RF & P Corp. v. Little

• Decision Date: 25 February 1994
• Docket Number: Nos. 930376,930379,s. 930376
• Citation: 440 S.E.2d 908,247 Va. 309
• Court: Virginia Supreme Court
• Parties: RF & P CORPORATION v. George B. LITTLE, et al. VIRGINIA RETIREMENT SYSTEM, et al. v. George B. LITTLE, et al. Record

Page 908

440 S.E.2d 908

247 Va. 309

RF & P CORPORATION v. George B. LITTLE, et al.

VIRGINIA RETIREMENT SYSTEM, et al. v. George B. LITTLE, et al.

Record Nos. 930376, 930379.

Supreme Court of Virginia.

Feb. 25, 1994.

Robert E. Eicher (David R. Johnson; Williams, Mullen, Christian & Dobbins, on briefs), for appellant in Record No. 930376.

J. Burke McCormick; George B. Little (Janet Singletary Thomas; Little, Parsley & Cluverius, on brief), for appellees in Record No. 930376.

Anthony F. Troy; Richard L. Walton, Jr., Sr. Asst. Atty. Gen. (Stephen D. Rosenthal, Atty. Gen., Mary Yancey Spencer, Deputy Atty. Gen.; Michael K. Jackson, Sr. Asst. Atty. Gen.; James C. Roberts; Alexander M. Macaulay; Mays & Valentine, on briefs), for appellants in Record No. 930379.

J. Burke McCormick; George B. Little (Janet Singletary Thomas; Little, Parsley & Cluverius, on brief), for appellees in Record No. 930379.

Present: All the Justices.

KEENAN, Justice.

These appeals arise from the trial court's interpretation of the Virginia Freedom of Information Act, Code §§ 2.1-340 to -346.1 (the Act). The specific issues presented are whether the trial court erred: (1) in ruling that the Board of Directors of RF & P Corporation (the RF & P Board) is a "public body," within the meaning of the Act; (2) in finding that Jacqueline G. Epps willfully and knowingly violated the Act; and (3) in awarding George B. Little costs and attorney's fees of $133,170.55 under the Act.

I.

In December 1991, Little filed his petition for injunctive and other relief under the Act, naming, among others, the Virginia Retirement System (VRS), the Board of Trustees of the Virginia Retirement System (the VRS Board), System Holdings, Inc. (SHI), the RF & P Board, and Epps, Chair of the VRS Board and a director of SHI. He asked the trial court, among other things, to find that the defendants had violated the Act and to enjoin them from any further violations. Little also asked the trial court to find that Epps had willfully and knowingly violated the Act and to award him reasonable costs and attorney's fees.

VRS was established by the General Assembly to maintain a retirement system for state employees. It is administered by a Board of Trustees appointed by the Governor. Code § 51.1-109. The VRS Board is authorized by statute "to acquire and retain every kind of property and every kind of investment," using the "judgment of care ... which [persons] of prudence, discretion, and intelligence exercise in the management of their own affairs." Code § 51.1-116.

The evidence shows that in March 1990, as part of its investments, VRS held approximately 20% of the stock in RF & P Corporation (RF & P). Based on this interest, VRS was entitled to appoint two directors to the RF & P Board. The VRS Board appointed two of its members, Epps and Mark T. Finn, to those positions.

In June 1991, as part of its plan to acquire ownership of 100% of RF & P's stock as authorized by Code § 51.1-116, VRS created SHI, a single-purpose, non-profit corporation, for the purpose of holding the RF & P stock. The RF & P stock is SHI's only asset.

As the sole shareholder of SHI, VRS appointed the SHI Board of Directors. The initial directors of SHI were Epps and Finn, and a third member who later resigned. In November 1991, Walter J. Mika, Jr., was named a director. Epps, Finn, and Mika were all VRS Board members as well.

VRS eventually acquired 100% of RF & P's stock through its ownership of SHI. However, RF & P and each of its subsidiaries have continued to operate as for-profit Virginia stock corporations. These corporations do not receive any appropriations from the Commonwealth. The value of VRS's investment in RF & P is approximately $500,000,000.

Upon its acquisition of 100% of RF & P's stock, VRS, through SHI, was authorized by Code § 51.1-151 to appoint all the members of the RF & P Board. The "non-public" members of the RF & P Board resigned in October 1991, leaving only Epps and Finn as RF & P Board members. VRS authorized SHI to appoint new directors to the vacant positions on the RF & P Board. Epps and Finn, acting both as Board members of SHI and as the only remaining members of the RF & P Board, appointed five new directors to the RF & P Board.

