Graydog Internet, Inc. v. Giller
| Decision Date | 27 July 2016 |
| Docket Number | A156539 |
| Citation | 279 Or.App. 722,381 P.3d 903 |
| Parties | Graydog Internet, Inc., an Oregon corporation, Plaintiff–Appellant, v. David Giller, Defendant–Respondent. David Giller, Third–Party Plaintiff–Respondent, v. Douglas Westervelt, Third–Party Defendant–Appellant. |
| Court | Oregon Court of Appeals |
Susan Marmaduke argued the cause for appellants. With her on the opening brief were John C. Rake and Harrang Long Gary Rudnick, P.C., and Robert J. McGaughey and Law Offices of Robert J. McGaughey. With her on the reply brief was Harrang Long Gary Rudnick, P.C.
Colin M. Murphy argued the cause for respondent. With him on the brief were Gary M. Bullock and Gary M. Bullock and Associates, P.C.
Before Duncan, Presiding Judge, and Lagesen, Judge, and Flynn, Judge.
, J.
In this appeal, which arises out of a dispute between the minority and majority shareholder of a closely held corporation, we are called upon to construe the scope of ORS 60.952(6)
, a provision that allows closely held corporations to resolve certain shareholder claims through the mechanism of a forced buyout of the complaining shareholder's shares for fair value. The trial court granted a limited judgment declaring that the buyout election, which is available after “the filing of a proceeding under” ORS 60.952(1), does not apply to the third-party complaint filed by the minority shareholder, because that pleading did not commence an action and did not assert a claim of the type addressed in ORS 60.952(1). We conclude that the filing of the third-party complaint constitutes “the filing of a proceeding” for purposes of ORS 60.952(6). We also conclude that the real character of at least some of the third-party claims is a claim for oppression against the majority shareholder for purposes of ORS 60.952(1). Accordingly, we reverse the limited judgment and remand for further proceedings consistent with this opinion.
Graydog Internet, Inc., founded in the mid–1990s, has two shareholders. Westervelt is the majority shareholder and Giller is the minority shareholder. In 2004, the parties signed a shareholder agreement that is at the heart of their current dispute. One provision of the agreement specifies that, if a shareholder's employment ends, the terminated shareholder shall be deemed to have offered to sell all of his shares to the corporation and the other shareholders.
In 2013, Graydog filed a complaint against Giller in circuit court seeking a declaration that Giller is an at-will employee and that it has a right to terminate Giller's employment. In his answer, Giller denied that he is an at-will employee, included counterclaims alleging that the shareholder agreement is unenforceable, and sought injunctive relief.
The following day, Giller also filed a third-party complaint against Westervelt, in which he incorporated the allegations of his answer, affirmative defenses, and counterclaims against Graydog. The third-party complaint includes claims for (1) a declaration that the “shareholder agreement is void and unenforceable,” (2) “breach of contract” based on Westervelt allegedly violating the corporate bylaws by “tak[ing] unilateral action in his personal capacity and for his personal interests,” and (3) “breach of [the] contractual duty of good faith and fair dealing” based on Westervelt allegedly “having acted for the sole purpose of trying to force David Giller to unwillingly sell his shares to him.”1
Graydog and Westervelt took the position that Giller's counterclaims and third-party complaint triggered the statutory buy-out provision in ORS 60.952(6)
. Accordingly, Graydog elected, in writing and in the requisite timeframe, to purchase Giller's shares for $300,000. Giller responded by amending his answer to add a fifth counterclaim that sought a “declaratory judgment that ORS 60.952(6) does not apply to this suit.” He then sought summary judgment on that counterclaim, and Graydog filed a cross-motion for partial summary judgment on the same issue.2 Following a hearing, the court issued a letter opinion granting Giller's motion and denying Graydog's motion. The court then entered a limited judgment in which it incorporated its letter opinion and declared:
“1. ORS 60.952(6)
does not apply to this case because ORS 60.952(6) may be triggered only against one who commences an action, not against a party who files counterclaims or a third-party complaint.
