Murray v. Conseco, Inc., 29A02-0108-CV-552.

• Decision Date: 12 April 2002
• Docket Number: No. 29A02-0108-CV-552.,29A02-0108-CV-552.
• Citation: 766 N.E.2d 38
• Parties: Dennis MURRAY, Sr., Appellant-Plaintiff, v. CONSECO, INC., Appellee-Defendant.
• Court: Indiana Appellate Court

766 N.E.2d 38

Dennis MURRAY, Sr., Appellant-Plaintiff, v. CONSECO, INC., Appellee-Defendant.

No. 29A02-0108-CV-552.

Court of Appeals of Indiana.

April 12, 2002.

Rehearing denied June 3, 2002.

Michael A. Wilkins, Ice Miller Donadio & Ryan, Indianapolis, IN, Attorney for Appellant.

Joseph H. Yeager, Jr., Scott D. Himsel, Shawna Meyer Eikenberry, Baker & Daniels, Indianapolis, IN, Attorneys for Appellee.

OPINION

BARNES, Judge.

Case Summary

Dennis Murray, Sr., appeals the trial court's grant of summary judgment in favor of Conseco, Inc., in Murray's action challenging his removal from Conseco's board of directors.¹ We affirm.

Issue

The sole restated issue that we consider today is whether the Indiana Business Corporation Law ("IBCL") authorized Conseco's board of directors, by a majority vote, to remove Murray from the board without cause, even though Murray had been elected to the board by Conseco's shareholders.

Facts

Conseco's shareholders first elected Murray to the board of directors in 1994. He was twice re-elected to three-year terms on the board, most recently in June 2000. At the time of this election, there were 330,000,000 outstanding shares of common stock and "Series F" preferred stock that were eligible to vote for directors. 288,934,684 votes were cast in Murray's favor. On December 12, 2000, the board of directors voted to oust Murray from his directorship. Murray asserts that his removal came about because he wanted to pursue litigation, contrary to the views of management and others on the board, against certain third parties whom he claimed were responsible for Conseco's recent and well-publicized financial difficulties and decrease in the value of Conseco stock. Conseco is silent as to the reasons for Murray's removal, but it has not attempted to label Murray's removal as being "for cause." Conseco's articles of incorporation and by-laws do not discuss the removal of directors by the board.

Murray filed a declaratory judgment action on the same day he was voted off the board, which challenged his removal from the board and sought damages resulting from Conseco's alleged "wrongful acts." Appellant's App. p. 24. Conseco filed a motion to dismiss and for summary judgment on February 7, 2001. Murray responded with a cross motion for partial summary judgment, arguing that his removal from Conseco's board violated the IBCL as a matter of law and requesting that the trial court order his reinstatement. After conducting a hearing, the trial court entered summary judgment in favor of Conseco on July 20, 2001, concluding Murray's removal was in accordance with the IBCL. Murray now appeals.

Analysis

This case centers on the proper interpretation and application of Indiana Code Section 23-1-33-8(a) & (b), which contains arguably inconsistent language regarding who may remove directors and how they may go about doing so. This portion of the IBCL provides:

(a) Directors may be removed in any manner provided in the articles of incorporation. In addition, the shareholders or directors may remove one (1) or more directors with or without cause unless the articles of incorporation provide otherwise.

(b) If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director.

Murray's essential argument is that a director elected by the shareholders, like him, may only be removed by the group of shareholders that elected him or her pursuant to subsection (b), and that the board's authority to remove directors is limited only to those directors who had been appointed by the board to fill an unexpected vacancy. Conseco counters that the second sentence of subsection (a) provides the board with unlimited authority to vote directors off the board, and subsection (b) is only relevant if the removal of a director is put to a shareholder vote. We conclude that Conseco's proposed interpretation of the statute best harmonizes the tension between subsections (a) and (b) and gives effect to the legislative intent and policy behind this statute and the IBCL generally, while Murray's interpretation would eviscerate that intent and render part of the statute essentially meaningless, namely, the second sentence of subsection (a).

This case is before us after the grant of a summary judgment motion. A grant of summary judgment requires that no genuine issue of material fact exist and that the movant be entitled to judgment as a matter of law. Ind. Trial Rule 56(C); Lake County Equal Opportunities Council v. Greer, 735 N.E.2d 206, 208 (Ind.2000). On appeal from summary judgment, the reviewing court analyzes the issues in the same fashion as the trial court, de novo. Greer, 735 N.E.2d at 208. The court must also view the pleadings and designated materials in the light most favorable to the non-movant. Id. A grant of summary judgment may be affirmed upon any theory supported by the designated materials. Hibler v. Conseco, Inc., 744 N.E.2d 1012, 1018 (Ind.Ct.App.2001). Once a summary judgment movant has made a prima facie showing that there is no genuine issue of material fact, the burden falls upon the non-moving party to identify a factual dispute that would preclude summary judgment. Abbott v. Bates, 670 N.E.2d 916, 921 (Ind.Ct.App.1996).

