Landers v. Fed. Deposit Ins. Corp.

• Decision Date: 27 February 2013
• Docket Number: No. 27223.,27223.
• Citation: Landers v. Fed. Deposit Ins. Corp., 402 S.C. 100, 739 S.E.2d 209 (S.C. 2013)
• Parties: Christopher T. LANDERS, Respondent, v. FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for Atlantic Bank and Trust, Atlantic Banc Holdings, Inc., and Neal Arnold, Appellants.
• Court: South Carolina Supreme Court

402 S.C. 100

739 S.E.2d 209

Christopher T. LANDERS, Respondent,

v.FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for Atlantic Bank and Trust, Atlantic Banc Holdings, Inc., and Neal Arnold, Appellants.

No. 27223.

Supreme Court of South Carolina.

Heard March 20, 2012.

Decided Feb. 27, 2013.

C. Mitchell Brown and Sue E. Harper, both of Columbia, of Nelson Mullins Riley & Scarborough, LLP, and Amy L. Gaffney of Columbia, of Gaffney Lewis and Edwards, LLC, for Appellants.

Clayton B. McCullough, of McCullough Khan, LLC, of Charleston, for Respondent.

Justice KITTREDGE.

This case concerns the scope of an arbitration clause under the Federal Arbitration Act (FAA).RespondentChristopher Landers served as Appellant Atlantic Bank & Trust's executive vice president pursuant to an employment contract.The contract contained a broad arbitration provision, requiring arbitration of “any controversy or claim arising out of or relating to this contract, or breach thereof.”In the underlying action, in which Landers alleges five causes of action, Landers claims he was constructively terminated from his employment as a result of AppellantNeal Arnold's tortious conduct towards him.Appellants moved to compel arbitration pursuant to the employment contract.The trial court found that only Landers' breach of contract claim was subject to the arbitration provision, while his other four causes of action comprised of several tort and corporate claims were not within the scope of the arbitration clause.We disagree.

Landers' pleadings provide a clear nexus between his claims and the employment contract sufficient to establish a significant relationship to the employment agreement.We find the claims are within the scope of the agreement's broad arbitration provision.Thus, we reverse the trial court's order and hold that all of Landers' causes of action must be arbitrated.

I.

In 2005, Landers and two other individuals founded Atlantic Bank & Trust (Bank).¹Landers purchased 50,000 shares of common stock of Bank's holding company, Atlantic Banc Holdings, Inc.(Holding Company).On February 20, 2007, Landers and Bank entered into a written employment agreement (Agreement).The Agreement contained an arbitration provision which stated: “Except matters contemplated by Section 17 below [Applicable Law and Choice of Forum], any controversy or claim arising out of relating to this contract, or the breach thereof, shall be settled by binding arbitration ....”(emphasis added).

The Agreement provided for an initial term of three years' employment for Landers as Executive Vice President and Chief Mortgage Officer and automatic extensions for successive one-year terms unless either party gave written notice of an intent not to extend the contract.The Agreement also stated that after Holding Company established a stock incentive plan, Landers was to receive an option to purchase 65,000 shares of common stock of Holding Company and provided for a lump-sum payment of 2.99 times Landers' base pay in the event his employment was terminated within one year after a change of control.²

Pursuant to the Agreement, Landers was to perform his duties “subject to the direction of the [CEO]” and “diligently follow and implement all reasonable and lawful management policies and decisions communicated to him by the [CEO].”Landers was required to “devote substantially all of his time, energy and skill during regular business hours to the performance of the duties of his employment ... and faithfully and industriously perform such duties.”Finally, the Agreement expresses what constituted termination for “cause” and Landers was authorized to terminate the Agreement for cause based upon “a material diminution in the powers, responsibilities, duties or compensation of [Landers]” thereunder.

Bank, like most, suffered financial hardship as a result of the economic collapse in the fall of 2008.In May 2009, Bank's Board of Directors(Board) hired Neal Arnold to serve as CEO and Landers voluntarily accepted the position of president.³Thereafter, Arnold began soliciting out-of-state investors to recapitalize Bank.Landers claims he was assured by Arnold that his job was safe despite the impending recapitalization.According to Landers, however, since Arnold's arrival, he was “systematically and deliberately stripped of his authority” as president.Landers contends Arnold began a campaign to “discredit, belittle, demean, and constructively terminate” him.Arnold and other executives stated “Landers had ADD [Attention Deficit Disorder] and was incompetent to perform his job” and “incapable of effectively communicating with anyone in performing his job.”