Graydog and Westervelt (jointly, “appellants”)3 appeal from the entry of that limited judgment, assigning error both to the trial court's granting of Giller's motion for partial summary judgment and its denial of Graydog's cross-motion for partial summary judgment.
In this appeal from a judgment addressing cross-motions for summary judgment, in which appellants have assigned error to the trial court's rulings on both motions, both rulings are subject to review.4 Adair Homes, Inc. v. Dunn Carney , 262 Or.App. 273, 276, 325 P.3d 49
, rev. den. , 355 Or. 879, 333 P.3d 333 (2014). “We review the record for each motion in the light most favorable to the party opposing it to determine whether there is a genuine issue of material fact and, if not, whether the moving party is entitled to judgment as a matter of law.” Id . (citing ORCP 47 C and Eden Gate, Inc. v. D&L Excavating & Trucking, Inc. , 178 Or.App. 610, 622, 37 P.3d 233 (2002) ). As to the issues raised on appeal, the parties agree that there are no disputed issues of fact and that we should determine as a matter of law whether the buy-out election of ORS 60.952(6) is available to Graydog.
Whether ORS 60.952(6)
applies is a question of statutory construction that we resolve by applying the methodology articulated in State v. Gaines , 346 Or. 160, 171–72, 206 P.3d 1042 (2009). Under that methodology, we seek to determine the legislature's intent by examining the text and context of the statute, followed by consideration of the legislative history to the extent it “appears useful to the court's analysis.” Id .
Until 2001, corporate dissolution—authorized under ORS 60.661
—was the only statutory remedy to address claims of oppression or misconduct in closely held corporations.
Hickey v. Hickey , 269 Or.App. 258, 268–69, 344 P.3d 512, rev. den. , 357 Or. 415, 356 P.3d 638 (2015). The legislature addressed that perceived problem by asking an Oregon State Bar task force to draft the bill that became ORS 60.952. In testimony before the House subcommittee that approved the bill, the chair of the task force emphasized that dissolution of the corporation by judicial order was “ ‘typically the worst remedy available, both for the plaintiff and the corporation and for the economy’ ” and that the proposed legislation would codify alternative remedies that Oregon courts were already granting. Hickey , 269 Or.App. at 269, 344 P.3d 512 ().
Subsection (2) contains a long list of specific remedies that “include but are not limited to” various types of equitable relief to alter the corporate structure or operations, “[t]he award of damages to any aggrieved party,” and a corporate buyout “of all of the shares of one or more other shareholders for their fair value.” ORS 60.952(2)(a)-(m)
. Subsection (5) specifies considerations and a procedure for the trial court to follow if it orders the remedy of share purchase for value.
We have described the remedy of a “court-ordered share purchase for fair value” as “Oregon courts' preferred remedy for oppression in closely held corporations.” Hickey , 269 Or.App. at 268, 344 P.3d 512
. The legislative history of ORS 60.952 suggests that the bill was designed to encourage courts to use that remedy. Id. at 269, 344 P.3d 512 ().
In addition, ORS 60.952(6)
—the provision at issue here—allows “the corporation or one or more shareholders” to resolve the litigation by “elect [ing] to purchase all of the shares owned by the shareholder who filed the proceeding for their fair value.” In the event of that election, the parties are allowed 30 days to “reach agreement as to the fair value,” or, if they are unable to reach an agreement, “the court, upon application of any party, shall stay the proceeding under subsection (1) of this section and shall * * * determine the fair value and terms of purchase of the shares of the shareholder who filed the proceeding.” ORS 60.952(6)(e), (f). The legislative history suggests—as does the text—that ORS 60.952(6) “ ‘provides a means to bring the litigation to an early end’ ” by providing that “ ‘[a]ny of the defendants or...
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Graydog Internet, Inc. v. Giller
...'having acted for the sole purpose of trying to force [Giller] to unwillingly sell his shares to him.' " Graydog Internet, Inc. v. Giller , 279 Or.App. 722, 725, 381 P.3d 903 (2016) (first and second brackets in Graydog Internet, Inc. ). In support of those claims, Giller alleged:"Westervel......