Additionally, this case turns on a question of statutory interpretation, which is a question of law reserved for the courts that is reviewed de novo. Spears v. Brennan, 745 N.E.2d 862, 869 (Ind.Ct.App. 2001). When a statute is clear and unambiguous on its face, we may not interpret it. Schafer v. Sellersburg Town Council, 714 N.E.2d 212, 215 (Ind.Ct.App.1999), trans. denied. Rather, words are to be given their plain, ordinary, and usual meaning unless a contrary purpose is clearly shown by the statute itself. Id. We engage in statutory interpretation only if the statutory language is ambiguous, or susceptible to more than one interpretation. Foster v. Evergreen Healthcare, Inc., 716 N.E.2d 19, 25 (Ind.Ct.App.1999), trans. denied. If a statute is ambiguous, our main objective in construing that statute is to determine, effect, and implement the intent of the legislature. Rheem Mfg. Co. v. Phelps Heating & Air Conditioning, Inc., 746 N.E.2d 941, 948 (Ind.2001) (quoting Melrose v. Capitol City Motor Lodge, Inc., 705 N.E.2d 985, 989 (Ind.1998)). In ascertaining this intent, we "presume that the legislature did not enact a useless provision" and that "[w]here statutory provisions are in conflict, no part of a statute should be rendered meaningless but should be reconciled with the rest of the statute." Id. (quoting Robinson v. Wroblewski, 704 N.E.2d 467, 474-75 (Ind.1998)). One additional rule of statutory construction is that it is just as important to recognize what the statute does not say as it is to recognize what it does say. Schafer, 714 N.E.2d at 217. Here, we will concede that Section 23-1-33-8 is ambiguous in that subsection (b) may in isolation be construed as contemplating that only shareholders are entitled to remove shareholder-elected directors. Indeed, such a construction would be consistent with the entirety of the Model Business Corporation Act ("MBCA") § 8.08 upon which Section 23-1-33-8 was based. That section of the MBCA is entitled "Removal of Directors by Shareholders" and provides in part:

(a) The shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause.

(b) If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him.

Under Section 8.08 of the MBCA, therefore, it is plain that only shareholders may remove directors.² Subsection (b) clarifies that where a director was elected by a specific voting group of shareholders, only that voting group may vote for his or her removal.

Our General Assembly, in enacting the IBCL, rejected a verbatim enactment of MBCA § 8.08(a), while adopting subsection (b) with no substantive changes. In fact, subsection (a) of XX-X-XX-X bears very little resemblance to subsection (a) of MBCA § 8.08. The General Assembly made a concerted effort to point out the differences between Section 23-1-33-8(a) and MBCA § 8.08(a) by stating in the "Official Comments" to the statute that "[t]he second sentence of the BCL subsection [a], authorizing the board itself to remove directors `with or without cause unless the articles of incorporation provide otherwise,' is found in neither the [MBCA] nor the [predecessor to the IBCL]...." The General Assembly also made it clear that "[u]nder the BCL provision, a corporation that wishes to adopt the [MBCA] rule (or similar provisions) authorizing shareholder removal of directors, or to limit or eliminate the board's authority to remove directors, must do so in its articles of incorporation." (Emphasis added).

The "Official Comments" to the IBCL "may be consulted by the courts to determine the underlying reasons, purposes, and policies of [the IBCL] and may be used as a guide in its construction and application." Ind.Code § 23-1-17-5. Our supreme court has recognized the IBCL "Official Comments" as "authoritative." Fleming v. International Pizza Supply Corp., 676 N.E.2d 1051, 1054 n. 5 (Ind. 1997). Those comments have plainly indicated the legislative intent behind Section 23-1-33-8(a): if a corporation is required to indicate its desire to "limit or eliminate the board's authority to remove directors" in the articles of incorporation, it logically follows that the General Assembly intended for that authority otherwise to be limitless. The plain language of subsection (a) supports that construction: "directors may remove one (1) or more directors with or without cause unless the articles of incorporation provide otherwise." Furthermore, we must recognize what the statute does not say as much as what it does say. To insert...