Kugler v. Ron Nelson, David J. Powers, Steven L. Kenison & Powers Candy Co.
| Decision Date | 28 June 2016 |
| Docket Number | Docket No. 42690 |
| Citation | 374 P.3d 571,160 Idaho 408 |
| Court | Idaho Supreme Court |
| Parties | John B. KUGLER, Plaintiff–Appellant, v. Ron NELSON, David J. Powers, Steven L. Kenison and Powers Candy Co., Inc., Defendants–Respondents. |
John B. Kugler, Tacoma, Washington, pro se appellant.
Wright Brothers Law Office, PLLC, Twin Falls, for respondents. Brooke B. Redmond argued.
This is an appeal from a grant of summary judgment dismissing John Kugler's case. Kugler sought damages from Ron Nelson, David Powers, Steven Kenison, William Armstrong, and Powers Candy Co., Inc. (collectively "the Defendants"), alleging breach of various agreements and wrongful actions taken by the Defendants.1 The district court dismissed all of Kugler's claims because it found that the claims were derivative and Kugler failed to comply with derivative action requirements. We affirm.
Until mid–2010, Kugler, Nelson, Powers, Kenison, and Armstrong were all shareholders of H & M Distributing, Inc. (H & M), a wholesale distributor of beverages, cigarettes, and other miscellaneous items. At all relevant times, Powers was the president of H & M and the majority shareholder of H & M and Powers Candy. Nelson was the general manager of H & M until mid–2010. Pursuant to his original employment agreement with H & M, Nelson was awarded twenty-seven shares of H & M stock. He subsequently acquired another twenty shares of stock. Nelson's employment with H & M ended in acrimony in mid–2010. Thereafter, Powers, Nelson, and H & M proposed a Settlement Agreement and Mutual Release (Settlement Agreement) in which: (1) H & M agreed to purchase Nelson's original twenty-seven shares for $96,336.67; (2) Powers agreed to purchase the remaining twenty shares from Nelson for $90,000; and (3) the parties agreed to a mutual release of claims arising from Nelson's employment.
Powers called a special meeting of shareholders for July 6, 2010. Powers sent a notice of the meeting, signed June 23, 2010, to all of the shareholders and directors in which he outlined the purpose of the meeting and attached the proposed Settlement Agreement. Among other things, the notice stated the purpose of the meeting was to: establish the members of the board of directors, establish H & M's current directors, approve Powers Candy's purchase of H & M inventory, and approve the Settlement Agreement. The notice also stated, "Kugler is not proposed as a director due to distance issues since he lives in Washington state."
All shareholders were present for the special meeting on July 6, 2010, except for Nelson. Kugler appeared by telephone. The shareholders voted on several issues at the meeting. First, a majority voted to amend H & M's Bylaws to establish the number of directors as between one and five and to appoint Powers, Kenison, and Armstrong as directors of the corporation. Kugler was the only shareholder to vote against this action. Second, the shareholders unanimously voted "to approve the purchase by Powers Candy Co., Inc. of the candy and tobacco inventory and the transfer of that portion of the business to Powers Candy Co., Inc." Third, a majority voted to approve the Settlement Agreement. Kugler was the sole dissenter. Fourth, the shareholders unanimously approved Powers' purchase of Nelson's twenty shares of stock. Finally, a majority approved H & M's purchase of the twenty-seven shares of Nelson's stock. Kugler again was the only dissenting shareholder. Pursuant to an earlier Stock Subscription and Cross Purchase Agreement (Shareholder Agreement), all shareholders were given the option to purchase a prorata share of Nelson's stock. No shareholder elected to exercise this option.
The next day, Nelson, Powers, and H & M executed the Settlement Agreement. Powers Candy made payments to H & M between August of 2010 and October of 2012 for the transfer of the tobacco and candy portion of H & M's business.
On April 10, 2013, Kugler filed the present action. He alleged four causes of action: (1) that the Defendants improperly redeemed Nelson's stock; (2) that Nelson breached the duty of good faith, breached his employment contract, and committed fraud; (3) that Powers Candy purchased vehicles and inventory from H & M without just compensation; and (4) that the Defendants improperly removed Kugler from his position as a director of H & M. On December 2, 2013, Kugler moved to disqualify the Defendants' attorney. The district court denied this motion.
