Robinson v. Langenbach
|12 May 2020
|No. SC 97940,SC 97940
|599 S.W.3d 167
|Joan L. ROBINSON, Respondent/Cross-Appellant, v. John F. LANGENBACH, Judy Lanfri f/k/a Judy Longbrook, and Perma-Jack Company, Appellants/Cross-Respondents.
|Missouri Supreme Court
Langenbach, Lanfri and the company were represented by Paul J. Puricelli of Stone, Leyton & Gershman in St. Louis, (314) 721-7011.
Robinson was represented by John G. Beseau of Foley & Mansfield PLLP in St. Louis, (314) 925-5700.
Defendants John F. Langenbach and Judy Lanfri f/k/a/ Judy Longbrook appeal the circuit court's judgment on a jury verdict for plaintiff Joan Robinson on her claim that, as directors of the closely held Perma-Jack Company, they breached their fiduciary duty to her as a shareholder. The defendants argue her claim is really one for wrongful termination, which she could not bring as an at-will employee. They also appeal the circuit court's finding that they engaged in shareholder oppression and its order requiring them to buy Ms. Robinson's Perma-Jack shares. Ms. Robinson cross-appeals the way the circuit court determined the fair value of her shares in the buyout as well as its denial of prejudgment interest and attorney's fees.
This Court affirms. With respect to the breach of fiduciary duty claim, Ms. Robinson sued defendants as directors and majority shareholders for the loss of financial benefit flowing from her minority stock ownership due to her bad-faith removal from her position as company president and her removal from all involvement in the company. She did not sue Perma-Jack itself for lost wages or reinstatement.
And while defendants presented substantial evidence of their good faith, the jury believed Ms. Robinson's contrary evidence as it was entitled to do. That same evidence supported the circuit court's finding of shareholder oppression and its decision to order a buyout of Ms. Robinson's shares in light of the parties’ inability to work together to govern the company and the worthlessness of Ms. Robinson's interest in the company in light of the oppression. The circuit court did not abuse its discretion in determining that, on the particular facts of this case and in light of the overlap in damages asserted on Ms. Robinson's claims for breach of fiduciary duty and for oppression, it was appropriate to apply certain discounts in determining the fair value of her shares. It also did not abuse its discretion in determining that, on these facts, equity did not require it to award prejudgment interest on an unliquidated sum and, for similar reasons, did not abuse its discretion in denying attorney's fees. The judgment is affirmed.
This case comes to the Court following a dispute among three siblings as board members and shareholders of a closely held corporation, Perma-Jack. Perma-Jack is a franchisor of a foundation repair and stabilization system. It was founded by George Langenbach in 1975; he then retired in 1985, and his three children – John F. Langenbach, Judy Lanfri f/k/a/ Judy Longbrook, and Joan L. Robinson – became equal shareholders of Perma-Jack. Together, the three served as its board of directors beginning in 1987.
Perma-Jack's bylaws vest the board of directors with the power to control and manage the corporation, including appointment of a president and secretary and any other officers the board may deem necessary. The bylaws also provide that "[a]ny officer or agent appointed by the Board of Directors may be removed by the Board of Directors whenever in the judgment of the Board the best interests of the corporation shall be served thereby." Under the bylaws, an action of the majority of directors present at a board meeting is an official act of the board.
Founder George Langenbach appointed Ms. Robinson as president and treasurer following his decision to retire in 1985 and after Mr. Langenbach declined the appointment. Before 2012, Mr. Langenbach served as Perma-Jack's vice president and secretary. Ms. Lanfri did not serve as an officer, played no role in Perma-Jack's day-to-day operations, and did not draw a Perma-Jack salary. At some point prior to 2012, Ms. Robinson's son, John, and Mr. Langenbach's daughter, Jessica, also were hired as Perma-Jack employees.
Over time, Mr. Langenbach and Ms. Lanfri ("Defendants") became dissatisfied with Ms. Robinson's management. Although at its peak the company had 15 franchisees, Perma-Jack was losing money between 2008 and 2010 and eventually dropped to a low of six franchisees. The defendants noted that, while the loss of business could be attributed in part to the economic recession, Ms. Robinson spent only about two hours per day at the offices and the other family members also worked fewer than normal business hours. The defendants believed the minimal hours Ms. Robinson devoted to company work resulted in a lack of leadership and that these factors and a lack of professionalism were large causes of the drop in company business.
