Roussel v. Tidelands Capital Corp.

• Decision Date: 29 July 1977
• Docket Number: Civ. A. No. 76-G-1724-S.
• Citation: 438 F. Supp. 684
• Parties: Louis J. ROUSSEL, Plaintiff, v. TIDELANDS CAPITAL CORPORATION, et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

438 F. Supp. 684

Louis J. ROUSSEL, Plaintiff, v. TIDELANDS CAPITAL CORPORATION, et al., Defendants.

Civ. A. No. 76-G-1724-S.

United States District Court, N. D. Alabama, S. D.

July 29, 1977.

Robert M. Alton, Jr., Alton & Leavell, Montgomery, Ala., for plaintiff.

J. Darrell Jordan, pro se.

Richard H. Gill, Hobbs, Copeland, Franco & Screws, Montgomery, Ala., for Gibraltar Life Ins. Co. (dismissed 1/31/76).

Charles M. Crook, Smith, Bowman, Thagard, Crook & Culpepper, Montgomery, Ala., and Drayton N. Nabers, Jr., and George G. Lynn, Cabaniss, Johnston, Gardner, Dumas & O'Neal, Birmingham, Ala., for American Tidelands Life Ins. Co.

MEMORANDUM OPINION

GUIN, District Judge.

This cause is before the court on plaintiff's motion for rehearing or for new trial and motion for recusal. This action was filed solely as a derivative action on behalf of American Tidelands Life Insurance Company ("American Tidelands") by the plaintiff, Louis J. Roussel, against nineteen individual and corporate defendants. The purported occasion for filing this action was a proposed tender offer by American Tidelands for approximately 380,000 shares or some 51 percent of the outstanding stock of The Gibraltar Life Insurance Company of America, of Dallas, Texas. Roussel is a resident of New Orleans, Louisiana. He is an experienced businessman and financier with interests in insurance, banking, real estate and oil and gas enterprises. The defendant, American Tidelands, in whose behalf plaintiff sought to maintain this action, is an Alabama insurance company with its principal place of business in Birmingham, Alabama. Approximately 67.5 percent of its stock is owned by the defendant, Tidelands Capital Corporation ("Tidelands Capital"), a Louisiana business corporation which is a publicly held holding company. The balance of American Tidelands' stock is owned by some 4,000 minority shareholders, including plaintiff, who owns approximately .9 percent of American Tidelands' outstanding stock. Approximately 97 percent of Tidelands Capital's total assets are its holdings of American Tidelands stock. The complaint alleged that the proposed tender offer would render American Tidelands insolvent and force it into receivership. The tender offer was consummated shortly after the complaint was filed. On February 1, 1977, acting on defendants' motion to dismiss, this court entered an order dismissing with prejudice this derivative action under Rule 23.1 of the Federal Rules of Civil Procedure on the ground that plaintiff did not fairly and adequately represent the interests of the defendant, American Tidelands, for reasons which are reviewed below in the discussion of the motion for rehearing.

The issue presented by defendants' motion to dismiss, insofar as relevant to the motion for rehearing, is whether it appears that plaintiff fairly and adequately represents the interests of American Tidelands' shareholders in enforcing the rights of American Tidelands. The court has been guided by definitive pronouncements of the United States Supreme Court on the nature of the plaintiff in a derivative lawsuit. In the leading case of Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1948), the Court described the derivative plaintiff as follows:

A stockholder who brings suit on a cause of action derived from the corporation assumes a position, not technically as a trustee perhaps, but one of a fiduciary character. He sues, not for himself alone, but as representative of a class comprising all who are similarly situated. The interests of all in the redress of the wrongs are taken into his hands, dependent upon his diligence, wisdom and integrity. And while the stockholders have chosen the corporate director or manager, they have no such election as to a plaintiff who steps forward to represent them. He is a self-chosen representative and a volunteer champion.

337 U.S. at 549, 69 S.Ct. at 1227, 93 L.Ed. at 1538. It is in this light that the court finds plaintiff cannot meet the adequacy of representation requirement of Rule 23.1.

The evidence demonstrates that the plaintiff had sought to gain control of Tidelands Capital and its American Tidelands subsidiary during the year prior to the filing of this lawsuit. In the fall of 1975, a Louisiana group, financed by the plaintiff, commenced a take over bid for Tidelands Capital. This group sent out some one or two thousand postcards and made hundreds of telephone calls to Tidelands Capital stockholders soliciting the sale of Tidelands Capital stock. Altogether, plaintiff or companies controlled by him or his family acquired in excess of 20 percent of Tidelands Capital's outstanding stock.

