint as well as on the counterclaims.

II. PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS

Plaintiff moves for judgment on the pleadings on the counterclaim raised by Defendant in the "Ninth Affirmative Defense and Counterclaim" pursuant to Fed. R.Civ.P. 8, contending that the paragraph is inadequate to state a claim. Defendant responds that the paragraph was mislabeled "and Counterclaim" by clerical error and was not intended to assert a counterclaim. Therefore, the Court will order the words "and...