Rains v. Jones, 092418 FED8, 17-2759

Docket Nº:17-2759
Opinion Judge:LOKEN, Circuit Judge.
Party Name:Donna K. Rains; Alice Belle Laurendine Plaintiffs-Appellants v. Oscar Homer 'O.H.' Jones, III, et al. Defendants-Appellees
Judge Panel:Before SMITH, Chief Judge, WOLLMAN and LOKEN, Circuit Judges.
Case Date:September 24, 2018
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Donna K. Rains; Alice Belle Laurendine Plaintiffs-Appellants


Oscar Homer "O.H." Jones, III, et al. Defendants-Appellees

No. 17-2759

United States Court of Appeals, Eighth Circuit

September 24, 2018

Submitted: April 10, 2018

Appeal from United States District Court for the Eastern District of Arkansas - Little Rock

Before SMITH, Chief Judge, WOLLMAN and LOKEN, Circuit Judges.

LOKEN, Circuit Judge.

This is a dispute among six siblings primarily over ownership and control of OKISDA, Inc. (OKISDA), a family corporation their mother, Eunice Ashabranner, established in 1974. In their First Amended Complaint, the Plaintiffs, sisters Donna Rains and Alice Laurendine, assert multiple claims against OKISDA, their brother, Oscar Homer Jones, III ("O.H."), and sisters Karen Loden, India Huddleston, and Sandra Ballard. After substantial, contentious discovery, the district court1 concluded that "nearly all [the claims] hinge on whether the transfer of Class A [voting common] stock from [Ashabranner's revocable] Trust to Mr. Jones was valid." The court held the transfer valid and granted Defendants summary judgment dismissing all claims. Plaintiffs appeal, contending the court made five reversible errors. Reviewing the grant of summary judgment de novo, we disagree and affirm.

I. Background and Procedural History.

In 1974, Ashabranner (nee Eunice Jones) incorporated OKISDA to own and operate roughly 1, 100 acres of farmland in Jefferson County, Arkansas. The Articles of Incorporation authorized OKISDA to issue 26, 000 shares of Class A voting common stock and 26, 000 shares of Class B non-voting common stock. At the June 1, 1974, organizational meeting, attended by incorporator Ashabranner and her attorney, the corporation resolved that Ashabranner would be the sole director; that Ashabranner would serve as President, Vice President, and Secretary-Treasurer; and that Ashabranner subscribed for the authorized 26, 000 shares of Class A voting common stock and 26, 000 shares of Class B non-voting common stock in exchange for her interest in the Jefferson County farmland. Later that year, Ashabranner transferred 4, 333 shares of Class B non-voting stock to each of her six children. As of December 1974, Ashabranner owned 26, 000 Class A shares and two Class B shares, and each child owned 4, 333 Class B shares.

More than twenty-five years later, Ashabranner transferred her 26, 000 Class A voting shares and two Class B non-voting shares to the Eunice K. Ashabranner Trust, a revocable trust drafted by an attorney in Conway, Arkansas. But by 2008, trustee Ashabranner was dissatisfied with the Trust's successor trustee provision and consulted her accountant, Kirk Stone, and attorney Ted Drake, who had drafted a prior will in the 1980s and served as counsel to OKISDA. Drake testified that the Conway attorney "had done a revocable trust that wasn't at all what Miss Ashabranner wanted." It bothered Ashabranner that the Trust "favored Donna and made her trustee and gave her control over OKISDA." On February 1, 2011, Ashabranner signed a Second Restatement to the Trust drafted by Drake. Among other changes, the restated Trust appointed O.H. the primary successor Trustee, followed by Loden and Huddleston. Drake's notes from the meeting state: "Mrs. A was alone and obviously mentally competent. We went over trust and . . . order of trustees. She said that is what she has always wanted. O.H. knows the business. Other two girls know it next best."

In March 2012, Ashabranner met with Stone, expressed concern that her daughters might pressure O.H. to sell the farm, and said she wanted to give O.H. control of OKISDA. After confirming that Ashabranner understood the import of a decision to give up her sole control of the corporation, Stone emailed Ted Drake that "[Ashabranner] would like to gift O.H. all the voting stock. . . . She understands this gives O.H. control now. She is ok with O.H. having control. She does not want to worry about the daughters being able to s[ell] the farm without O.H.'s approval." Drake then orchestrated a series of actions to implement Ashabranner's decision.

On June 15, 2012, Ashabranner as sole voting shareholder elected herself, O.H., Huddleston, and Loden to OKISDA's Board of Directors. The next day, at a special meeting, the expanded Board elected new officers2 and added a provision to the Bylaws allowing "Informal Action" without a meeting if a majority of the Board signed written consents describing the actions taken. The following month, the Board amended the Articles of Incorporation to authorize the issuance of 26, 000 shares of Class C non-voting stock "with distribution on liquidation of the corporation limited to [$1.00 per share] par value." By contrast, the Class A and Class B shares continued to have a par value of one dollar per share, but there was no limit to the per share distribution they would receive upon liquidation. At the same meeting, the Board authorized OKISDA to exchange 25, 998 Class C shares for 25, 998 Class A voting shares held by Ashabranner's revocable Trust. After this exchange, only two Class A voting shares remained outstanding, held by the Trust. On September 24, 2012, with Ashabranner as sole Trustee, the Trust transferred these two shares to O.H.

Rains, Laurendine, and Ballard received no notice of these 2012 transactions. On August 14, 2013, Ashabranner sent Rains, Laurendine, and Ballard a letter expressing "my disappointment in...

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