In February 1991, Little had written a letter to VRS, informing it that he had not been receiving notice of VRS meetings, which he earlier had requested pursuant to Code § 2.1-343. In that letter, Little again requested that he be notified of meetings both of the VRS Board and of all committees and subcommittees thereof.

On August 15, 1991, at a meeting of the VRS Board of which Little was notified, Epps initially refused to allow a photographer from the Richmond News Leader to take photographs of the meeting, stating, "I know the law and there is nothing that says you have to let someone take pictures." Epps testified that she had directed Glen Pond, VRS's Director, to seek advice from the Office of the Attorney General regarding this request. Relying on what she understood that advice to be, Epps initially prohibited the taking of any photographs. However, after an attorney representing the Richmond News Leader came to the meeting and read portions of Code § 2.1-343 to her, Epps ultimately allowed the photographs to be taken.

On November 4, 1991, the SHI Board held a meeting to which the VRS Board members were invited. Epps testified that she was "shocked" that all the members of the VRS Board attended. She stated that she had scheduled the meeting to discuss hiring a consultant for SHI. Epps conceded, however, that VRS business also was discussed at the meeting. Little was not notified of this meeting.

S. Buford Scott, a VRS Board member, testified that VRS business was discussed at the meeting, including the fact that Epps and Finn had failed to consult any other members of the VRS Board concerning their appointment of the new RF & P directors. Scott stated that several VRS Board members were upset about Epps's and Finn's conduct, and that one member stated an opinion that the VRS Board had been "blind sided" by their actions.

Scott also testified that he was not furnished with a copy of the Act, either when he was appointed to the VRS Board in 1984 or when he was reappointed in 1988. Epps also was not furnished with a copy of the Act when she was appointed to the VRS Board in 1990, and she testified that she was not aware of this requirement in the Act.

Epps testified that she was familiar with the Act, having interpreted its provisions as part of her prior duties as an Assistant Attorney General. However, Epps also stated that she was not familiar with every provision of the Act. The record also shows that, earlier in Epps's tenure as VRS Board Chair, Little had filed another suit against VRS under the Act. In that case, a judge of the Circuit Court of the City of Richmond ruled that VRS had committed technical violations of the Act.

Here, after a two-day hearing, by letter opinions and order, the trial court held, among other things, that the RF & P Board "was effectively created as a committee to perform VRS's function of investing for the state employee retirement plan; therefore, the Board is a public body subject to [the Act]." The trial court also held that Epps had willfully and knowingly violated the Act and ordered her to pay $250 to the State Literary Fund, pursuant to the civil penalty provision of Code § 2.1-346.1.

The trial court enjoined VRS, the VRS Board, and "committees or subcommittees of the Board" from holding any further meetings without complying with all requirements of the Act. However, the trial court, noting "the uniqueness of the relationship" between VRS and the RF & P Board, suspended execution of "such portion of the VRS injunction which reaches to the RF & P Board of Directors" during the pendency of this appeal. Finally, the trial court found that Little had substantially prevailed in his suit and, pursuant to Code § 2.1-346, ordered that he recover $133,170.55 in attorney's fees from VRS and SHI, jointly and severally. These appeals followed.

II.

RF & P argues that the trial court erred in ruling that the RF & P Board is a "public body," within the meaning of the Act. RF & P contends that the trial court's holding disregards the settled principle that a corporation is a legal entity completely distinct from its shareholders. RF & P further asserts that the record does not support the trial court's decision to "gently lift" the corporate veil and to "look realistically at the relationship between the managing boards of VRS, SHI, and RF & P."

In response, Little first contends that, since the General Assembly amended the Act in 1993 to include RF & P and SHI specifically within the Act's definition of "public body," the issue raised by RF & P is moot. Little also argues that resolution of the RF & P Board's status as a "public body" under the Act does not require a piercing or lifting of the corporate veil. Rather, Little asserts that, because the Act must be liberally construed, the pre-amendment definition of "public body" applied by the trial court plainly encompasses the RF & P Board. We disagree with Little.

Initially, we hold that RF & P's appeal is not moot. While the trial court did not order direct injunctive relief against the RF & P Board, the court stated in its final order that since the RF & P Board "is a committee or subcommittee of the VRS Board of Trustees, meetings held by the RF & P Board of Directors in violation of [the Act] would also be in conflict with the specific injunction against VRS." Thus, the trial court recognized that the terms of its injunction covered the RF & P Board's actions.

Injunctive relief under the Act is an "extraordinary and drastic remedy [and] is not to be casually or perfunctorily ordered." Nageotte v. King George County, 223 Va. 259, 270, 288 S.E.2d 423, 428 (1982). If this Court does not address the issue whether the...