The Defendants moved for summary judgment, and a hearing was set in March of 2014. After Kugler requested a continuance to conduct discovery, the hearing was reset for the end of May of 2014. A few days before the rescheduled hearing, Kugler responded to the Defendants' motion for summary judgment and filed his own motion for partial summary judgment. The district court received argument on the Defendants' motion for summary judgment and granted Kugler additional time to submit additional evidence in support of his motion. On September 24, 2014, the district court issued its memorandum opinion, in which it granted the Defendants' motion for summary judgment and denied Kugler's motion for partial summary judgment. The district court determined that all of Kugler's claims were derivative in nature and Kugler had failed to comply with the requirements for bringing a derivative action imposed by Idaho Code section 30–1–742 and Idaho Rule of Civil Procedure 23(f). Subsequently, in a December 17, 2014, decision, the district court partially granted the Defendants' request for attorney fees and awarded $15,000. The Defendants sought reconsideration of the attorney fee award, arguing Kugler was responsible for delays in the proceedings which increased the costs of defending the case. The district court granted the motion to reconsider, increasing the attorney fee award by $4,000. Kugler timely appealed.
"When this Court reviews a district court's ruling on a motion for summary judgment, it employs the same standard properly employed by the district court when originally ruling on the motion." Chandler v. Hayden , 147 Idaho 765, 768, 215 P.3d 485, 488 (2009). "Summary judgment is proper when there is no genuine issue of material fact and the only remaining questions are questions of law." Id. "This Court liberally construes all disputed facts in favor of the nonmoving party and draws all reasonable inferences and conclusions supported by the record in favor of the party opposing the motion." Id. "[W]e can affirm the district court's order granting summary judgment on alternate grounds."
"The award of attorney fees and costs is within the discretion of the district court and reviewed for an abuse of that discretion." Jim & Maryann Plane Family Trust v. Skinner , 157 Idaho 927, 932, 342 P.3d 639, 644 (2015). "In making a determination of whether a trial court abused its discretion, this Court considers: (1) whether the trial court correctly perceived the issue as one of discretion; (2) whether the trial court acted within the boundaries of this discretion and consistent with the legal standards applicable to the specific choices available to it; and (3) whether the trial court reached its decision by an exercise of reason." Charney v. Charney , 159 Idaho 62, 64, 356 P.3d 355, 357 (2015).
Our review of Kugler's appeal has presented a challenge due to significant deficiencies in his briefing. Some of Kugler's assignments of error are merely conclusory statements without reasoning or other support. Such briefs do not comply with our rules. See I.A.R. 35(a)(6) (); Bach v. Bagley , 148 Idaho 784, 790, 229 P.3d 1146, 1152 (2010) (). This opinion will address those claims which Kugler has marginally advanced, even though the issues were not presented in full compliance with our rules. These issues are whether the district court erred in granting summary judgment, denying Kugler's motion to disqualify opposing counsel, and awarding attorney fees.
The district court found that Kugler's complaint advanced derivative claims. It further found that Kugler's failure to comply with Idaho Code section 30–1–7422 and Idaho Rule of Civil Procedure 23(f) were fatal to his claim and granted summary judgment. On appeal, Kugler contends his claims are not derivative.
A derivative action is distinguishable from an individual action. We have described a derivative action as follows:
A stockholder's derivative action is an action brought by one or more stockholders of a corporation to enforce a corporate right or remedy a wrong to the corporation in cases where the corporation, because it is controlled by the wrongdoers or for other reasons fails and refuses to take appropriate action for its own protection.
McCann v. McCann , 152 Idaho 809, 814, 275 P.3d 824, 829 (2012) [ McCann II ] (quoting McCann v. McCann , 138 Idaho 228, 233, 61 P.3d 585, 590 (2002) [ McCann I ] ). In comparison:
[I]t is generally held that a stockholder may maintain an action in his own right for an injury directly affecting him , although the corporation also may have a cause of action growing out of the same wrong, where it appears that the injury to the stockholder resulted from the violation of...
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