Landers alleges that these and other statements were made in front of numerous coworkers.He also claims Arnold's behavior towards him was verbally abusive, demeaning, and generally unprofessional and improper.According to Landers, Arnold routinely called him offensive names and used unseemly language towards him in front of upper-level management and other co-workers.In one instance, Landers contends Arnold even threatened him in a highly aggressive and volatile manner when Landers came to the defense of a junior co-worker.Beginning in September 2009, Landers alleges he was forced to sign in and out whenever he left the office and was required by Arnold to enlist the help of other management personnel when communicating with a certain client because Arnold asserted he was not capable of handling these discussions.

Additionally, Landers contends Arnold steadily and purposefully provided incorrect information to him about the status of Bank's management.Landers claims he was not permitted to see documentation regarding the recapitalization or takeover despite repeatedly asking for such information.The pertinent documents revealed a new management team and Board, neither of which listed Landers as a member.Landers also asserts Arnold repeatedly assured him that he would be entitled to receive payment for the “Change in Control” pursuant to the Agreement, which Appellants now refuse.According to Landers, Appellants also refuse to offer him stock options to which he is entitled under the Agreement.

On December 18, 2009, Landers sent a letter to Arnold “recognizing his constructive termination.”Landers expressed he was writing the letter “as a result of [Arnold's] actions over the past six months, especially those over the last 30 days.”In the letter, Landers claims Arnold “acted to effectively destroy [his] authority and ability to perform [his] job.”In one section, the letter states:

You have made a concerted effort to undermine my authority, removed much of my authority, changed my duties, have defamed me in front of co-workers, and generally made it impossible for me to perform as President.You continue to withhold vital information and misrepresent facts.As a result, you have effectively terminated me from my position as President of Atlantic Bank.

Arnold accepted Landers' letter of constructive termination several days later.

In January of 2010, Bank and Holding Company sent a Notice of Special Meeting and Proxy to their shareholders.The Notice contained information regarding new investors and proposed amendments to the Articles of Incorporation.According to Landers, the Notice and Proxy Statement contained incomplete and misleading information concerning the effect the recapitalization would have on shareholders of common stock.⁴Landers alleges he was “forced out” of Bank as a result of the concerns that he expressed regarding Arnold's campaign to provide incorrect information about the recapitalization.In his complaint, Landers states: “As a result of Landers' concerns, and in an effort to eliminate Landers as a potential problem, he was stripped of much of his authority as President, defamed, and then terminated by Atlantic Bank.”

Lastly, Landers contends he was excluded from his role as a director on the Board in “an ongoing effort to freeze [him] out and strip him of his authority.”According to Landers, when he was not permitted to call in to a special Board meeting in May 2010, he went to the meeting in person and was asked to recuse himself.Landers refused to recuse himself and claims he was ejected from the meeting.Landers alleges he is no longer provided necessary information or authority to serve in his capacity as a director.⁵

Landers commenced this action in January 2010.In his complaint, Landers' asserted five causes of action: (i) breach of contract/constructive termination; (ii) slander/slander per se; (iii) intentional infliction of emotional distress; (iv) illegal proxy solicitation pursuant to S.C. Code Ann. § 33–7–220(i)(Supp. 2011);⁶ and (v) wrongful expulsion as a director.Appellants moved to compel arbitration pursuant to the arbitration clause contained in the Agreement and to dismiss or stay the action.The trial court ordered arbitration for Landers' breach of contract/constructive termination claim.However, the trial court denied Appellants' motion to compel arbitration as to the remaining causes of action.In doing so, the court found there was not a significantrelationship between the claims and the Agreement.Alternatively, the court found the allegations underlying the claims were unforeseeable at the time the parties entered into the Agreement.Thus, the trial court stayed the breach of contract claim and ordered that the remaining four claims proceed to court.

II.

“The question of arbitrability of a claim is an issue for judicial determination unless the parties provide otherwise.”Partain v. Upstate Automotive Group,386 S.C. 488, 491, 689 S.E.2d 602, 603(2010).“The determination of whether a claim is subject to arbitration is subject to de novo review.”Id.(citingGissel v. Hart,382 S.C. 235, 240, 676 S.E.2d 320, 323)(2009).However, in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is...