Holten v. Standard Parking Corp.
| Decision Date | 27 March 2015 |
| Docket Number | Civil No. 3:10CV00452 AVC. |
| Citation | 98 F.Supp.3d 444 |
| Parties | John V. HOLTEN, Plaintiff, v. STANDARD PARKING CORPORATION, Defendant. |
| Court | U.S. District Court — District of Connecticut |
David S. Golub, Jonathan M. Levine, Silver, Golub & Teitell, Stamford, CT, George B. Yankwitt, Squire Sanders (US) LLP, New York, NY, Jeffrey J. Wedel, Ryan A. Sobel, Cleveland, OH, for Plaintiff.
Christopher L. Wanger, Heather Littlejohn, Stephen Mayne, Manatt Phelps & Phillips, LLP, San Francisco, CA, James T. Cowdery, Cowdery & Murphy, LLC, Hartford, CT, for Defendant.
RULING ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT
This is an action seeking compensatory damages and equitable relief. It arises out of an alleged breach of an employment agreement between the plaintiff John V. Holten, and the defendant, Standard Parking Corporation (“Standard Parking”).
The complaint is brought pursuant to common law tenets concerning contract law. Jurisdiction is authorized pursuant to 28 U.S.C. § 13321 on the basis of diversity of citizenship.
On March 7, 2014, Standard Parking filed a partial motion for summary judgment on its third cause of action of the amended counterclaim for breach of fiduciary duty. On May 6, 2014, Holten filed a motion for summary judgment on Standard Parking's second and third counterclaims. That same day, Holten also filed a separate motion for summary judgment on his complaint.
For the following reasons, Standard Parking's motion for summary judgment (document no. 115) and Holten's motion for summary judgment on Standard Parking's second and third counterclaims (document no. 127) are GRANTED IN PART and DENIED IN PART, and Holten's motion for summary judgment on his complaint (document no. 129) is DENIED.
Examination of the complaint, pleadings, local rule 56 statements, the exhibits accompanying the motion for summary judgment, and the responses thereto, discloses the following, undisputed, material facts:
The defendant, Standard Parking Corporation (“Standard Parking”), is incorporated in Delaware and maintains its principal place of business in Chicago, Illinois. The company provides professional parking, ground transportation, facility maintenance, security, and event logistics services to real estate owners and managers throughout the country. From 1989 to 2009, the plaintiff, John V. Holten, beneficially owned a majority interest in Standard Parking and served as chairman of the board of directors. Holten is a citizen of Norway and a resident of Greenwich, Connecticut.
In April 1989, Holten acquired beneficial ownership of the majority of stock of APOCA, a privately held company that provided parking and management services to garages across the country. In 1998, APOCA acquired Standard Parking and adopted its name for the entire corporation.
In April 2004, Holten owned approximately eighty-four percent of Standard Parking's stock. On May 7, 2004, Holten and James Wilhelm, Standard Parking's President and Chief Executive Officer, executed an employment agreement. On May 25, 2004, the board of directors at Standard Parking, comprised of Holten, Wilhelm, and Gunnar Klintberg, approved the employment agreement by a unanimous resolution. Standard Parking did not form a special committee to evaluate this contract.
The contract specified a five-year term of employment and provided an automatic renewal for four-year terms after the initial five-year term expired, unless Standard Parking provided Holten with notice to the contrary at least one year prior to the end of the initial term. It also stated that any notice not to extend the term of Holten's employment agreement must be “accompanied by a resolution duly adopted by the affirmative vote of not less than three quarters (3/4) of all of the disinterested members of the Board.” Standard Parking agreed to pay Holten “a base salary at an annual rate of not less than Four Hundred Thousand Dollars ($400,000)” in addition to other bonuses, awards, and other forms of compensation. Specifically, a letter dated May 7, 2004, “memorialize[d] [Holten and Wilhelm's] agreement that the total expense of [Holten's] salary, annual bonus or other bonus, options and equity awards ..., deferred compensation, short-term and long-term compensation, automobile allowance, secretary and office in Greenwich, Connecticut, and all other benefits and perquisites” was $650,000 for 2004 and $700,000 for 2005.