American Tidelands' and Tidelands Capital's management resisted this take over bid. They reported the activities of plaintiff's group to the Securities and Exchange Commission, which initiated an investigation of plaintiff's activities. They also turned to the defendant, Western Preferred Corporation ("Western Preferred"), of Denver, Colorado, and negotiated for it to make a tender offer for Tidelands Capital's stock in order to prevent plaintiff from acquiring control of Tidelands Capital and American Tidelands. Thereafter, Western Preferred (through its wholly-owned subsidiary, Western Preferred Life Insurance Company, also a defendant), made two public cash tender offers for Tidelands Capital stock, and through these offers acquired approximately 62 percent of Tidelands Capital's outstanding stock.

These tender offers resulted in Western Preferred's acquiring control of Tidelands Capital and American Tidelands. They defeated the efforts of plaintiff's group to acquire control of these companies. Following the failure of plaintiff's group to gain control of these companies, plaintiff swore in testimony before the Securities and Exchange Commission that the Western Preferred group "will be in the court-house a hell of a long time."

Plaintiff's activities, including this lawsuit, demonstrate his intention to fulfill that declaration. First, he sought to have the acquisition of control of American Tidelands by Western Preferred disapproved by the Alabama Commissioner of Insurance. When the Commissioner approved the acquisition, plaintiff appealed to the Alabama courts. His appeal was dismissed. Then, in August of 1976, when American Tidelands proposed the Gibraltar tender offer, plaintiff filed this lawsuit to block its consummation. When a reorganization between American Tidelands and Tidelands Capital was announced in November 1976, plaintiff amended his complaint herein and sought to enjoin the reorganization. Following an evidentiary hearing, this court denied plaintiff preliminary injunctive relief against that reorganization. Now, weeks after final judgment of dismissal was entered in this case, he has filed motions for rehearing and for recusal.

Roussel's public record establishes a total and habitual disdain and contempt for law and fiduciary responsibility. The record shows that he has testified falsely under oath, violated the federal banking laws, violated the corporate rights of minority stockholders, and violated his fiduciary duty to minority stockholders.

In Schmitt v. Roussel, Dixie Homestead Ass'n v. Schmitt 181 So. 218 at 220 (Ct. App.La.1938), the Court of Appeals of Louisiana specifically found that Roussel testified falsely under oath: "Roussel's evidence cannot be favorably considered inasmuch as we find that he testified untruthfully . . .. The maxim `falsus in uno, falsus in omnibus' applies and therefore no part of his statement is entitled to credence."

In 1964, the Louisiana Court of Appeals expressly found, following a Roussel takeover of a life insurance company, that his treatment of the minority stockholders of that company so flagrantly violated his fiduciary and corporate duties to the stockholders that a judicial receiver was required to be appointed to protect the stockholders from Roussel. West v. Certified Credit Corp., 162 So.2d 589, 596 (Ct.App.La.1964).

Again, in Noe v. Roussel, 299 So.2d 481, 484 (Ct.App.La.1974), the Louisiana Court of Appeals found Roussel had breached his fiduciary duty to the minority stockholder of a real estate corporation by causing its principal asset to be sold to American Benefit Life Insurance Company, a Roussel-controlled insurance company:

It is our opinion that the trial court erred in a matter of law when it concluded that the defendant, Louis J. Roussel, Jr., did not breach his fiduciary obligation to the plaintiff. . . . We find that the breach of Roussel's fiduciary obligations to his principal, Noe the minority stockholder, had its inception with the commencement of the voluntary liquidation as shown by the dissolution resolution of July 1, 1970.

On August 23, 1976, Roussel consented to a sweeping decree, entered by the United States District Court for the Eastern District of Louisiana in an action filed by the S.E.C. charging plaintiff with two take over attempts in violation of the Williams Act, 15 U.S.C. §§ 78m-n, and involving substantially the same take over tactics as used against American Tidelands and Tidelands Capital. The S.E.C. is presently investigating Roussel in connection with his similar take over attempt of American Tidelands and Tidelands Capital.

Roussel has been charged by the United States Comptroller of the Currency with gross misconduct in connection with his control and operation of the National American Bank of New Orleans. Specifically, on July 11, 1974, the Board of Governors of the Federal Reserve System ordered Roussel to appear and answer charges of "breaches of fiduciary duty . . . involving personal dishonesty on the part of Louis J. Roussel . . . under 12 U.S.C. § 1818(e)(4)." Roussel never answered these charges; rather, he resigned as a director and officer of the National American Bank.

As stated above, the complaint in this matter alleged that the proposed tender offer would...