In 2010, Mr. Langenbach and Ms. Robinson discussed whether Ms. Robinson would be willing to retire or resign. There was conflicting evidence as to whether Ms. Robinson at first agreed to leave but then changed her mind. In any case, she did not retire or resign. Later that year, given the difficulties the company was experiencing, the three siblings and other Perma-Jack employees met, and Mr. Langenbach said he told everyone that they would need to work harder and devote more time to the company. Ms. Robinson did not recall Mr. Langenbach saying everyone needed to work harder, but she did recall everyone discussed "the new [Perma-Jack]," although it was not clear to Ms. Robinson exactly what that meant (it may have included use of licensees rather than franchisees).
All parties agreed that, after this meeting, the defendants never discussed with Ms. Robinson their dissatisfaction with her work, areas for improvement, or any plans to remove her. Nonetheless, from mid-2010 to mid-2012, Mr. Langenbach and his daughter, Jessica, took surreptitious notes of Ms. Robinson's alleged shortcomings. Between 2011 and 2012, the defendants also expressed their displeasure about Ms. Robinson to each other in written communications, including a comment by Ms. Lanfri that Ms. Robinson was not competent to run the company and that she was thinking of selling her stock because Ms. Robinson was going to "take us all down with her." Mr. Langenbach said he hoped she would not sell and asked Ms. Lanfri to make sure, if she were to sell, he and Ms. Robinson would not be equal shareholders as In May 2012, Mr. Langenbach told Ms. Lanfri he wanted to get rid of Ms. Robinson immediately. Ms. Lanfri encouraged him to do so.
Ms. Robinson was not aware her siblings were planning to remove her until she received notice of a special board of directors meeting a few days before it was held in June 2012. The defendants voted to remove her as president and treasurer, although she technically remained on the board. The circuit court found that, thereafter, "she was excluded from [Perma-Jack]’s offices1 and was provided with no salary, severance pay, benefits or dividends as a shareholder of [Perma-Jack]."2 The company terminated her son John's employment the next day.
The defendants voted Mr. Langenbach in as president. In that role, he had the authority to control Perma-Jack's payroll. He began working 60 hours per week and increased his salary from $56,000 to $104,000 then and to $123,000 the following year. He also purchased a new company car for his use and paid himself a $15,000 bonus. His daughter, Jessica, began working 40 hours per week at a salary Mr. Langenbach increased from $52,000 to $75,000 to reflect her "longer and harder work." In 2013, Mr. Langenbach hired his other daughter, Alexis, to work part-time for $600 every two weeks. He also changed from a franchise system to a system of licensing agreements. Mr. Langenbach had been advocating for a shift to licensing agreements for some time, and he said Perma-Jack had gained 10 additional dealers since it adopted that new business approach. Following her removal, Ms. Robinson sued the defendants for breach of fiduciary duty to her as a shareholder.3 She also sued the defendants and Perma-Jack under section 351.4944 and requested one of "the panoply of equitable remedies available to the Court, for example, dissolution of [Perma-Jack], appointment of a receiver and/or custodian, and/or an order requiring the purchase of [Ms. Robinson]’s shares by any one or more Defendants following a court-ordered appraisal of the fair value thereof." The parties filed cross-motions for summary judgment.
The circuit court sustained the defendants’ motion, finding they had authority to remove Ms. Robinson. Ms. Robinson appealed. The appellate court found the defendants, as a two-thirds majority of Perma-Jack's board of directors, could remove Ms. Robinson as an officer of the company, but it remanded because disputed issues of material fact remained regarding whether the defendants breached their fiduciary duties to Ms. Robinson or committed shareholder oppression. Robinson v. Lagenbach, 439 S.W.3d 853, 861 (Mo. App. 2014) .
On remand, the circuit court granted Ms. Robinson's motion for a separate jury trial on her breach of fiduciary duty claim, while it would hear her equitable claim for shareholder oppression. It overruled the defendants’ motion in limine to exclude evidence of Mr. Langenbach's and his daughters’ salary increases. At trial, the defendants renewed their objection but also questioned their own experts about the appropriateness of these salaries given Perma-Jack's value as a company.
The jury returned a verdict for Ms. Robinson and awarded her $390,000 for breach of fiduciary duty. After a bench trial, the...
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