On June 2, 2004, Standard Parking went public and closed its initial public offering (“IPO”). After the IPO, Standard Parking's board increased to eight members, including four independent members as defined under NASDAQ rules. In 2007, a ninth independent director was appointed.
Since June 2004, Standard Parking has remained a public company. In 2005, 2006, 2007, 2008, and 2009, Standard Parking filed annual proxy statements with the Securities and Exchange Commission (“SEC”) stating that the compensation paid to Standard Parking's executive officers, including Holten, was “reasonable and not excessive.” It is disputed, however, whether the compensation committee or its retained consultant, Watson Wyatt, ever actually reviewed Holten's compensation. During that same time period, Holten beneficially owned more than fifty percent of Standard Parking's capital stock and voting power through Steamboat Industries LLC, meaning that Standard Parking constituted a “controlled company” for purposes of NASDAQ rules.
In 2005, Standard Parking disclosed in a Form 8–K that Steamboat Industries had pledged 560,000 shares of common stock to an unaffiliated lender. Standard Parking's audit committee requested outside counsel to prepare a memorandum analyzing “whether or not Mr. Holten, as a director, officer and majority shareholder of SPC, had an obligation to discuss the situation with the Audit Committee in advance of this transaction and the related public disclosure.”
On November 2, 2005, three members of Standard Parking's audit committee, who were also independent directors on the board, met with Holten to discuss the memorandum. The memorandum stated that “[a]s part of a director's duty of care, each board member must disclose to other members of the board information known to the director to be material to the oversight responsibilities of the board or its committees.” It concluded that “Holten should have discussed the refinancing transaction with the Audit Committee in advance of its consummation to give these directors the opportunity to understand the transaction and how the new change of control situation could impact the Company and its risk profile.” The memorandum further advised that Holten should provide the audit committee with the opportunity to conduct a risk assessment before any future refinancing.
In June 2006, GSO Capital Partners loaned Holten, through Steamboat Industries, $84 million, which was secured by nearly all of Holten's Standard Parking stock. The loan's terms specified a maturity date of September 30, 2008. Holten disclosed this loan to the independent directors. In 2007, Holten borrowed an additional $15 million from GSO to purchase a house in Greenwich, Connecticut, which was also secured by the Standard Parking stock.
On May 16, 2008, four of the five independent directors discussed the renewal of the employment agreement between Holten and Standard Parking. By that time, Holten owed more than $110 million on the GSO loan, which was due in four months. The four independent directors approved an automatic roll-over of the employment agreement for an additional four-year term.
In September 2008, GSO granted Holten a brief extension of the maturity date of the loan to January 31, 2009. Holten failed to repay the loan and GSO foreclosed on his shares of Standard Parking. Accordingly, Holten lost nearly all of his stock in Standard Parking. On October 5, 2009, Standard Parking removed Holten as chairman and terminated his employment agreement. On October 7, 2009, Standard Parking filed a Form 8–K with the SEC stating that the terms of Holten's employment agreement were not fair to the company and that the employment agreement resulted from an unfair process.
A motion for summary judgment may be granted “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c).
Summary judgment is appropriate if, after discovery, the nonmoving party “has failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “The burden is on the moving party ‘to demonstrate the absence of any material factual issue genuinely in dispute.’ ” Am. Int'l Group, Inc. v. London Am. Int'l Corp., 664 F.2d 348, 351 (2d Cir.1981) (quoting Heyman v. Commerce and Indus. Ins. Co., 524 F.2d 1317, 1319–20 (2d Cir.1975) ).
A dispute concerning material fact is genuine “if evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). The court must view all inferences and ambiguities in a light most favorable to the nonmoving party. See Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.1991). “Only when reasonable minds could not differ as to the import of the evidence is summary judgment proper.” Id.
A dispute concerning material fact is not created by a mere allegation in the pleadings, or by surmise or conjecture. Stuart & Sons, L.P. v. Curtis Pub. Co., Inc., 456 F.Supp.2d 336, 342 (D.Conn.2006) (citing Applegate v. Top Assoc., Inc., 425 F.2d 92, 96 (2d Cir.1970) ); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980)....
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