Leithead v. Banyan Corp.
| Decision Date | 23 September 2005 |
| Docket Number | 1040688. |
| Citation | 926 So.2d 1025 |
| Parties | W. Bruce LEITHEAD III v. BANYAN CORPORATION. |
| Court | Alabama Supreme Court |
K.W. Michael Chambers and Adam T. Williamson of Chambers & Williamson, L.L.C., Mobile, for appellant.
Cinda R. York and Kirk D. Smith of Campbell, Waller & Poer, L.L.C., Birmingham, for appellee.
W. Bruce Leithead III appeals from an order entered by the Shelby Circuit Court dismissing his complaint on the basis that the court lacked jurisdiction over Banyan Corporation ("Banyan"). We reverse and remand.
Leithead is an Alabama resident. Banyan was formed in 1978 as an Oregon corporation with its principal place of business in California. In 1995 Banyan acquired DoubleCase Corporation ("DoubleCase"), a Kansas corporation with its principal place of business in Colorado, as a wholly owned subsidiary. In May 2001 Banyan acquired Chiropractic USA, Inc. ("Chiropractic"), a Colorado corporation with its principal place of business in Louisiana, also as a wholly owned subsidiary.
In the summer of 2001, Leithead, anticipating being named president of DoubleCase, sought and received Banyan's permission to relocate DoubleCase's principal place of business from Colorado to Alabama. On November 1, 2001, Leithead purportedly entered into a written employment contract with DoubleCase; the contract referred to Leithead as president of DoubleCase. The contract provided, among other things, that Leithead's compensation package would include 400,000 shares of Banyan's common stock, as well as options to purchase an additional 400,000 shares of Banyan's common stock. In the event DoubleCase terminated Leithead's employment before December 31, 2003, Leithead would immediately be entitled to the 400,000 shares promised as compensation and would have 60 days in which to exercise all stock options. Three entities are listed as parties to the contract: DoubleCase, Leithead, and Banyan. There is a signature line for Banyan as the "parent" company, under which is typed the name "Michael Gelmon, C.E.O."; this line is signed by Michael Gelmon. The signature line provided for execution by DoubleCase proposed that it would be signed by "Michael Gelmon, Director." That entry is marked through with a large "X," followed by the cursive initials "MG." Michael Gelmon subsequently stated in an affidavit that he had marked through the DoubleCase signature line because it incorrectly listed him as a director of DoubleCase, which he asserted he was not and has never been. Whatever Gelmon's relationship with DoubleCase, no other person signed the contract on behalf of DoubleCase.
According to Leithead, Banyan exercised significant control over DoubleCase. He makes repeated reference to the Gelmon brothers, Michael and Cory, who held a controlling interest in Banyan. Leithead's affidavit filed in opposition to Banyan's motion for a dismissal on the ground of lack of jurisdiction states, in pertinent part:
As Leithead states in the final paragraph quoted above, Banyan's annual report submitted to the Securities and Exchange Commission, which is included in the record, on page 15 states that "[Banyan] currently has management agreements in place with Cory Gelmon, Michael Gelmon, and [Leithead], the president of DoubleCase." Additionally, as Leithead alleges, page 38 of the same report indeed states that "[i]n November 2001, [Banyan] entered into a two-year employment agreement... expiring on December 31, 2003, with the president of DoubleCase."
Over time, DoubleCase's financial health deteriorated, resulting in the virtual collapse of the corporation, at which time Banyan sold DoubleCase to another company. This sale and Leithead's consequent termination as president of DoubleCase occurred on October 30, 2002.
Before the sale of DoubleCase, the Gelmons had invited Leithead to meet with them in Canada. Leithead alleges that at that meeting they offered him employment as an area developer for Chiropractic. Leithead returned to Alabama, and during the next two or three months, as DoubleCase was sold, he communicated by telephone at least 12 times with representatives of Banyan, about half of those telephone conversations being with one or both of the Gelmons. Leithead even met with the Gelmons in Louisiana in November 2002. According to both Leithead's complaint and his affidavit, in telephone conversations during that time, Banyan representatives told Leithead to refrain from exercising the stock options he became entitled to exercise as of the date of his termination as president of DoubleCase — and which would expire 60 days from that date — explaining that those stock options would "roll over" into Leithead's new position with Chiropractic. Leithead complied with these instructions and refrained from exercising his stock options.
On December 29, 2002, Leithead's stock options expired. Some time between November 2002 and April 2003, Banyan made the corporate decision to retain only chiropractors as area developers of Chiropractic; Leithead is not a chiropractor. In April 2003, Michael Gelmon telephoned Leithead and left him a voice mail, informing him of Banyan's decision to use only chiropractors as area developers.
On January 9, 2004, Leithead filed the underlying action in the Mobile Circuit Court against Banyan, Chiropractic, and DoubleCase. His complaint alleged that Banyan, Chiropractic, and DoubleCase were liable for breach of contract and negligence. On March 11, 2004, Banyan and Chiropractic filed a motion to dismiss pursuant to Rule 12(b)(2), Ala. R. Civ. P., arguing that the trial court lacked personal jurisdiction over them.1 Pursuant to an agreement of the parties, the court subsequently transferred the underlying action to the Shelby Circuit Court. That court heard oral argument, apparently not reported and transcribed, after which it granted the motions to dismiss filed by Banyan and Chiropractic. The trial court certified, pursuant to Rule 54(b), Ala. R. Civ. P., that there was no just reason for delay and that its order as to each motion to dismiss constituted a final judgment. Leithead timely appealed the judgment as to Banyan only.
"`"An appellate court considers de novo a trial court's judgment on a motion to dismiss for lack of personal jurisdiction."'" Corporate Waste Alternatives, Inc. v. McLane Cumberland, Inc., 896 So.2d 410, 413 (Ala.2004) (quoting Wenger Tree Serv. v. Royal Truck & Equip., Inc., 853 So.2d 888, 894 (Ala.2002), quoting in turn Elliott v. Van Kleef, 830 So.2d 726, 729 (Ala.2002)). Further:
A state has jurisdiction over a person or corporation so long as its "long-arm statute" reaches the person or corporation...
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